Transfer of immovable properties, particularly
through transfer of shares, is very common in Mumbai, Gujarat and West Bengal
but not so popular in Karnataka.The Transfer of Property Act, 1882 defines the
transfer of property as “An act by which living persons convey the property in
present or in future to one or more other living persons or to himself and to
transfer the property is to perform such act” (Sec 5).
The act further describes the word “living persons”
to include company, association, body of Individuals, whether they are
incorporated or not.
The recognized mode of transfers are sale mortgage
lease, exchange and gift. In case of mortgage and lease, the owner of the
immovable property retains his ownership rights but transfers some interest,
and in certain cases possessory rights.
Sale, exchange and gifts are transfer of absolute
rights in the immovable property by the owner to the other. In sale and
exchange, the transfer is for consideration in cash or kind. In gift, the
property is transferred to others out of love and affection and no other
consideration is accepted and the transfer is absolute without any conditions
attached. Section 10 of the Transfer of Property Act mandates that no absolute
restrictions can be imposed on transfer of property and only some temporary
restrictions may be part of the transfer.
Registration of sale and exchange deeds, if the
value of property transferred is rupees one hundred or more is a
must. In case of transfer of immovable property is by gift, the document
evidencing the gift should be registered irrespective of the value of the
gifted property. Section 17 of Indian Registration Act deals with the documents
whose registration is compulsory. It includes deed of gift,
non testamentary document (other than will) which create declare, assign,
limit, extinguish any right, title, interest on immovable property, the value
of which is Rs.100 or more.
The Stamps Acts of various states prescribe the
stamp duty payable on such documents of transfer.Thus, any transfer of
immovable property shall be absolute without permanent restrictions, with power
to alienate and shall be by registration of the deed of transfer on which
prescribed stamp duty has to be paid. The prescription that the registration is
compulsory when the value of the immovable property is Rs. One Hundred or more
is only of academic interest, as no immovable property will be less than worth
Rs.100. But, we are dealing in this article, with an altogether different type
of transfer of immovable property adopted by some housing co-operative
societies where the transfer is neither absolute nor the deed of transfer is
registered.
Housing co-operative societies
With the evolution of time and emergence of group housing schemes,
institutions which serve the cause of housing have developed. These housing
societies are co-operative institutions which are required to be registered
with the registrar of the co-operative societies. Such societies have their own
rules, by law. Recently, the Supreme Court has held that they can limit the
membership to a particular class unless appropriate amendments are made to
various Co-operative Societies Acts, incorporating a policy that no society
shall be formed or if formed, membership in no society shall be restricted to a
particular profession, religion, belief. There are mainly three types of
housing co-operative societies.
Tenant ownership co-op housing societies
The society purchases or takes on lease the land,
makes layout and allot sites to its members. The members construct the houses
at their cost. In such societies the land is owned by the society and the
constructed part by the members.
Co-partnership co-op housing societies
The society purchases or takes on lease the land
and constructs buildings/flats which are allotted to the members.
Here both the land and constructions are owned by the society.
Other co-operative housing societies
The persons who have purchased flats from
builders under the agreements as per Flat Ownership Acts of various states
from society, the builder conveys the land and building in favour of society.
Such societies are called flat owners’ type co-op housing societies.
Both the land and building vest with the society.
One should not mistake these societies, with the associations formed by the
purchasers to manage the common areas and to keep the documents to title of the
property.
Shares of the Societies
Housing co-operative socities which own both the
land and building offer shares to its members. The number of shares
allotted to its members is in relation to size of the flat, which is to be
allotted to the members. To be clearer, the member who is allotted a
three-bedroom flat has more shares than the person who is allotted a 2BHK flat.
The society owns the land and the building. On payment of fixed amount of
deposit, the society allots the flat to the member. No sale deed is
executed or registered in favour of the member. He is not the absolute owner of
the flat. His right is limited only to the use and enjoyment of the flat.
Shares, deposit, and right to use and enjoy the flat shall constitute an
integral and indivisible right which shall not be separated, that is, a share
holder cannot transfer the shares to one person, deposit to another and right
to use and enjoyment of that flat to a third person. In such an irregular
transfer, the societies recognize only the person to whom the shares are
transferred.
In case of transfer of right to use and enjoyment
of his flat, the transfer of shares to such a transferee is a must. Members may
also surrender their rights to use and enjoyment of the flat to the society and
get refund of the deposit and the share money. Here, the members do not get
absolute rights over the property and the ownership vests with society.
Apart from housing co-operative societies, certain
companies which are registered under the Companies Act, also follow this
procedure, wherein the flats are allotted to its member share holders only to
use and enjoy the flat and the company retaining the ownership of the
properties.
The member is entitled to transfer his rights – use
and enjoyment of flat. No absolute ownership is transferred which vests with
the society. No objection certificate from society is necessary for such a
transfer and the purchaser has to become a member of the society. The shares
standing in the name of the previous owner will be transferred to the
transferee. The society charges a fee for such a transfer.
Mortgage
Often, financial institutions finance for transfer
of such flats. But as the right of the member is limited to use and enjoyment
of the flat, the financing institution does not get proper charge of such flats
as the ownership is with the society. No Objection certificate is a must for
such a mortgage.
The Supreme Court has held that such properties
cannot be alienated or auctioned to recover the dues. Even the entire property
is assessed as a single unit for property tax in the name of the society which
will collect proportionate property tax from its members.
Housing Societies in Karnataka
This practice is not so common in Karnataka though,
there are some tenant ownership housing Societies in Karnataka. The
Karnataka government has made it very clear that separate regular conveyance
deeds have to be made in case of individual share holders on payment of
property stamp duty and registration charges. Department of Stamps and Registration has issued notices in many cases and the law is still unsettled in
our State.
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