Transfer of Flat in Housing Society

   25-05-2019 -       UMESHCHANDRA YADAV -       no comment.

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Difference Between Transfer and Transmission of Shares:

Transfer of shares is a voluntary act of a member that takes place by way of contract. It is not exactly same as transmission of shares, as the two differ in their meaning and concept as well. The transmission of shares occurs due to the operation of law i.e. in case if the member passes away or becomes insolvent/lunatic.

1. Transfer of shares requires and instrument of transfer, whereas no such instrument is required in the transmission of shares.

Comparison Chart

BASIS FOR COMPARISON TRANSFER OF SHARES TRANSMISSION OF SHARES

Meaning :

Transfer of shares refers to the transfer of title to shares, voluntarily, by one party to another.

Transmission of shares means the transfer of title to shares by the operation of law.

Affected by Deliberate act of parties. Insolvency, death, inheritance or lunacy of the member.
Initiated by Transferor and transferee Legal heir or receiver
Consideration Adequate consideration must be there. No consideration is paid.
Execution of valid transfer deed Yes No
Liability Liabilities of transferor cease on the completion of transfer. Original liability of shares continues to exist.
Stamp duty Payable on the market value of shares. No need to pay.

Definition of Transmission of Shares
There are some cases when the transfer of shares occurs due to the operation of law, i.e. when the registered shareholder is no more, or when he is insolvent or lunatic. Transmission of shares also occurs when the shares are held by a company, and it is wound up.

The shares are transferred to the legal representative of the deceased and the official assignee of the insolvent. The transmission is recorded by the company when the transferee gives the proof of entitlement of shares.

Definition of Transfer of Shares
Transfer of shares refers to the intentional transfer of title (rights as well as duties) to shares by one person to another. There are two parties to transfer of shares, i.e. transferor and transferee.

The shares of the public company are freely transferable unless there is an express restriction provided in the articles of association. However, the company can refuse the transfer of shares, if it has a valid reason for the same. In the case of a private company, there is a restriction on the transfer of shares subject to certain exceptions.

Key Differences Between Transfer and Transmission of Shares

The significant differences between transfer and transmission of shares are provided below:

1. Stamp duty is payable on the market value of shares in case of transfer while in the transmission of shares no stamp duty is to be paid.

2. When the transfer is completed, the liability of the transferor is over. On the other hand, the original liability of shares exists.

3. Execution of valid transfer deed is necessary when there is the transfer of shares, but not in the transmission of shares.

4. Transferee pays an adequate consideration to the transferor for the transfer of shares. In the case of transmission of shares, no consideration shall be paid.

5. The transfer of shares is initiated by the parties to transfer, i.e. transferor and transferee. Unlike transmission of shares which is initiated by the legal representative of the concerned member.

6. Transfer of shares is done intentionally whereas death, bankruptcy and lunacy are the reasons for transmission of shares.

7. When the shares are transferred by one party to another party, voluntarily, it is known as transfer of shares. When the transfer of shares happens due to the operation of law, it is referred to as transmission of shares.
Conclusion:

By and larger, transfer of shares is the normal course of transferring property, while the transmission of shares takes place only on demise or insolvency of the shareholder. Moreover, Transfer of shares is very common, but the transmission of shares takes place only on the happening of the certain event.

1. How do I transfer house ownership to my wife?

Ans: in order to save income tax and capital gains tax.
If a husband transfers a rental property (or a share in a property) to his wife there is no capital gains tax payable on the transfer.

2. Do you have to pay stamp duty if you transfer a property?

Ans: Yes stamp duty is mandatory to be paid to government on purchase /sale transaction of property.

3. How do you transfer ownership of property after death?

Ans: We transfer Ownership after death of member by obtaining succession certificate / legal heirship certificate from civil court. And thereafter applying society for transmission process.

4. Can a house be gifted to a family member?

Ans: Yes, house can be gifted to family members,

5. How do you get someone’s name off a deed?
Ans. The name of person can be removed by executing deed of cancellation.

6. How much does it cost to transfer property title?

Ans. It depends upon the market value of the property .

7. Can you transfer a property to a family member ?

Ans. Yes ,it can be gifted or transferred by registering the documents , by paying appropriate stamp duties and charges.

8. How do you transfer property from one person to another?

Ans: we transfer property by gifting , by executing release deed ., by executing sale deed , by executing conveyance deed .

