Tamil Nadu Apartment Ownership: Current Legislation Vs. 2022 Act

In December 2022, after much deliberation, the State Government notified the Tamil Nadu Apartment Ownership Act, 2022[1], vide G.O (ms) no. 566, post receipt of the presidential assent. The 2022 Act is a repealing statute and a complete overhaul of the three-decade-old law, the Tamil Nadu Apartment Ownership Act, 1994, that currently governs the administration of apartment communities and regulation of use of common areas and facilities, albeit inadequately.

While the objectives of the 1994 Act are laudable, the real estate sector has undergone drastic transformation and expansion in all spheres since the enactment of the 1994 Act. Hence, there exists a dire need to repeal and re-enact the 1994 Act to align it with the peculiarities of this sector and to protect the divergent interests of multiple stakeholders.

In view of burgeoning development in the industry, the 2022 Act makes sweeping changes which aim at addressing the issues that arise in the present nature of community development and its administration. However, the State Government is yet to give effect to the provisions of the 2022 Act.

Significant changes introduced by the 2022 Act

The scope and impact of the new provisions and conceptual changes to certain key provisions of the 1994 Act are set out below: –

  • Applicability

Even though the Act does not expressly specify its applicability, the existence of a threshold limit in the definition of ‘building’ implies that the Act does not apply to a single independent unit as the intent of the Act seems to bring only ‘building’ comprising four or more apartments within its ambit. Moreover, a bare perusal of the 2022 Act indicates that it applies to existing buildings as well as future projects.

  • Submission of ‘Declaration’ – Only one for each project & a one-time exercise

Present position: The 1994 Act mandates every apartment owner to individually file a ‘Deed of Apartment’ for their respective apartment and the available common areas and facilities in the project and get the same registered with the concerned Sub-Registrar. Since the apartment owners do not have all the information with respect to the available common areas and facilities in the entire project, the deed of apartment filed by each apartment owner of the same housing complex will be inconsistent with one another. Further, there is a lack of clarity on the applicable stamp duty and registration fee to register the Deed of Apartment.

2022 Act: The Act has introduced the concept of ‘Declaration’ wherein details of the project are to be compulsorily declared for ongoing, new as well as completed projects. The responsibility to file the declaration is cast on the stakeholder who is managing the project. Therefore, the problem of inconsistency and irregularity is being addressed in the 2022 Act as the responsibility to file the declaration is cast on the person who has the complete information and wherewithal to carry out the necessary filing. As the declaration captures the details of the present or existing apartment owners and the common area and facilities part of the project, this ensures that the apartment owners are well aware and informed of their rights and responsibilities and also the details of the project.

Moreover, the requirement of compulsory registration with the concerned Sub-Registrar seems to have been dispensed with to ease the process of filing as the declaration is just a mere affidavit where the details of the project and the common areas and facilities part of the project would be declared; it does not in any manner qualify as a transfer deed.

  • Association of apartment owners – only one recognised association

Present position: Under the 1994 Act, the apartment owners were permitted to form associations under the Tamil Nadu Societies Registration Act, the Co-operative Societies Act or the Apartment Ownership Act. Since no specific provision is stipulated under the Societies Registration Act or Co-operative Societies Act for governing housing complexes, a great deal of subject-specific issues were handled without any guidance. As the RERA Act has recognised phase-wise development, the formation of multiple associations in the same complex is a possibility under the 1994 Act which gives rise to various complications and ineffective management of the housing complex.

2022 Act: The 2022 Act envisages the associations to be compulsorily formed only under this enactment as it has been specifically enacted to safeguard and address the concerns that may be faced by the apartment owners and only one association is recognised for each project. However, the formation of an association is a possibility only if the declaration is filed for the project.  Even though the 2022 Act recognises the existing registered associations or societies, filing of declaration seems to be a mandatory pre-requisite.

  • ‘Federation’ of associations recognition of phase-wise development

Present position: Due to the existence of multiple associations in a large housing complex or townships developed phase-wise, issues pertaining to the division or partition of common areas and facilities between the associations of the same project are always a possibility and growing concern.  

2022 Act: To address the issue of partition and division of common areas between the associations of different phases, the 2022 Act has introduced the concept of ‘Federation’ where the associations formed for multiple phases join together and form a federation for effective management and administration of their “collective” common areas and facilities which are intended for the “common use” of all phases in the project.

  • Consistent formula for determining undivided interest in common area

Present position: The 1994 Act provides for the determination of ‘plinth area’ to arrive at the percentage of the undivided interest of each apartment owner in the common areas and facilities of the project. As there is no standard definition for measuring the plinth area, there exists no clarity or consistency in arriving at the undivided interest of each apartment owner in the common areas and facilities.  

2022 Act: As ‘carpet area’ is a pre-defined and widely used term under the RERA Act, to avoid discrepancies, the 2022 Act provides a consistent and specific formula to calculate the percentage of undivided interest of each apartment owner by using carpet area.

