Using residential property for commercial purposes has become common for earning higher rental income. While cooperative housing societies (CHSs) often oppose utilising the residential apartment for commercial activity, there are cases where owners can take appropriate permissions to do so. Some limitations and laws need to be considered, such as whether municipal zoning rules permit you to do so and whether the housing society allows for such activities.
This week, I will share the solution to one such problem: the owner has failed to inform the CHS about his tenant, and the tenant has started operating a commercial business from the flat. We will also address other housing society problems, such as the legality of parking charges imposed by the managing committee (MC), illegal maintenance charges and the application of a 'conflict of interest' rule, when both spouses are elected to managing committee positions in a housing society.
The bye-laws and any appendix numbers referred to in the below solutions are in reference to the cooperative housing society bye-laws book of 2014.
Commercial Activities by Tenant in a Residential Flat
Question: One member has rented out his flat and the tenant has used the flat for commercial purposes without intimating the Society. This is regardless of a resolution that was passed in our annual general meeting (AGM) that no commercial activities are to be conducted on society premises. Further, the owner has failed to give the Society a copy of the tenancy agreement, as he insisted that the tenant was like his daughter. This has been going on since the COVID-19 pandemic.
Now the Society has told him to evict the tenant and has also charged a penalty of Rs15,000. He refuses to pay the fine, stating that as per the housing society bye-laws one cannot charge more than Rs5,000 in a year. From the Society's perspective, neither a tenancy agreement is in place nor has the police verification been completed. There is also a violation of our Society's rules by using the flat for commercial purposes.
Please let us know how the Society can act on this issue. Whether the penalty charged is legal or not?
Answer: If the flat is given on rent without informing the Society, then Society can give notice to the flat owner for not giving a copy of the leave & licence (LL) agreement and a copy of the police verification certificate of the person residing on rent. If the flat owner is not paying non-occupancy charges to the Society for renting his flat, then under the Bye-law No. 174(A)(v) make a complaint against the flat owner to the deputy registrar of cooperative societies in your area.
The tenant can be considered a trespasser on Society's premises, as the Society has not been informed of the tenancy agreement by the owner. Under Bye-law No. 174(E)(v), make a complaint against the flat owner to the nearest police station, stating that a copy of the LL agreement and the police verification certificate of the person residing in his flat, has not been given to the Society.
For renting a residential flat to use on a commercial basis, under Bye-law No. 174(D)(iii), make a complaint against the flat owner to the assistant municipal commissioner of your local municipal ward office, stating that the person residing on rent is using the flat for commercial use.
At all the places as stated above, after you make a complaint, with a copy of the same, write a right to information (RTI) letter to the public information officer (PIO) of the respective office where you had made the complaint. This may help ensure that you get a response from the concerned officer within a month of making the complaint.
For not observing the Bye-laws of the Society, the managing committee can charge Rs5,000 as a fine to that flat owner. Under Bye-law No. 165(a) Rs5,000 penalty per financial year can be levied on that flat owner after passing this penalty in the annual meeting of the Society.
Also, under Bye-law No. 169(a), after passing in the general body meeting of the Society, a fine up to five times the monthly maintenance charge can be levied on that flat till the flat owner gives a copy of the LL agreement, and police report of the tenant, along with a confirmation that commercial activities have stopped.
Applicability of 'Conflict of Interest' Rule, When Both Husband and Wife are Managing Committee Members
Question: In our cooperative housing society, the husband (the flat owner) is a managing committee member, while his wife (a shop owner in the same building) is the Secretary. Since they both live in the same flat, can they both legally have positions in the managing committee? Or must one of them give up these posts, due to a conflict of interest? There have also been allegations of misuse of society funds.
Answer: In your Society, since the husband owns a flat and the wife owns a shop, they are considered two members of the same housing society. Hence, both can contest the managing committee election to become a Secretary or a managing committee member. There is no conflict of interest to be considered here.
On the other hand, for misuse of the Society's funds, if any, you can write a complaint against the Secretary of the Society, to deputy registrar of cooperative societies, under Bye-law No. 174(A)(xii).
NOTE
We will not be answering queries posted in the comments. Only questions sent through the Moneylife Foundation's Legal Helpline will be answered. If you want to seek guidance or ask questions to Mr Shanbhag, kindly send it through Moneylife Foundation's Free Legal Helpline. Here is the link: https://www.moneylife.in/lrc.html#ask-question
Maintenance Charges for Common Amenities Based on Shop Area
Question: Our housing society has 128 commercial shops ranging from 10 sqft to 4,000 sqft. The majority of the shops are about 200sqft. Despite accepting bye-laws upon registration, which clearly state that maintenance for common amenities should be equally charged per unit, after the first annual general body meeting, a resolution was passed to collect such maintenance based on the square feet area of each shop. Since small shops have the majority, this was passed with 85% votes in favour of the resolution. The larger shop owners are paying a very high amount for maintenance. Please advise on an amicable solution.
Answer: A cooperative society cannot pass a resolution which goes against the bye-laws of the Society. Even the deputy registrar of cooperative societies will not approve this wrong resolution.
Kindly make a complaint against the Society to the deputy registrar of cooperative societies, under Bye-law No. 174(A)((xxii), for passing a resolution which violates Society's bye-laws, and for charging common amenity charges by area of the flat.
Legality of Parking Charges Decided in the AGM
Question: Can a housing society's managing committee decide in the annual general body meeting to charge a fixed amount for parking?
Answer: There is no rule about how much the charges for parking should be in a cooperative housing society -CHS. If you find that unreasonable parking charges are levied by your Society, then against the Society, you can make a complaint in a cooperative court under Bye-law No. 174(B)(iv), by hiring the services of an experienced advocate who practices in such parking-related matters in the cooperative court.
(Shirish Shanbhag has an MSc in Organic Chemistry, Diploma in Higher Education, and a Diploma in French and has completed his LL.B. in first class in 2021. Before his retirement, he was a junior college teacher at Patkar College from July 1980 to May 2012, teaching theoretical and practical chemistry. Post-retirement in 2012, he started providing guidance and counselling to people on several issues, specifically focusing on cooperative housing society-related matters. He has over 30 years of hands-on experience in all matters about housing societies and can provide out-of-box solutions for any practical issue.)
