Disputes between cooperative housing society (CHS/the Society) and their members often arise from overreach, a misunderstanding of bye-laws or arbitrary decisions taken in the name of ‘general body approval’. Whether it is unlawful demands linked to renting out a flat, confusion around corpus funds or the persistent problem of recovering dues from defaulters, CHS members are frequently unsure of what the law actually permits. 
 
This week’s column addresses some of these recurring issues by clarifying what the Society can legally charge, what rights members retain and the remedies available when rules are violated.
 
Society’s Demand for Security Deposit from Leave & Licence Arrangements
 
Question: Whenever I rent out my flat on a leave & licence basis, the CHS office-bearers demand a security deposit equivalent to two months’ rent. Is the refundable security deposit meant to be kept by the licensor and returned to the licensee (subject to deductions) at the end of the leave & licence term?
 
Our Society is compelling me to deposit the security amount into the Society’s account. Is it their legal right to demand the security deposit and earn interest on it instead of me, as the licensor, whom they claim is making ‘huge profits’ by renting out the flat? Is this a blatant flouting of norms and a restriction on my rights as a Society member? Is their demand legal?
 
Answer: For keeping a person in your flat on a leave & licence basis, under bye-law no43, you do not need to take permission from the Society. However, you must submit a copy of the registered leave & licence agreement along with a copy of the police intimation report to the Society.
 
As per the government resolution no.CHS-1064/15165/Sr. No. 317/14-C, Mumbai-32, dated 1 August 2001, the Society can charge only 10% of the monthly maintenance charges (excluding municipal property taxes) as non-occupancy charges for keeping a person on a leave & licence basis. Service charges in the monthly maintenance bill, however, will to charged equally to all. 
 
If the Society demands any amount over and above this as non-occupancy charges, then under bye-law no. 174(A)(v), you can make a complaint against the Society to the deputy registrar of cooperative societies (DRCS), without paying any additional amount.
 
The deputy registrar will take cognisance of the complaint and issue directions to the Society not to charge any additional amount as non-occupancy charges.
 
However, please note that in Maharashtra, CHS often charge ₹1,000 to ₹5,000 as refundable or non-refundable shifting or logistics charges for tenant move-in and move-out to cover common area wear & tear. While not explicitly detailed in the model bye-laws, these are commonly accepted by the tenant and the owner-member. For this, too, you need to file a complaint with the DRCS. 
 
Recovery of Outstanding Dues from Defaulting Flat-owners
Question: We live in an apartment complex with about 350 flats. The Society currently has around ₹1 crore as a corpus fund. However, the Society keeps asking members to top up the corpus, with the stated objective of building it up to ₹10 crore.  Is it legal to collect money as a corpus? If I sell my flat at a later date, am I entitled to get the corpus amount back from the buyer or from the Society? There are some members who are defaulters even in paying the monthly maintenance, despite the interest rates being defined. How should such defaulters be dealt with?
 
Answer:  A corpus fund is usually collected for future major repairs of the Society’s building(s). The amount of corpus required depends on the structural audit of the building(s), which determines how much money will be needed for major repairs after a certain number of years. Based on this assessment, the required amount is collected over several years in equal instalments from each flat in the Society.
 
The corpus is generally collected based on the area of the flat and may be charged on a monthly, bi-monthly or quarterly basis. If there are defaulters in the Society, the bye-laws provide for the recovery of dues along with applicable interest and penalties.
 
The corpus fund remains attached to the flat. It is the responsibility of the Society to inform each flat owner of the corpus amount accrued against their flat, periodically, similar to the interest information provided for a bank fixed deposit.
 
When a flat is sold, the corpus amount attributable to that flat goes to the buyer. Therefore, while selling the flat, the seller should clearly include this condition in the sale transaction and recover the corpus amount from the buyer.
 
Recovery of Outstanding Dues from Defaulting Flat-owners
Question: What are the various legal provisions available to recover outstanding dues from members in the Society? How can delayed payment fines be applied (is there a prescribed method under the law)? It is difficult to even contact the owner, especially if the flat is vacant or rented and tenants are advised not to divulge any details. In some cases, only female individuals are occupying the flat as tenants.
 
Answer: If a member fails to pay the Society’s dues for their flat for three months, then under bye-law no71, the Society can levy a simple interest at 21% on the pending dues. If the dues are still not paid, then under the Maharashtra Cooperative Societies Act, 1960, Section 154B-29 (earlier Section 101), recovery action can be initiated against the member through the deputy registrar’s recovery officer.
 
Additionally, it is essential to understand that the rules and regulations for renting out a flat in a CHS are quite clear. In Maharashtra, tenant rules in CHSs mandate that the owner submit a copy of the registered leave & licence agreements, along with police verification. The member-owner is primarily responsible for ensuring police verification is completed. CHS's managing committee can issue a notice to the member-owner demanding compliance. The committee can also inform the local police station in writing that the member has allowed a tenant to stay without police verification. Furthermore, the Society may pass a resolution to restrict the unauthorised tenant from entering the premises until verification is completed.
 
NOTE
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Disclaimer: The guidance provided in these columns and on our Legal Helpline is on the sole basis of the facts provided by the reader/questioner and does not amount to formal legal advice in any form whatsoever. 
 
(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.)