Associations

While numerous apartment societies operate under the Karnataka Societies Registration Act, 1960, it may not suffice as a legally sound option for forming apartment societies due to its primary focus on the establishment of welfare and religious societies, rather than safeguarding the interests of apartment owners in their properties. Consequently, we advocate for the formation of associations under the Apartment Ownership Act, 1972 (KAOA) for our clients. This article undertakes a comparative analysis of both acts, highlighting the advantages of opting for KAOA for apartment ownership associations.

The Apartment Ownership Act, 1972 (KAOA) stands as a unique legislation dedicated specifically to apartment-related concerns and the establishment of apartment owners’ associations. The core objective and preamble of the Act underscore its purpose: to facilitate individual apartment ownership within a building, ensuring the inheritability and transferability of such property, alongside addressing associated matters. KAOA meticulously outlines the procedures and protocols governing the maintenance and administration of apartment complexes.

The Karnataka Societies Registration Act (KSRA) is primarily designed for organizations engaged in charitable, scientific, literary, and religious endeavors. Enacted under item No. 28 in the concurrent list of the Seventh Schedule of the Constitution of India, it pertains to “Charities and charitable institutions, charitable and religious endowments and religious institutions”. While suitable for NGOs, KSRA lacks applicability to apartment owners’ associations, where the paramount concern is safeguarding property rights rather than religious, scientific, or social welfare. Notably, property management and governance are explicitly excluded from KSRA’s objective clause as outlined in section 3 of the Act. Thus, the overarching aim of KSRA diverges significantly from the management of apartment complexes.

Under the Apartment Ownership Act (KAOA), registration necessitates unanimous consent from all apartment owners to bring their properties under its purview. Conversely, a society under the Karnataka Societies Registration Act (KSRA) can be established with just seven members. This discrepancy can lead to multiple societies within the same complex, potentially resulting in disputes, such as representation in legal matters or the transfer of documents and funds from the builder to the association. KAOA, designed specifically for apartment units, addresses these concerns by requiring consent as per section 2, thereby safeguarding the long-term property rights of unit owners.

Despite the fact that it is legally inaccurate, approximately 90% of apartments in Karnataka have opted to establish their associations under KSRA. This recurring error can be attributed to the relatively lenient and less time-consuming procedures involved. KSRA mandates only seven members to form a society, and the verification of submitted documents is not stringent. However, the prevalence of this mistake does not rectify its legality. While the process under KAOA may be more time-consuming, associations formed under this Act are legally binding and fully enforceable.

The Apartment Ownership Act of 1972 (KAOA) highlights the importance of heritable and transferable rights. While sale deeds indeed confer transferable rights to property owners, complications arise in apartment complexes due to multiple units on a composite property. KAOA aims to mitigate such complexities by providing a framework for property management. Although the Transfer of Property Act of 1882 governs property rights generally, KAOA, as a specialized legislation for apartment owners, reinforces the concept of property transfer by explicitly addressing it in its objectives. By facilitating the formation of collective bodies for property management, KAOA enhances the practicality of property ownership transfer within apartment complexes.

For owners who have taken possession of their units or entered into purchase agreements without registering the sale deed, participation in the formation of an association under KAOA may still be possible. Currently, the builder, acting as the owner, can sign the necessary documents for registration on behalf of unsold or unregistered apartment units.

In 2018, the Government of Karnataka acknowledged the challenges posed by societies formed under the 1960 Act within apartment complexes and issued a notification prohibiting the registration of associations or societies governed by the Karnataka Apartment Ownership Act, 1972, under the Karnataka Societies Registration Act, 1960. Moreover, the recent ruling of the High Court of Karnataka has invalidated the Certificate of Registration issued by the Society’s Registrar, emphasizing the necessity to establish associations under the KAOA, 1972. In essence, the KAOA, 1972, stands as the appropriate legislation for the formation of apartment owners’ associations.