Non-Occupancy Charges – Rates, Calculation And When is it Not Applicable
May 28, 2024
Introduction
Owning an apartment or a flat in a housing society comes with several financial responsibilities, including monthly maintenance charges. But what if you decide to rent out your place instead of living there yourself? This is where non-occupancy charges come in. In this blog post, we will see what exactly are non-occupancy charges in housing society, how they are calculated, and the situations when these charges are not applicable.
Table of contents
- What are non-occupancy charges?
- How to calculate non-occupancy charges?
- Who pays the non-occupancy charges?
- When are non-occupancy charges not applicable?
- Conclusion
- FAQs
What are non-occupancy charges?
Non-occupancy charges represent fees imposed by housing societies on property owners who opt to lease their units rather than reside in them. This fee structure arises from the recognition of leasing as a commercial endeavour, generating financial gains for the property owner.
These charges serve as supplementary income streams for housing societies where the proceeds are often set aside for enhancing community amenities or undertaking maintenance projects. It's crucial to differentiate non-occupancy charges from maintenance fees, as they constitute separate financial obligations.
Non-occupancy charges are implemented to encourage timely leasing or ensure that properties are not left vacant for extended periods, thereby safeguarding the overall welfare of the property or community.
How to calculate non-occupancy charges?
For non-occupancy charges calculation, the first step would be to determine the service fees component of the monthly maintenance cost. Then, apply the 10% limit (based on a ruling that applies to certain jurisdictions such as Maharashtra) to ensure that the non-occupancy fees do not exceed it. This ensures fairness and prevents excessive charges for property owners who lease out their units within the society.
For example, if the monthly service fee is INR 5,000, the non-occupancy charges should not surpass INR 500 (10% of INR 5,000). If the non-occupancy fees calculated exceed this limit, they should be adjusted accordingly to comply with the 10% rule. It is important to note that limitations on non-occupancy charges can vary by region.
Who pays the non-occupancy charges?
Non-occupancy charges are typically paid by property owners who lease out their units within a housing society or community. These charges serve as a financial obligation for property owners who derive rental income from their units but do not reside in them.
However, if agreed upon and stated in the tenancy agreement, the tenant may assume responsibility.
When are non-occupancy charges not applicable?
Non-occupancy charges in society are typically not applicable in 3 situations:
- If the housing unit remains empty and locked with no occupants.
- If close family members of the homeowner reside in the unit.
- If the owner is residing in the unit.
Conclusion
If you are planning to rent out your apartment in a housing society, understanding non-occupancy charges is essential. For more informed decisions, it is important to know your society’s rules and any local rules on the limits on these charges.
Planning to purchase an apartment with the intention of renting it out? SMFG Grihashakti provides versatile home loan solutions with straightforward eligibility criteria, affordable interest rates, and flexible repayment terms. Contact us to know more!
FAQ's
What is the purpose of non-occupancy charges?
Non-occupancy charges serve to compensate housing societies for the upkeep of communal facilities and services when property owners choose to lease out their units instead of residing in them.
Can non-occupancy charges be negotiated?
While it may be possible to negotiate non-occupancy charges in certain cases, it is dependent on the housing society's policies and the agreement between the property owner and the tenant. It is also essential to review the society's by-laws and engage in transparent communication with all parties involved to explore the possibility of negotiation.
Are there any legal implications of non-payment of non-occupancy charges?
Failure to comply with these financial obligations may result in penalties, fines, or legal action initiated by the housing society or homeowner association. It is essential for property owners to fulfill their financial responsibilities to avoid potential legal consequences.
How can property owners avoid disputes related to non-occupancy charges?
In order to avoid disputes regarding non-occupancy charges, property owners should thoroughly review the housing society's by-laws and communicate transparently with tenants about their financial responsibilities. There should be clear agreements in rental contracts regarding the payment of non-occupancy charges that can prevent misunderstandings and potential conflicts in the future.
What are the criteria for levying Non-Occupancy Charges?
The criteria for levying non-occupancy charges typically include:
- Property vacancy for a specified period of time.
- When the property owner leases out the unit to tenants.
- Any additional conditions specified in the society's by-laws or rental agreements.
What happens if the flat-owner refuses to pay Non-Occupancy Charges?
If the property owner refuses to pay non-occupancy charges, the housing society may issue a reminder notice. If they continue to not make the payments, it could lead to the flat-owner being declared a defaulter which could result in the society withholding a 'no-dues' certificate necessary for property transactions.
Disclaimer: *Please note that this article is for your knowledge only. Loans are disbursed at the sole discretion of SMFG Grihashakti. Final approval, loan terms, disbursal process, foreclosure charges and foreclosure process will be subject to SMFG Grihashakti’s policy at the time of loan application. If you wish to know more about our products and services, please contact us.