9. How do I transfer inherited property into my name?

Ans: With a quitclaim deed, you literally quit whatever claim you have to the property — hence the name — and transfer it to someone else. Quitclaim deeds are the most common way to transfer property among family members when money doesn’t change hands, or gift property to someone.

10. Can I transfer my house to someone else?
Ans. With a release deed, you literally quit whatever claim you have to the property — hence the name — and transfer it to someone else. deeds are the most common way to transfer property among family members when money doesn’t change hands, or gift property to someone.

11. How do I transfer house ownership?

Ans. To transfer ownership of your property, first visit your county recorder’s office to request:
1. A quitclaim deed form. You’ll enter the date, the value of your home for consideration and a legal description and location of your property.
2. A Preliminary Change of Ownership form.

12. Is nominee the owner of the flat?

Ans. The Supreme Court, in the case of Sarbati Devi, which was decided in 1983, held that the nominee is a trustee of the property and is liable to hand it over to the legal heirs. … However, such a nominee, who is registered as the owner of the property in the records of the housing society, represents the legal heir/s.

13. Is NOC required for flat registration?

Ans. For registration NOC from society is a mandatory requirement in Mumbai. Apart from this you will require the sale deed, EC (Encumbrance Certificate) for verification, Stamp Duty DD, Aadhaar & PAN of buyer & seller are required for registration.

14. What is the procedure to transfer property?

Ans. You can obtain immovable property in various perspectives, and there can be various circumstances when you wish to transfer your ownership of property to your beloved ones. The most used method of transferring or acquiring a property is through the execution of SALE DEED, which is also called TRANSFER DEED.

15. How long does it take to transfer ownership of a property?

Ans. It usually takes four to six weeks to complete the legal processes involved in the transfer of ownership of a property.

16. Transfer of flat and transfer fee
1. A member should not transfer his ownership of flat to others before completing one year, to his membership of the society.
2. A member has got ownership of a flat through court or heirs by order of court above condition of one year is not applicable.
3. Even though there is no necessity of No objection certificate for transfer of flat, according to rule 24 of the Rule 1961, he has to give 15 days’ notice to society before transferring of flat.
4. On receipt of such notice, the Secretary should place the same before the meeting of the committee and take decision thereof before 30 days and inform such decision to the member within 8 days from the decision of society.
5. If any member has demanded No Objection Certificate from the society for transfer, the responsibility of the chairman/secretary is to approve the same and if it is not possible to issue NOC then the reasons for it should be communicated to the member within eight days.
6. For transferring the membership to the nominated heirs/persons after the death of the member, the managing committee should proceed as per the provisions in Rule 25 of section 30 of the Co-operative Act.
7. It is necessary to take decision within three months on receipt of the application for transferring the share and the decision should be communicated.
8. If Society has not taken any decision within the 3 months stipulated period as per provision in Section 22(2) and society has denied such application there is a provision to appeal before the Register u/s 23(2).
9. If Society does not accept the application of transfer from member, the member can make application to the Society through Registrar of Co-operative Societies.
10. It is obligatory on the part of the Society to take decision within 60 days on such application received from the Registrar.
11. For transfer of flat, the member has to produce necessary legal documents according to Bye- law No.38(E).
12. It is necessary to deposit admission fee, transfer fee and transfer premium along with transfer application.
13. Amount of Premium shall be maximum Rs.25,000/-. Similarly it shall be Rs.25,000/- or the amount which was approved by the General body meeting of the society whichever is less. The said provision is applicable to all the flat and plot owner’s of society.
14. Transfer premium is not necessary for deceased member, mutual transfer among two members of the society or transfer among family members.
15. Society will provide no objection certificate if demanded by member to produce the same for the loan from the financial agencies. If society is not able to give such certificate of NOC, they have to inform concerned person in writing within 15 days.
16. If the Society refuses to issue NOC. then member has a right to seek justice from three members committee or making an application to the Registrar.
17. Registrar of Co-operative Societies will give his verdict on the applications regarding NOC received against the decision of the society after hearing all concerned. Such verdict shall be binding on society and member. All the above provision are applicable to flat, tenement, shop, bungalow/ plot, garages etc.

1. As a measure to obviate the necessity of making nomination or executing a Will, with attendant disputes and procedural hassles, an alternative course to facilitate transmission is to provide for the successor in the Purchase Deed itself at the time of acquiring the flat. Quite often the flat is acquired by two individuals, say husband and wife, with the intention that it should pass to the survivor. In such a case the flat may be purchased by the couple as joint tenants or joint owners with a clear stipulation that on the death of either of them, the survivor will become the sole owner of the flat. A possible way to do so is to define the purchaser in the recitals in such a way that the term ‘purchaser’ means and include the survivor. This will be an easier way to exclude other legal heirs to put their claim as heirs.

