KARNATAKA APARTMENT OWNERSHIP ACT 1972
Common expenses and profits.
Common expenses and profits.
Application of the Act :
This applies only to property of the sole owner or all owners, which submits to the provisions of this Act by duly executing and registering a Declaration as here in after provided.
Provided that no property shall be submitted to the provisions of the Act, unless it is mainly used or proposed to be used for residential purpose.
What does it mean?
It means that condominiums of number of apartments can be developed on a landed property, only when the land over/owners execute and register a Declaration. This declaration is Form A under item 8 b shall declare the percentage of undivided interest in the common areas and facilities appurtenant to each apartment. This percentage shall be the basis to arrive at (i) monthly maintenance charges (ii) distribution of common profits and common expenses (iii) voting weightage (iv) share in common insurance premium of condominium building etc., etc. among apartment owners. It is value based proportionate share therefore it goes with the value of apartment owned. Uniform distribution of maintenance charges to every apartment irrespective of its value is UNLAWFUL and as such NULL & VOID Further provision given below make it more explicit, 'common' word is mis conceived and mis interpreted in practice.
Definitions :
“Common Expenses” means
1) All sums lawfully assessed against the apartment owners b y the Association of Apartment owners by the Association of Apartment owners'
2) Expenses of administration, maintenance, repair or replacement of common areas and facilities.
3) Expenses agreed upon as common expenses by the Bye-laws;
Expenses declared as common expenses by the provision of this Act or by the Declaration or Bye- laws.
What does it means?
1) It means that the sums assessed for an apartment owner must be lawful. It is lawful if it is conforming to the applicable law. Applicable law is based on the principle of pro-rata sharing to the value of the apartment unit owner by an owner in the common areas and common facilities.
2) Insurance against natural calamities like fire, earthquake etc. for Common Areas and Common Facilities comes under 'common expenses'
3) Item of cable T.C. doesn't come under common expenses.
“Common Profits”
Means the balance of all income, rent profits and revenues for common areas and facilities remaining after the deduction of common expenses.
What does it mean?
It means that (i) common areas which is utilized by shop keepers in shop line for their exclusive use can be rented by Association and it shall be rent profits (ii) limited common areas like parking slot owned by an apartment owner for his exclusive use but being maintained by Society can fetch income as service charges.
“Limited common areas and common facilities: means those common areas and facilities designed in Declaration as served for use of certain apartment or apartments to be exclusion of the other apartments:
What does it mean?
Parking slots owned by apartment owner for their exclusive use come under this category.
Status of Apartments
Each apartment together with its undivided interest in the Common Areas and facilities,, appurtenants to such apartment, shall for al purposes constitute heritable and transferable immovable property.
What does it mean?
It means that each apartment together with its undivided interest in the Common Areas and facilities, appurtenants to such apartments shall go together in transfer. They cannot be separated from each other in any transaction of transfer.
Common area and Facilities :
Each apartment owner shall be entitled to an undivided interest in the Common Areas and facilities in the percentage expressed in the declaration. Such percentage shall be computed by taking as a basis the value of the apartment in relation to the value of the property and such percentage shall reflect in limited common areas as facilities.
What does it mean?
It means that in apartment property two types of ownership exist. One is exclusive ownership and the other is common ownership. Apartment proper and limited / restricted area, if any, have exclusive ownership of the owner while the common area and common facilities comes under common or undivided ownership.
Profit and expenses of exclusive ownership part it shared exclusively by the apartment owners while profit and expenses of common areas and common facilities shall be shared by an apartment owner in the ratio of the value of apartment owned by him to the total value of apartment complex property i.e. on pro- rata basis. Though there are two types of ownership in case of apartment property but they go together the same way intact at the transfer of property on sale or otherwise. They cannot be separated at any point of time. This is the back ground behind apartment complex condominium.
Common Profits and Expenses :
The common profits of the property shall be distributed among and the common expenses shall be charged to the apartment owners according to the percentage of undivided interest in the common area and facilities.
What does it mean?
It means that share attributed to an apartment in the common profits and common expenses of an Association shall be in the ratio of its value to the total value of apartment complex as a whole. Profits it from surplus income. Surplus income is monthly income minus monthly expenses incurred by the Association. That means it both surplus income and expenditure rules of proportionate sharing holds good.
Contents of Deeds of Apartments:
1) Deeds of Apartments shall include the particulars as provided i.e. in the Act, which includes the percentage of undivided interest appertaining to the apartment in the common areas and facilities.
What does it means?
It means that Registered Sale deed of each apartment must specify the percentage of undivided interest of the owner in Common Areas and Common Facilities provided. Present day sale deeds do not contain this percentage. If the mention of this percentage in sale deed while its execution and registration is taken care of, it shall become very handy to decide the monthly maintenance charges to be attributed to each apartment owner.