  • Provision for redevelopment

Considering the existence of several old and dilapidated apartment complexes which could not be re-developed due to a lacuna in the legal ecosystem that mandated 100% concurrence from owners to commence redevelopment, the 2022 Act has introduced a specific provision for redevelopment. The 2022 Act has stipulated that any apartment complex can be re-developed if (i) 2/3rd of the apartment owners are in agreement for re-developing the said building or (ii) if the appropriate authority has certified the building to be in a ruinous condition that is likely to endanger the occupants.

The dissenting minority apartment owners cannot take a stand-alone position and halt the redevelopment of a building but instead, are bound by the decision of the majority apartment owners. In case the dissenting minority objects or creates hurdles to redevelopment, appropriate steps can be taken to evict the obstructing owners. This provision will prevent the minority apartment owners from hijacking the process of redevelopment to the disadvantage of the consenting apartment owners. The modus operandi of the process for re-development has been proposed to be covered in detail in the Tamil Nadu Apartment Ownership Rules.

  • Comprehensive definitions that are consistent with RERA Act

In order to align with the provisions of the RERA Act, the 2022 Act has brought in definitions of ‘Apartment’, ‘Carpet area’, ‘Common areas and facilities’, ‘Promoter’, etc.

  • Introduction of penal provisions

Present position: Even though the 1994 Act has mandated the filing of deed of apartment and the formation of associations, the said Act has not stipulated any penal provisions for non-compliance with its provisions. In the absence of express penal provisions in the 1994 Act, the enforcement of such mandated provisions poses a challenge.

2022 Act: The 2022 Act has made the filing of declaration and formation of association mandatory, failing which, the penal provision stipulated for such non-compliance will take effect. Furthermore, to ensure that the maintenance charges are collected effectively by the association, the 2022 Act has stipulated penal interest for non-payment or delay in payment of maintenance charges. Additionally, a specific provision has been included to create a charge on the apartment in order to recover the dues of the association.

  • Introduction of grievance redressal mechanism

One of the most significant additions to the 2022 Act is the introduction of a grievance redressal mechanism to regulate, protect and enforce the interest of the aggrieved apartment owners. This would ensure greater accountability of the association towards the apartment owners and significantly reduce fraud, mismanagement of funds or abuse of their dominant position. One of the goals of the Act was to offer the apartment owners timely and affordable resolutions of their grievances, and the introduction of the grievance redressal mechanism would aid in achieving such a goal.

Comparative Chart

A comparative chart of the provisions of the 1994 Act vis-à-vis 2022 Act is given below: –

Title

1994 Act

2022 Act

Applicability

Building having a minimum of 5 units.

Building having a minimum of 4 units.

Associations

Permitted to form associations under the Tamil Nadu Societies Registration Act, Co-operative Societies Act or Apartment Ownership Act.

The associations are to be compulsorily registered only under this enactment.

Existence of multiple associations for each project.

Only one association is recognised for each project.

Deed of apartment or Declaration with respect to CAM

‘Deed of Apartment’ is mandated to be filed by each apartment owner.

Only one ‘Declaration’ should be filed for a project by the promoter or the majority of apartment owners.

No time limit prescribed.

Time limit prescribed.

Registration

Deed of apartment to be registered under the Registration Act, 1908.

No requirement of registration of the declaration.

No specific provision for non-compliance with registration requirement.

Federation

No such provision exists.

The associations formed for multiple phases can join together and form a ‘Federation’ for effective management of the collective common areas and facilities of the project.

Redevelopment

No such provision exists.

Any apartment complex can be re-developed if 2/3rd of the apartment owners are in agreement for re-developing the said building or if the appropriate authority has certified the building to be in a ruinous condition likely to endanger the occupants.

Penal provisions

No such provision exists.

Penal provisions prescribed for non-compliance with the provisions of the Act.

Conclusion

As is evident, the 2022 Act assiduously attempts to recognise the challenges faced by the industry and has sought to address the issues that were not comprehensively touched upon or dealt with by the 1994 Act. The 2022 Act also provides for practical and much-needed revisions to the 1994 Act. The 2022 Act, most importantly, removes the drafting ambiguities that have been plaguing the 1994 Act.

The ramifications of the 2022 Act cannot be precisely evaluated beforehand as many new and novel concepts have been introduced to cater to the needs and challenges in the ever-changing housing industry. The effective implementation of the 2022 Act plays a crucial role in its success. However, despite being notified in December 2022, the provisions of the 2022 Act are yet to be given “effect to” and as a result, the 1994 Act continues to apply at present.

That being said, only time will decide the fate of the well-intentioned 2022 Act, which, prima facie, appears to be much more in alignment with the constantly changing trends in the housing industry vis-à-vis the 1994 Act.

Key Takeaways of 2022 Act: –

  • Comprehensive definitions in line and consistent with RERA
  • Submission of ‘Declaration’ – Only one for each project & one-time exercise
  • Only one recognised association
  • Recognition of phase-wise developments in line with RERA – Concept of ‘Federation’
  • Consistent formula prescribed for determining undivided interest in common area
  • Provision for redevelopment
  • Single competent authority
  • Removal of mandatory registration under the Registration Act
  • Introduction of penal provisions and grievance redressal mechanism

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