Intestate Succession

2. Intestate succession of the property of deceased takes place as per operation of law. There being no uniform law of succession, different communities are governed by different laws. Muslims for instance, are governed by Shariat law, Christian and Jews by Sections 31 to 49 of Indian Succession Act, 1924 and Parsis by Sections 50 to 56 of the Indian Succession Act, 1924. The Hindus are generally governed by the provisions of Hindu Succession Act, 1956 and some provisions of the Indian Succession Act, 1925.

2.1 Persons marrying under the Special Marriage Act, 1954 are, in the matter of succession, governed by those provisions of Indian Succession Act which are applicable to Christians, etc. Thus, if one Muslim and one Parsi get married under the Special Marriage Act, succession to their estate is governed by the provisions of Indian Succession Act, 1925. However, where both the spouses are Hindu, Buddhist, Sikh or Jain the succession to their estate will continue to be governed by Hindu Succession Act.
Safeguard in the Purchase Deed for smooth transmission.

Testamentary Succession:

3. Succession is testamentary if the deceased has executed a Will which is a legal declaration of the intention of the testator with regard to his properties to be carried into effect after his death. Will is sometimes accompanied by ‘Codicil’ which is an instrument made in relation to a Will explaining, altering or adding to its dispositions. It forms part of the Will. The Will is required to be probated if it is executed by Hindus or Parsis within the jurisdiction of Calcutta, Bombay and Madras High Courts. Probate is also necessary if the Will is executed by Hindus or Parsis outside these jurisdictions but it relates to the flat situated in these cities. As a general rule, it is not necessary to probate the Will of a Muslim. However, if the Muslim was married under the Special Marriage Act, the succession to his estate is governed by Indian Succession Act. Up to 26th May, 2002, Christians also were required to obtain probate of the Will but they have now been exempted from this requirement.

Nomination

4. Membership in Co-operative Society or Company can be conveniently transferred if the original owner of shares makes a nomination in favour of somebody else. The new model bye-laws in bye-law 33 clarifies that person acquiring membership by nomination shall hold the flat in trust till the legal heirs are brought on record and shall not have the right to ownership and shall not create third party interest or alienation in any way whatsoever.

4.1. The Model bye-laws of the housing society provide for nomination to be made by the member nominating a person or persons to whom the whole or part of the shares and/or interest of the member in the capital/property of the Society shall be transferred in the event of his death. On the death of the member the Society is required to transfer the share/interest to the nominee/nominees for which the nominee is required to apply for membership within 6 months of the death.

4.2. If the member dies without making a nomination or no nominee comes forward for transfer, the Society invites claims or objections by a public notice and then the committee decides the person who, in its opinion, is the legal heir of the deceased.

4.3. In case a flat is purchased by two persons contributing equally, only one, to be decided by them, can be the member of the Society, the other is admitted as ‘associate member’ only. As per the bye-laws, if there is a nomination, it is the nominee who succeeds as member and not the associate member. In a Company also the nominee takes precedence over all other, including the legal heirs. This was confirmed by Hon’ble Justice Roshan Dalvi in the Suit filed by Smt. Harsha Nitin Kokate against the Saraswat Bank Ltd. in Suit No. 1972 of 2008 wherein after the death of Nitin Kokate, the claim of the widow Harsha was rejected as there was nomination in favour of the nephew of the deceased. On a reading of Section 109A of the erstwhile Companies Act the Hon’ble Court held that the intent of the nomination is to vest the property in the shares which includes the ownership rights thereunder in the nominee upon nomination validity made as per the procedures prescribed.

4.4. The transmission by nomination in respect of shares in a co-operative Society is not a conclusive proof of ownership and can be challenged by other claimants in appropriate proceedings. It was held by the Hon’ble Bombay High Court in the case of Gopal Vishnu Ghatnekar vs. Madhukar Vishnu Ghatnekar reported in AIR 1982 Bom 482 that a nomination is permitted only in respect of the share and the property of the society. The society is concerned only with the shares held by a member and the land given by it to a member and not with the structure that a member may put up.

