Flat Purchase by Way of Share Certificate Method
Flat Purchase by Way of Share Certificate Method
Co-operative Societies Acts of many states provide for formation of housing Cooperative housing societies. Karnataka Co-operative Societies Act also permit the
formation of Co-operative housing societies. These societies acquire the land,
construct the flats, which are allotted to its members. The society allots shares to its
members. Such societies need to be registered with registrar of Co-operative
societies.
Members are of different category, the member, associate member, and nominal
member. Individuals, Partnership fir, registered company, registered society local
authority, State government, central government, public trust, any other corporate
body registered under the relevant act, may become member of the co-operative
housing society, subject to the rules governing the admission
A minor can also become a member of Housing Society through his guardian;
Certain states have put restriction of membership of family trust. Hindu undivided
family.
Here are different types of Co-operative housing societies.
1. A society purchases the land or takes on lease, divide into several plots and allots
to its members. The members construct houses, on such allotted lands. In such
cases, the land is owned by the societies and the houses on plots to members.
Such societies are called Tenant ownership type housing societies.
2. Societies acquire land by sale or on lease and construct the buildings; flats are
allotted to the members. In such cases, both the land and building are owned by
the societies. These are called tenant Co-Partnership Co-operative housing
societies.
3. Societies are also formed by person who purchase the flats from the builders,
under agreement as per flats ownership acts of the respective states. In this case
also, both the land and building belong to the society after the execution of
conveyance by the builder in favour of the society. Such societies are called flat
owners Co-operative housing society.
Flat owners Co-operative societies are of more common. These societies are very
popular in Maharashtra, Gujarat and West Bengal and not so common in
Karnataka.
Flat owners Co-operative societies issues shares to its members by which the
members gets to right to live, reside and enjoy the flat. It is to be remembered
that the rights and interest of the member in the flat is limited only to reside and
enjoy. Member can transfer only such right. He is not the absolute owner of the
flat.
On sale of the flat, society transfers the shares to the names of the purchaser, on
purchaser complying with the formalities. After the purchaser is admitted, the
purchaser becomes a member of the society and acquires right to reside and
enjoy, the flat.
4. In case of death of a member the society transfers the shares to the name of the
nominee;
In the absence of any nomination, the society may transfer the shares to any one
of legal heirs on consent given by other legal heirs. In case of any dispute, the
legal heirs may have to obtain letter of administration from a competent court.
The flats are to be required to be occupied by the owners. in case the flats are let
out, the members have to pay non-occupancy charges to the society.
In case of transfer of share to the others, the member has to give a notice to the
society along with the consent of the proposed purchaser. The member may also
obtain no-objective certificate from the society for transfer of share. The
managing committee on considering the notice of transfer will call for the
following documents:
Application of the transfer of shares along with share certificate.;
Membership application for the purpose of transfer;
Resignation letter from the original member.
Prescribed transfer fee, membership fee, price of the shares premium amount,
copy of the stamp duty paid agreement, declaration by both
transferor/transferee under urban land (ceiling and regulation) act, 1976, if
applicable; various reasons for transfer declaration to use the flat for the purpose
of which it is bought, undertaking to discharge all liabilities to the society, no
objection letter from the financing agency, if the seller has availed loan. No
objection letters from any other statutory agency, which has given land to the
Many states provide in their statutes that the builder/owner should take steps
for registration of the Housing Co-operative society and thereafter transfer the
land to the society within a time frame. As per the sections 10, 11 of the
Karnataka Flats ownership Act 1972 and Karnataka Flat ownership rules 1975,
Rule No. 10, 11, the promoter builder shall submit an application for registration
of the society within four months from the date of which minimum number of
persons require to form a society have taken flats - Thereafter the promoter shall
convey the land to the society within four months from the date of registration of
society.
5. Another interesting aspect is the charge created on individual flats/apartments
by the members. The right of the member is limited, to reside and enjoy the flat,
but they do not have any ownership right. So the members can mortgage their
right to reside, hence such flats cannot be alienated, since the ownership rests
with the Housing Co-operative society. In case of sale, only the right to reside in
the flat is transferred to the purchaser, he will not acquire absolute ownership.
So is the case where the flats are mortgaged to the financial institutions by
members. No objection certificate from the Co-operative Society is essential to
mortgage the flat.
In case of the transfer of flats by transfer of shares, the Co-operative societies will
not register the flats in individual names, and the entire property stands in the
name of the Co-operative Societies; the property is also assessed for tax as a
single entry.
Karnataka government is of the view that individual flats should be registered in
individual names by regular conveyance deed duly registered and tax
assessment should be done flat wise.
Tracing the title of the flat requires verification of the society records, its byelaws
and share certificates.