Non-Occupancy Charges: A Guide for Property Owners and Tenants

Owning a property in a housing society comes with its own set of rules and regulations. One such concept that can be confusing for homeowners is non-occupancy charges. These are fees levied by the society when the owner doesn't reside in the property but rents it out to tenants. Let's delve into what non-occupancy charges are, why they exist, and how they impact you as a homeowner.

What Are Non-Occupancy Charges?

Investing in real estate is a very common scenario in India. The market is huge and largely unorganized and grows exponentially with each passing year. The rules and regulations governing the market differ from state to state. In some states like Maharashtra, a Non-Housing Charge is taxed against the owner under certain circumstances. Now, Let’s take an indepth look at the Non-Occupancy Charges Circular and find out the important details:

Who Pays the Non-Occupancy Charges?

According to Non-Occupancy Charges Society Bye-Laws, the owner, who is also a member of the society, is responsible for the charges of non-occupancy. However, if it has been mutually agreed upon in the tenancy agreement by the tenant and the landlord, the tenant can be made responsible for paying Non-Occupancy Charges. As per society bye-laws, non-occupancy charges are levied on owners who rent out their flats, intended to cover additional strain on resources due to tenants.

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Non-Occupancy Charges as per bye-laws are levied if a ready to move flat remains vacant after possession or it is not used by the landlord or their close family members. The owner of the unit is responsible for paying the charges of non-occupancy. 

When Are Non-Occupancy Charges Not Applicable?

As per Non-Occupancy Charges rules, a charge for non-Occupancy is not levied if: -

1. You are using the premises as a residential unit for yourself. 
2. A close member of your family (parents, spouse, children, siblings including other close relations) is occupying the flat.
3. The unit is not sublet, remains vacant or locked. 

The finer print defines these circumstances in detail. In some cases, if the residents are availing commercial benefits from a property in a society, the society has the right to apply a non-Occupancy Charge along with the maintenance bill. Non-Occupancy Charges on sinking funds are not included along with other repair funds and taxes.

How To Calculate the Non-Occupancy Charges?

The rules and regulations of applicability of a charge of non-occupancy are detailed in the Non-Occupancy Charges Circular, Maharashtra. According to Section 79A of the Maharashtra Cooperative Societies Act, 1960, the total amount in cases of non-occupancy cannot exceed 10% of the maintenance or basic service charge of the society.

For example, If the maintenance charges of a society amount to ₹ 3,000, the total NOC charges cannot exceed ₹ 300. Under the Supreme Court’s judgement on Non-Occupancy Charges and its revision, the cap is set at 10% to avoid exploitation by the housing society. 

Non Occupancy Charges meaning in Marathi: अधिभोग नसलेले शुल्क (Adhibhōga nasalēlē śulka)

Non Occupancy Charges meaning in Hindi: गैर अधिभोग शुल्क (Gair Adhibhog Shulk)

What Is The Criteria for Levying Non-occupancy Charges: Cooperative Housing Societies?

A Non-Occupancy Charge in Society is applicable under the circumstances of a vacant or rented flat. A cooperative Housing Society has the right to levy:

1. Non-occupancy charges for vacant flat
2. Non-occupancy charges for a rented flat
3. Non-occupancy charges for commercial premises

How Much Can Societies Charge as Non-Occupancy Charges?

Before the Supreme Court’s judgement on Non-Occupancy Charges, members of a cooperative housing society were asked exorbitant amounts as Non-Occupancy Charges. Some dishonest office bearers from Managing Committees of Societies would charge unfair amounts as NOC charges and manage the property tax for the society with the funds. This led to adverse conditions for real estate investors and there was a brief period of low real estate investments.

After the Non-Occupancy Charges circular was released by the Maharashtra Government and later passed on by the Supreme Court of India, the cap on Non-Occupancy Charges in a Housing Society was fixed at 10%. This circular also set rules and regulations around the Non-Occupancy Charges for commercial premises and the cap was set at 10% as well.

What Happens If the Flat-owner Refuses to Pay Non-Occupancy Charges?

In case the owner of a unit fails or refuses to pay the Non-Occupancy Charges, the housing society can send a reminder notice to the owner. The Managing Committee has the right to declare the owner a ‘defaulter’ and withheld the no-dues certificate. In certain circumstances, society can initiate a legal proceeding to collect the withheld/due amount. 

Government Resolution on Non-Occupancy Charges?

The real estate market is highly unorganised and the rules and regulations vary within the country. In some states like Karnataka, the government has issued direct guidelines against the collection of NOC charges. However, homeowners in states like Maharashtra still suffer from the clutches of these extra charges hindering their ability to profit more from their investment. 

Before the Maharashtra Cooperative Housing Societies Act, 1960, housing societies in the state charged exorbitant amounts leading to the mass exploitation of homeowners. With the Maharashtra Cooperative Housing Societies Act, 1960, the state government had the authority to intervene in the non-occupancy charge rules and make amendments. 

To lessen the economic gap between the minor and major groups of the city, the Maharashtra government revised the laws regarding the calculation and collection of Non-Occupancy Charges with the Non-occupancy Circular and Maharashtra Cooperatives Societies Act. With the act, the cap was set at 10% of the basic service charge or maintenance charge of the society. 

By definition, service charges in Cooperative Housing Societies included salaries for the workforce and charges for amenities and functions but excluded taxes and sinking fund charges. 

Non-Occupancy Charges: Court Judgement

According to Section 79A of the Maharashtra Cooperatives Societies Act 1960, the state had the power to monitor and issue guidelines on how the housing societies should operate. The state government leveraged this circular to cap the Non-Occupancy Charges. This circular is a legal guideline and it is mandatory for the housing societies to follow the guidelines. However, the decision wasn’t appreciated by the Managing Committees of these housing boards and they decided to file a petition against it. 

Later, Section 79A of the Maharashtra Cooperatives Societies Act was challenged by Mont Blanc Cooperative Housing Society through a petition filed under Article 226 of the constitution of India. Arguing against the circular, Mont Blanc Cooperative Housing Society stated that the circular violated Article 19 of the Indian Constitution.

The housing societies claimed the government is restricting their right to opinion and freedom by imposing an unconstitutional circular. The case went on to be a landmark case under the Maharashtra Cooperatives Societies Act and for Non-occupancy Charges. Taking public interest into consideration, the final bylaws of the Maharashtra Cooperatives Societies Act 1960 were drafted and guidelines on Non-Occupancy Charges, its calculation and collections were revised. 

The guidelines around the Non-Occupancy Charges vary from state to state. The rate of calculation and circumstances of exemption may vary depending on the state you are living in. In such cases, keeping a track of the current rules and regulations can be tedious and even the slightest mistake can be heavy for your wallet. If you are looking for experts to handle legal issues and paperwork related to your property, you are at the right place. Let the experts at NoBroker handle your properties and get your queries resolved by a professional. Drop a comment under this blog or click on the link below to find a legal expert.

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