4.5. If the shares in a Company are held jointly by 2 persons, the surviving shareholder generally takes over as the sole owner. The transmission of shares in a Company is governed by the Articles of Association of that Company. As per Regulation 25 of Table A of the erstwhile Companies Act, on the death of a member, (who is a joint holder), the surviving joint holder and in case the shares are held by a single holder, his legal representatives will be the only person recognised by the Company as having any title to his interest in the shares. Where shares are registered in joint names of two brothers and the Articles provide that the survivor will be recognised, the Company will be justified in refusing to transfer the shares on death of the first holder in favour of his wife even if she had procured the succession certificate in her favour.

Transmission

5. As stated, transmission is passing of property or rights therein on the death of the erstwhile owner. It takes place in accordance with the wishes of the deceased or, in the absence of any expression of such wish, in accordance with the provisions of succession laws applicable to him. The wish is expressed either by nominating a person to take over on death or by a written or oral Will or any other testamentary disposition.

Flats in Condominium

6. As stated earlier, the legal position about ownership of flats in condominium is different from the flats in Co-operative Society or the Company. Section 4 of the MAOA, 1970 provides that each apartment, together with its undivided interest in the common areas and facilities, appurtenant to such apartment, shall for all purposes constitute heritable and transferable immovable property within the meaning of any law for the time being in force in the State. Accordingly, an apartment owner may transfer his apartment and the percentage of undivided interest in the common areas and facilities by way of sale, mortgage, lease, gift, exchange or in any other manner whatsoever in the same manner, to the same extent and subject to the same rights privileges, obligations, liabilities etc., as any other immovable property or, make a bequest of the same under the laws applicable to the transfer and succession of immovable property. Section 5 of the Act provides that each apartment owner shall be entitled to the exclusive ownership and possession of the apartment.

6.1. Unlike the flats in Co-operative Society, flats in condominium are not the property of the condominium but remain the property of the apartment owner and can be transferred like any immovable property by execution and registration of a Deed of Apartment (Sale Deed). This will, however, be subject to the procedure and conditions laid in the bye-laws of the condominium.

6.2. If a flat is acquired in a condominium by two co-owners, the rights of both the co-owners are distinctly recognised and each co-owner is treated as the owner of his share in the apartment.

Flats in Companies

7. As stated before, in case the promoter decides to constitute a company, the provisions of Companies Act will be applicable and the relationship, rights and obligations of the flat purchasers, who will be allotted shares therein, will flow from the provisions of Companies Act read with the Memorandum and Articles of Association of the Company.

7.1.  When a Company is formed in accordance with the provision of MOFA the land and building conveyed by the promoter belongs to the Company and the Articles of Association provides the nature of rights of the shareholders over the individual flat(s) as well as the manner of identifying the particular flat(s) in relation to which such rights are to be exercised. Whatever rights are held by the share holder in respect of the particular identified flat(s), are transferable by transfer of shares which represent his rights and interest in the company’s property.

7.2. This mechanism, therefore, provides a convenient and speedy manner of transferring interest in the flats in a company. The smooth operation of the system of holding flats by subscribing to shares of a company involves a very carefully drafted Articles of Association balancing the interest of the flat purchaser in the asset of the Company and to ensure that the benefit as well as cost of any improvement etc., effected in the building by the Company is equitably contributed and borne by all the shareholders.

7.3. It is in the realm of uncertainty as to whether with the amendment introduced in the definition of ‘transfer’ by the Finance Act, 2012 by insertion of an explanation making creation of an asset as a transfer, any transfer of shares in such a Company will tantamount to transfer of flat or interest in flat for tax purposes. This will have implications on computation of capital gains in application of the criteria for determining whether the asset is short-term or long-term and in application of provisions relating to transfer of immovable property.Flats in Co-operative Societies

8.  In a Tenant Co-partnership Housing Society where the flats are got constructed by the Society and allotted to the members, the issue whether the flats are attachable and saleable in the execution of a decree against the concerned member was subject of consideration by the Bombay High Court in Harsukh Jadhavji Joshi vs. Ramesh Himmatlal Shah [AIR 1974 Bom 87]. The question involved a decision about the nature of member’s interest in the flat. The Court held that the member is a tenant and the tenancy is subject to the regulations and the bye-laws. The member, therefore, has no saleable interest or disposing power in respect of the flat without the consent of the Society. The decision implied that the ownership of the building vests in the Society and not the members. In appeal, the Supreme Court, without disturbing the view that ownership vests in the Society, held the attachment and sale valid as the members have right of occupancy which right itself is a specie of the property. In other words, in a tenant co-partnership society when a member transfers his shares, he actually transfers the right of occupancy without a proprietary interest of any sort.

