Is your builder taking you for a ride over maintenance charges? Here's help
Maintenance charges are not mentioned in the allotment letter and the builder indicates a range if asked by the buyer during initial stages of the deal.
From the time one books a house to actually getting its possession, there can be plethora of charges, some disclosed upfront, while others are buried under the loads of agreement papers, which are typically signed blindly by the buyers.
One such charge is the maintenance agreement between the buyer and developer. Most buyers do not pay much heed to maintenance charges in the initial stage of booking, but it comes back to haunt them as the possession date nears.
What are maintenance charges?
Every housing society has some common areas and as per the Real Estate (Regulation and Development) Act or RERA (well, even before the Act came into existence), the promoter or the builder is responsible for providing and maintaining essential services on reasonable maintenance charges to be paid by the residents.
Once the society's Resident Welfare Association (RWA) is formed, and the maintenance work is handed over to it, the builder can no longer charge for maintenance. RWA can then devise its own set of rules for maintenance charges.
Maintenance charges are applicable for parks, gardens, lobbies, stairs, elevators, fire escapes, entrances and exits of the building, community centres, common parking areas, installations of central services such as power light, air conditioning, and things that are necessary for a society's existence, maintenance and safety.
Are they compulsory?
Maintenance charges involve a contractual element between the buyer and the developer. It is included in the allotment letter, initially issued to the buyer after he has paid the booking amount.
The actual amount, however, is not mentioned and the builder indicates a range if asked by the buyer during the initial stages of the deal.
How are they calculated?
Not all societies have the same structure when it comes to maintenance charges. In some, it may be flat and fixed from each household, irrespective of the area of the apartment. In some, they are calculated on the basis of the area of the flat.
Says Ashwinder Raj Singh, CEO, Residential Services, JLL India, "The funds will be collected from the residents, based on either the principle of equal participation, where the flat sizes are almost the same, or per square feet (psf) charges for varying flat sizes." For a resale property, where the RWA handles the maintenance, the model by-laws for RWA might give indication of the charges.
How much is the amount and when to pay?
They are not the same in every society and can be anywhere between Rs 2 psf to Rs 25 or more psf. So, for a 1,500 psf apartment, if the maintenance charge is Rs 3 psf per month, the amount will come to about Rs 4,500 per month.
The builders may ask for 12 months, or 24 months, of maintenance charges in advance at the time of possession. Once handed over to the RWA, the frequency of collecting the maintenance charges is decided by it.
How much is reasonable?
In the absence of a regulatory mandate, can the builders charge arbitrarily, and are there any rules? Says Singh, "No, the developers can't charge maintenance charges arbitrarily. Even though many state governments have made rules regarding such charges, the most effective and useful legislation that provides clear guidelines is from the state of Maharashtra."
Some heads of expenses could include repairs and maintenance of the building, service charges for housekeeping, security, common area electricity, equipments, expenses on repairs and maintenance of the lift, including charges for running the lift. Says Singh, "As per widely followed norms, 0.75 per cent per annum of the construction cost of each apartment is charged towards expenses for regular repair."
Even though this could be the biggest expense head, the actual maintenance charge should be around it. Let's work some numbers. Say, a 1,800 sq. ft. apartment costs Rs 5,000 psf amounting to a total cost of Rs 90 lakh. If 0.75 per cent per annum goes towards repairs, it amounts to Rs 67,500, i.e., Rs 3 psf per month. In such a scenario, the maintenance charges of Rs 3-4 look apt. The builders should explain if there is any drastically different figure.
When does it hurt?
If the applicability and the quantum of maintenance charges remain unknown at the time of booking, and the buyer gets to know of them only at the possession stage, it will, obviously, come as a surprise to the buyer. Also, if the builder increases the amount from the following year indiscriminately or fixes the amount on ad hoc basis, it hurts the residents.
So, at the time of buying, can these charges be disclosed upfront? "Absolutely. However, certain charges are variable like water charges, upkeep of services, unforeseen repair, etc., that can't be decided while booking of the apartment," informs Singh.
RERA to the rescue
On possession, the builder makes the buyer enter into a maintenance agreement clearly specifying the actual amount and the frequency. But, later on they can be fixed mutually between the RWA and the builder.
"Yes, that should ideally be the practice and RERA has made it a part of its provisions to ensure that residents don't have to pay ad hoc charges. The clear guidelines in the rules shall make the process smooth for the buyers," says Singh.
Resident right and defaults
As a resident paying maintenance charges, you can look at the actual amount spent by the builder on maintenance, along with the break-up. Singh says, "It is the residents' right to be aware of the amount spent by the builder on maintenance. Till a society is formed, a builder pays for the maintenance and has to keep his books open for scrutiny by the residents."
If the owner has put his flat on rent, it still doesn't absolve both him and the tenant from the responsibility of paying maintenance charges. The final responsibility even if the flat remains unoccupied, rests with the owner.
However, he can make the tenant pay the charges after putting it in the agreement letter. In case of default, the RWA may cut off or withhold supply of essential services such as supply of water, electricity, lights in passages, staircases, lifts, etc.
It's always better to have a fair idea of the maintenance charges at the time of booking an apartment as they are recurring monthly charges. Also, try and participate in the process of arriving at the charges when the RWA takes the matter in its hands.