Bye-law and their contents:
1) The administration of every property shall be governed by Bye-laws, a true copy of which shall be annexed to the Declaration. No modification of or amendment to the bye-law shall be valid unless set-forth in an amendment to the Declaration and such amendment is duly recorded and a copy there of it duly filed with the competent authority.
2) The Act has made it mandatory to provide for certain points in bye-law. Mode of collection of share of common expenses in one such.
What does it mean?
It means that the Bye-law are to be filed with the Competent Authority and this authority should be advised before any amendment made in the Bye-law are made effective. Implementation of an amendment shall be invalid if it is not recorded with the Competent Authority and intimation of its filing in record is received from the Competent Authority.
harges to be attributed to each apartment owner.
Bye-law and their contents :
1) The administration of every property shall be governed by Bye-laws, a true copy of which shall be annexed to the Declaration. No modification of or amendment to the bye-law shall be valid unless set-forth in an amendment to the Declaration and such amendment is duly recorded and a copy there of it duly filed with the competent authority.
2) The Act has made it mandatory to provide for certain points in bye-law. Mode of collection of share of common expenses in one such.
What does it mean?
It means that the Bye-law are to be filed with the Competent Authority and this authority should be advised before any amendment made in the Bye-law are made effective. Implementation of an amendment shall be invalid if it is not recorded with the Competent Authority and intimation of its filing in record is received from the Competent Authority.
This provision has been made in the Act to keep a tract of development taking place in the management of the Association from time to time. Association do changes in Bye-law which should be lawful. In case an Association makes a provision in amendment to collect monthly maintenance charges equally from each apartment which is not pro-rata to its value such changes in Bye-law are invalid/null and void. Only lawful amendment shall be valid and unlawful amendments shall be rejected by the Competent Authority. Similarly if any provisions is made to allow a person other than owner member to stand in election for the Board of Manager, such amendment shall also be invalid.That Act says that Bye-law should spell out clearly the manner of collecting their shares from apartment owners for the common expenses. 'Pro-rata to the value of apartment unit' must appear in the Bye-laws of Society. Each apartment owner shall have weightage in voting as per percentage of his undivided interest in common areas as common facilities. That need be spelt out in Bye-law. The Bye-law should also contain the percentage of votes required to amend bye-law.
Separate Assessment :
Not with-standing anything contrary contained in any law relating to local authorities, each apartment and its percentage of undivided interest in common /areas and facilities, appurtenant to such apartment shall be deemed to be separate property for the purpose of assessment to tax on lands and building leviable under such law and shall be assessed and taxed accordingly.
What does it mean?
It means that in Property Tax assessment of each apartment also, the principle of proportionate sharing of common area and common facilities shall have to be adopted b y an Association as the basis. Hence if quantum of share of each apartment towards common profits and common expenses is made in proportion to its property tax to total property tax being paid by all apartments, the rationale, is justified and fortified.
Insurance :
21.1) The Manager or Board of Managers, if required by the Declaration or the Bye-laws or by a majority of apartment owners, or at the request of a mortgage having a first mortgage covering an apartment, shall have the authority to and shall obtain insurance for the property against loss or damage by fire and as such other hazards under such terms and for such amounts as shall be required or requested.
Insurance referred shall be written in the names of the Manager or of the Board of managers of the Association of the Apartment owners as trustees for each of the apartment owners in the percentage established in the Declaration.
What does it mean?
It means that in case of Insurance also premium amount shall be shared by apartment owners pro-rata to the value of apartment unit owned by him.
Action to be binding on apartment owners tenants etc.
All agreements, decisions, and determinations law-fully made by the Association of Apartment owners in accordance with the voting percentage established under this Act. Declaration or Bye-laws, shall be deemed to be binding on all apartment owners.
What does it mean?
It means Association can make only such resolutions which ware law-full. If tenants are included in the Board of Managers it shall be violation of law and such decision shall be unlawful. Even a blood relation of an owner member cannot be include in the Board of Managers unless he procures a proper G.P.A. executed by his/her favour from the owner member to deal in Society maters on his/her behalf.
Again decisions shall be taken in any meeting in accordance with the voting weightage percentage and not on basis of raising of hands in favour of a resolution as normally being followed in public institutions. The logic here again is value based principle.
Apartment condominium is a joint venture of its owners in terms of investment of various amounts of shares in shape of apartments by them and as such sharing of all common items it done on the basis of pro-rata, to the value of unit owned by him. It is very valid and justified approach and all Sections of Karnataka Apartment Owners Act 1972 and Acts of other states also follow the same law of sharing.
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