8.1 The right of occupancy is represented by the share certificate. Section 29(2) of the M.C.S. Act lays down that the member shall not transfer any share held by him or his interest in the capital or property unless (a) he held such share or interest for not less than one year and (b) the transfer is made to a member of the Society or to a person whose application for membership is accepted. The Supreme Court in the case of Ramesh Himmatlal (supra), therefore, held that it will be for the auction purchaser to first obtain membership of the Society and the Court, before confirmation of the sale, will insist upon his membership of the Society which, it would not be unreasonable to assume, will be granted by the Society in the ordinary course unless there are cogent and relevant reasons for not doing so.

8.2 Bye-laws lay down the procedure for transfer of shares and interest in the capital/property of the Society. Briefly stated the steps involved are –
i. a 15 days notice by the member to the Society of intention to transfer;
ii. consideration of request in the meeting of the committee as to whether the member is prima facie eligible to transfer;
iii. issue of no-objection certificate, by the Society, if so required by transferor or the transferee;
iv. execution and registration of Sale Agreement;
v. submission of prescribed documents, including application of membership by the proposed transferee and resignation of transferor, duly registered agreement and transfer fees of ₹ 500/-. Also payment of amount of premium at the rate fixed by General Body Meeting and a no-objection certificate as required under any law from any authority. A no-objection certificate is required particularly from the bankers and financiers if the transferor had taken any loan against the flat or if the transferor is a charitable trust.

8.3 In case the decision of the committee is not communicated within 3 months, the transfer application shall be deemed to have been accepted. On the transfer application having been accepted, the share certificate will be transferred to the transferee with necessary mutation of names therein. If the flat has been purchased by two brothers by contribution in equal proportion, only one will be admitted as member by the Society, the other one will remain the Associate Member only.

TRANSFER

Transfer and Transmission of Flats:

9. Multi-storeyed ownership flats in cities and big towns have come to stay because of dire necessity and manifold reasons including the ever growing need of an urban community, lack of land availability in urban areas, rise in cost of construction, restrictions under various rent legislations, security and other reasons. Being units in a large complex structure, the ownership and enjoyment of such flats is subject to conditions aimed at ensuring peaceful possession and enjoyment by other unit holders sharing common amenities and having undivided interest in land over which the building stands. Unlike an independent residential house, the management of common amenities and ownership of land in a multi-storeyed structure is with an independent entity and the rights and duties of flat owners are regulated by the respective statutes governing such independent entities.

10.  The Maharashtra Ownership Flats (Regulations of the Promotion of Construction, Sale, Management and Transfer) Act, 1963 (MOFA), which regulates promotion of the construction, sale, management and transfer of flats taken on ownership basis in the State of Maharashtra, obligates the promoter to constitute a Co-operative Society or a company as soon as minimum prescribed number of flats are taken by the purchasers and to convey the title over the land and building to such Society/ Company. This is to ensure common management and collective ownership of land and property. The rights of individual flat purchaser vis-a-vis the Society/Company and inter se are governed by the Maharashtra Co-operative Societies Act in the case of constitution of Society and, by the Companies Act, in case a company is formed. A common feature, however, is that while the legal ownership of land and building vests in the entity so constituted, the right of enjoyment by way of the right of occupation remains with the member/shareholder which right itself is a transferable right.

10.1. MOFA also provides for an alternative to the constitution of Co-operative Society/Company by permitting the flat purchasers to submit their respective apartments to the provisions of Maharashtra Apartment Ownership Act, 1970 (MAOA) and form a condominium by making a declaration u/s. 2 and executing Deeds of Apartment as per Sec. 5(2) of that Act. In case a condominium is formed each apartment owner remains entitled to the exclusive ownership and possession of his apartment in accordance with the declaration and the whole property is deemed to be owned in common by the apartment owners. They have undivided interest in the common areas and facilities. The condominium is responsible for the management of property and common areas and facilities.

10.2. Transfer of property under the Transfer of Property Act, 1882 has been defined to mean an act by which a living person conveys property, in present or in future, to one or more other living persons or, to himself and one or more other living persons and “to transfer property” is to perform such act. The Act clarifies that “living person” includes a company or association or body of individuals whether incorporated or not. “Transfer” being an act implies a conscious, voluntary action by a person in his lifetime to any other living person. Transmission is succession which involves passing of a right and obligation over a property to the heirs or others consequent upon the death of the owner of the flat. The succession is either by nomination or by testamentary disposition or intestate as per the provisions of applicable law. These are discussed in the later part of this article.


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