Status as on- 28/02/2022
Real Estate is playing a crucial role in the development of the Indian economy. The Real Estate sector is the second largest sector, after agriculture, to provide employment to large number of people in the country. Since this sector has grown beyond expectations in recent times, it has also brought various duties and responsibilities for all the people involved. One of such responsibility lies on the shoulder of the promoter or the developer.
Section 11 of the Real Estate (Regulation and Development) Act, 2016 (RERA) mentions various powers, duties and responsibilities for the promoters or the developers. One such responsibility is to provide and maintain all the essential services at reasonable charges till handling over possession of project to the allottees or association of allottees.
What are maintenance charges?
The maintenance fee (also known as annual fee) are the charges or fee paid after the possession by the tenants or the owners for the maintenance, operations, repairs and upkeeping of the building.
Responsibility of promoter to provide and maintain essential services at reasonable cost
According to Sec 11(4)(d), the promoter shall be responsible for providing and maintaining the essential services, on reasonable charges, till the taking over of the maintenance of the project by the association of the allottees.
This implies that the real estate developer may commit to maintain the project for a few years. However, after that period, the developer or the promoter is allowed to collect the amount from the home buyers (allottees or purchasers) in installments or as a lump-sum amount.
Furthermore, the amount collected by the promoter or the developer cannot be considered as an income for him. In other words, the amount collected in the name of maintenance charges cannot be transferred to company’s account because it is not his income in any manner. This is because the builder is only a facilitator for the plot for the time being and the onus of taking up the responsibility of maintenance of the flat/ plot or apartment and its premises is on the association of allottees.
Sometimes, the developers tend to include the maintenance charges in the cost of the plot, but is it legal to do so? The answer was provided by the National Consumer Disputes Redressal Commission (NCDRC), in which it said that the builders can’t force homebuyers to pay maintenance charges for flats in housing projects that are yet to receive the occupancy certificate from the civic authority concerned.
What if the developer charges more than reasonable charges for the maintenance cost?
Many State Governments have provided clear guidelines about the maximum amount of maintenance charges that can be charged by the builder through a proper contractual arrangement. The developer can charge the maintenance by following the provided criteria:
| Type of maintenance charge | Applicability |
| Expenses on repair and maintenance of the building | 0.75% per annum of the construction cost of each flat |
| Service charges (housekeeping, security, electricity& water for common areas, equipment, etc.) | Equally divided among the flats |
| Expenses on repair and maintenance of elevators | Equally divided among the flats |
| Sinking fund | Minimum of 0.25% per annum of the construction cost of each flat |
| Parking maintenance | By number of parking slots of each member |
If the developer charges more than the prescribed charges, then it is presumed to be unreasonable. Hence, the allottee can sue the developer under the RERA Act and can ask for the relief for the same.
Conclusion
The Real Estate (Regulation and Development) Act, 2016 ensures that the residents do not have to pay any ad-hoc charges. Till the formation of Association of allottees, the promoter is solely responsible for the maintenance charges and to provide essential services at reasonable charges. These charges are generally included in the allotment letter which is initially issued to the buyer after the booking amount has been paid. Moreover, it is the responsibility of the promoter or the developer to properly disclose such charges at the time of booking. Post formation of the association, the promoter can collect it from the homebuyers as mentioned in the agreement.
Disclaimer: The above article is based on the personal interpretation of the related orders and laws. The readers are expected to take expert opinion before relying upon the article. For more information, please contact us at rera@centrik.in
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