Transfer of Flat after death of owner in Housing Society

Transfer of Flat after death of owner in Housing Society

Types of Housing Societies in Maharashtra: A tenant ownership cooperative housing society is one where the land is owned by the society and the superstructure or the houses are owned by the members.?In a?tenant?co-partnership cooperative housing society, the land with building is?owned?by the society and a tenement in the building for which a member has?contributed, is allotted to him for his use & occupation. Most Housing societies fall within this category, tenant?co-partnership cooperative housing society. These Housing Societies shows value of Land and Building in their Audited Balance Sheet as their asset and shows contra entry of similar value as “Contributions” by members on liability side. Housing Societies are also required to take insurance (Bye law 67) of the Building as Society has insurable interest in the Building (super structure).

Right, Title and Interest?constitute a Legal?Triplet: It signifies ownership and is generally used in drafting Property Agreement or deeds of transfer to denote ‘anything and everything’ in a property. ‘Right’ stands for ‘legal right’ in a property and ‘Interest’ manifests outcome of ownership with ‘right & title’, including enjoyment in all & whatsoever manner that “Owner” desires whereas ?‘Title’ indicates legal recognition of ‘ownership’ of a property. Thus what the Flat owner in a Housing Society has is “occupancy right” in the flat and share certificate denotes proportionate ownership in the land & superstructure but Land ownership & conveyance will continue to be owned by the Housing Society.

Nomination of a Flat in Housing Society: The Maharashtra Co-operative Societies Act, 1960 allows a member to nominate a person or persons to whom his share and interest in the co-operative society will be transferred by the society in the event of the member's death. Section 25 of the Act provides that a member would cease to be a member of a society on death. However, his holding and other interests do not lapse & they pass on to his heirs or legal representatives and the society is bound to transfer the shares or interest to them as provided in section 30 of the Act. The nominee does not become the absolute owner of the property. He is only empowered to hold the property “in trust” for the real owners as nominee is only a custodian and the actual ownership of the flat will go to legal heirs. He has “no power, authority or title” to alienate the property to the exclusion of the other legal heirs of the deceased member.

Supreme Court, In the matter of?Indrani Wahi v. Registrar of Co-operative Societies, observed that such a transfer in favour of a nominee would have no relevance to the issue of title between the inheritors or successors to the property of the deceased and it would be open to the other members of the family to pursue their case of succession or inheritance, in consonance with law.

As per Section 154B (18) (C) Nominee becomes “provisional Member” who is duly admitted as a member of a society temporarily after death of a Member on the basis of nomination till the admission of legal heir or heirs as the Member of the society in place of deceased Member

As per Section 154B-13, the society shall admit nominee as a provisional Member and “On the death of a Member of a society, the society shall transfer share, right, title and interest in the property of the deceased Member in the society to a person or persons on the basis of testamentary documents or succession certificate or legal heirship certificate or document of family arrangement executed by the persons, who are entitled to inherit the property of the deceased Member.

Why CHS should not insist only on Probate in Maharashtra? In a co-operative housing society you are the owner of unit of a share in the society in the form of a right to occupy the flat as Land is owned by Housing Society, similar to fractional ownership in a Company where you own all assets including properties propionate to your share in that company. In the case of Listed Companies, these shares are held in your D’mat Account and DPs provides Nomination facilities and upon death of account holder the share is transferred to the nominee without ever demanding Probate. This position has been upheld by courts in India as regards transfer of shares in Company to Nominee. Housing Society is the legal owner of the land & super structure and the member holds proportionate interest in that (Land & superstructure) through the Shares held in the capital of the Society and hence this transfer of share is very similar to transfer of share in Limited Company. Maharashtra Government amended the MCS Act in 2019 to recognise this situation and brought out elaborate change in terms of documents needed in Section 154B-13 of the MCS Act.

Old Cases where “Transfer” has already been done by CHS without "Probate": In such old cases, where transfer of shares has been carried out in CHS’s records based on nomination and the nominee`s name is still there as Member then such member should be treated & classified as “provisional member” in Society`s records and Society should insist on documents specified above?before sale & transfer of flat happens. If such member has already sold the flat, then buyer of the Property would get property with inherent defect in its title and runs the risk associated with such deficiency in title.

Author’s take: In my humble view, any Housing Society transferring the flat without legal documents like testamentary documents (Probate of Will) or succession certificate (absence of Will) or legal heirship certificate (issued tahsildar) or document of family arrangement (between members of the same family) is not following the due process of law. Release Deed, though registered, does not satisfy the requirements set in the law and hence the title remains defective and Management Committee is ignoring the provisions of Law. The essentials of a family arrangement were laid down by the Supreme Court in the case Kale & Ors vs. Deputy Director of Consolidation.

What are the practices followed in many Housing Societies

??Many associations/Most CHS does not insist on Probate or succession Certificate

??NOC (Relinquishment Deed) from other Legal Heir(s) for Relinquishment of his/her share (by all Class 1 heirs) & interest in the said Flat in favour of the Applicant(s)

??Declaration from Legal Heir as to total list of Class 1 Heirs and Undertaking to Society of its correctness

??Release deed executed among the legal heirs

??NOC from the other successors/heirs along with the affidavit

??Public Notice in 2 widely circulated newspapers by CHS

Society should insist on following as a matter of extra precaution:

1.??????Certified true copy of Death Certificate

2.??????Indemnity bond on Rs. 500/- (old200/-) stamp paper

3.??????No Objection Certificate(s) (NOC) from all the Class 1 legal heir(s) (Spouse, Children & mother of husband) who do not object to such transmission. If all legal heirs are nominees, then declaration that they are the only legal heirs of the deceased.

4.??????Housing Society should issue Public Notice in 2 local widely circulated newspapers about the transfer/transmission, inviting any claims or objections, if any, along with substantiating their claim.

For details about Sections, rules & Bye laws, please access link: https://www.dhirubhai.net/pulse/law-process-transfer-flat-after-death-owner-housing-society-shah/?published=t

CA Harshad Shah, Mumbai [email protected]