The number of people living in apartments and large organised living spaces such as townships is increasing. With growing urbanisation, we see the shift away from individual homes in tier-2/3 cities too, not just metros. And legal changes, such as the establishment of the Real Estate Regulatory Authority (RERA), have also altered the landscape. So, there is a need to improve and update laws that govern apartment ownership and management, which are often a few decades old in many States.

The recent proposed changes to the Tamil Nadu Apartment Ownership Act, 1994, are in line with this thought. Many other States, such as West Bengal and Maharashtra, had also amended their respective Apartment Ownership Act in the last few years to be in tune with the ground reality.

However, as with all changes, there are some aspects in the amendments that are creating new issues for some stakeholders, in the process of trying to fix what is broken currently. As the memo is open for public comments, it may be helpful to understand the differences to provide feedback based on learnings from other States.

Demolition and reconstruction

One big change that was required in nearly all the States concerns handling of old apartments. As buildings age, there is a need to demolish and reconstruct, for the safety of the residents. But unlike decisions by a single owner, getting consensus is not easy with multiple home-owners who may be facing different financial situations and/or other constraints, such as their ability to move out to a new place when redevelopment happens.

The proposed amendments allow re-development on one of two conditions - after thirty years of construction or concerned authority certifying that the structure is unfit for occupation. Once the amendments take effect, you only need the consent of two-thirds of apartment owners. This aspect was not covered in the regulation earlier which only spoke of certain construction/changes that required unanimous consent of all owners.

The change may be positive, given the growing number of apartments that are becoming dilapidated but with reconstruction initiatives stuck due to difficulties in getting full consensus. Often, owners may have moved out of the country or city and may not feel the urgency to act on rebuilding. The change may avoid delays and reduce risks such as building collapse.

Other States have also taken the route of bringing down the bar for consensus. For example, the Maharashtra Apartment Ownership Bill was also amended in 2018 and it addressed the issue of re-construction of dilapidated buildings. The new legislation only required the consent of 51 per cent of the owners, as opposed to the old requirement of unanimous consent (or 70 per cent for non-society condos) from owners.

However, the flip side is that the decision may be taken by a few owners for financial or other considerations, which may create a lot of logistical issues for some residents, mainly senior citizens. It is also possible for builders to lure some owners with favourable terms but not complete the work on agreed time and quality.

Unlike the past where there was no protection for home owners, regulations such as RERA can step in to provide comfort, in case of errant behaviour on the part of the redeveloper. But still, it may be worthwhile to be more nuanced about the consent needed rather than a blanket percentage for all project sizes and situations.

Multiple projects

Another practical issue to consider is the case of multiple associations and dealing with a project that gets completed in multiple phases. From single building/tower, larger developments or townships are built over a few years with some shared facilities.

The proposed Tamil Nadu amendments allow only one recognised Association for a project. It also suggests formation of federation of Associations in case of large complexes comprising more than one project. It notes that the common areas and facilities declared by every Association shall be deemed as the collective common areas and facilities of the federation and cannot be partitioned or divided.

This pooling can create problems – if some projects have more common area than others, the undivided share may be difficult to determine early on. The approach of West Bengal may be helpful to consider - common areas, facilities and amenities in a certain phase of a project that is part of the federation are considered to be shared amongst only the members of the particular Association of respective phase. Such share will be noted in the Declaration submitted for the formation of Association for that phase. Such an approach of keeping the phases separate may be helpful.

Points to ponder
Nod from only two-thirds of home-owners to redevelop property has plus and minus aspects
Defining shared facilities tough in case of multiple associations, projects done in phases
Defining competent authority to oversee implementation of changes is challenging
Competent authority

Any regulation is only effective as the authority that oversees its implementation as it has the power to take action in case of errant behaviour. For example, the authority can impose penalty if documents are not submitted and it has legal rights to make important decisions that can potentially affect apartment owners. The Tamil Nadu Apartment Ownership Act amendment defines the ‘competent authority’ as the Regional Deputy Registrar of Co-operative Societies (Housing) having jurisdiction over the area.

This is probably not the best option, as having an independent official may be beneficial to ensure that the required role is discharged in a timely manner. In Maharashtra, for example, the Authority may be appointed by the State Government, an officer not below the rank of the District Deputy Registrar of Co-operative Societies, to be the Competent Authority, for an area. Haryana has the Chief Administrator, Haryana Urban Development Authority, as the competent authority. These may be options to consider, so that the intended purpose is achieved.

The author is an independent financial consultant