Supreme Court Verdict on Society Maintenance Charges: A Comprehensive Overview

Maintenance charges are the operating expenses levied on residents of a housing society. These charges ensure the upkeep of common areas and facilities shared by all members of the community. Recent Supreme Court rulings on society maintenance charges have addressed various disputes and provided clarity on the legal framework, offering relief to residents and housing societies alike.

In this detailed blog, we will explore the concept of maintenance charges, their calculation, key provisions under the Real Estate (Regulation and Development) Act (RERA), and the implications of the Supreme Court’s landmark verdict on society maintenance charges.

What Are Society Maintenance Charges?

Society maintenance charges are levied on residents or property owners to manage and maintain common facilities. They are collected periodically—monthly, semi-annually, or annually—depending on the housing society or project.

Common Areas Covered by Maintenance Charges

The charges are primarily used to maintain the following common areas and facilities:

• Swimming pools

• Community facilities

• Commercial facilities

• Basements

• Common entrances and exits

• Fire escapes

• Elevators

• Staircases

• Lobbies

• Water tanks

• Parks and terraces

• Play areas

In gated societies, these charges ensure the smooth functioning of daily operations like security, cleaning, and waste management. Residents contribute a fixed amount to maintain these areas in good condition.

How Are Society Maintenance Charges Calculated?

The calculation of maintenance charges varies depending on the size of the property, quality of amenities, and services offered. Builders often charge between ₹2 and ₹25 per square foot, with more luxurious societies charging on the higher end.

Methods of Calculating Maintenance Charges

1. Per Square Foot Charge

   • Charges are calculated based on the area (carpet or built-up) of the flat. Larger flats pay higher amounts.

2. Equal Maintenance Fees

   • A uniform fee is charged irrespective of flat size.

3. Hybrid Method

   • Costs are split into two parts: one for common facilities (shared equally) and another based on the flat’s size.

The Supreme Court has not prescribed a standard formula, leaving the method of calculation to the discretion of the society or builder, provided it aligns with legal guidelines.

Supreme Court Verdict: Key Highlights

In its landmark ruling on society maintenance charges, the Supreme Court addressed multiple concerns related to unfair charges, penalties, and builder practices. Below are the highlights of the judgment:

1. Uniformity and Fairness in Charges

• Maintenance charges must be levied fairly and uniformly across residents.

• Builders and societies cannot impose arbitrary charges on certain groups, such as tenants.

2. Transparency in Usage

• Housing societies must publish detailed reports on maintenance collections and expenditures.

• Residents should have access to these records to ensure accountability.

3. Maintenance Charges for Unsold Flats

• Developers are responsible for paying maintenance charges on unsold flats until they are sold.

4. Penalties for Late Payments

• Penalties for late payment must be reasonable and capped (e.g., at 12% per annum).

• Residents must be given sufficient notice and a grace period to pay dues before penalties are applied.

5. RERA Provisions

Under Section 4(d) of RERA, builders are mandated to:

• Handle maintenance until the formation of a Residents Welfare Association (RWA).

• Charge reasonable maintenance fees as specified in the allotment letter.

6. Tenant Responsibilities

• The primary responsibility for maintenance charges lies with property owners.

• Owners may recover these charges from tenants through lease agreements, but societies cannot directly enforce payment from tenants.

RERA Guidelines on Maintenance Charges

The RERA Act, 2016, provides a robust framework to regulate maintenance charges and protect homebuyers. Here are the key provisions:

Builder’s Responsibility

• Builders must manage maintenance until the RWA is formed.

• Separate accounts must be maintained for maintenance and corpus funds, audited by a Chartered Accountant.

• Interest earned on these funds must be credited back to the respective accounts.

Transparency in Charges

• Maintenance charges must be disclosed during property booking.

• Non-disclosure or arbitrary charges by builders can be challenged under RERA.

GST on Maintenance Charges

• Maintenance charges exceeding ₹7,500 per month attract an 18% GST.

Flat Maintenance Charges: Rules and Regulations

Key Legal Provisions

1. Builders or promoters cannot profit from maintenance charges. These funds must be used solely for the society’s upkeep.

2. State-specific laws regulate the calculation and collection of maintenance charges.

3. Residents can verify the Income and Expenditure Statement to ensure charges are reasonable.

Rights of Residents

• Residents can challenge unfair practices in consumer courts or RERA authorities.

• All charges must be uniform across residents, barring specific, justified exceptions.

Obligations of Residents

• Payment of maintenance charges is mandatory, irrespective of flat occupancy.

• Non-payment may result in penalties or legal action.

Supreme Court Rulings: Detailed Analysis

Maintenance Charges for Tenants

The Court emphasized that maintenance charges are applicable regardless of whether the unit is occupied by the owner or rented out. The landlord is responsible for ensuring timely payment.

Role of RWAs

Once an RWA is formed, it takes over maintenance responsibilities from the builder. The Supreme Court directed builders to hand over surplus funds, financial records, and accounts to the RWA.

Guidelines for Builders

• Maintenance charges must be transparently communicated at the time of sale.

• Builders cannot impose additional, undisclosed charges post-sale.

State Regulations

State governments have issued guidelines capping the maximum maintenance charges, ensuring that residents are not overburdened.

Importance of Supreme Court Verdict

The Supreme Court’s judgment is a milestone in safeguarding the rights of residents while ensuring fairness and transparency in maintenance practices.

Impact on Residents

• Greater transparency in how charges are levied and utilized.

• Protection against arbitrary penalties or unfair practices by builders.

Impact on Builders

• Enhanced accountability in handling maintenance funds.

• Mandatory adherence to RERA guidelines and state regulations.

Impact on Housing Societies

• Encouragement to adopt standardized practices for calculating and collecting maintenance charges.

Conclusion

The Supreme Court’s verdict on society maintenance charges provides clarity and protection to both residents and housing societies. By mandating fairness, transparency, and adherence to legal guidelines, the judgment ensures that maintenance charges are justifiable and beneficial for all stakeholders.

For residents, this ruling is a call to remain vigilant and proactive in ensuring that their rights are upheld. For builders and RWAs, it is an opportunity to align practices with the law and foster trust within communities.