��The Maharashtra Ownership Flats Act, 1963

Prithviraj Chavan

Assistant Professor

DES’ Shri. Navalmal Firodia Law College, Pune

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Introduction

• The Maharashtra Ownership Flats Act, 1963 (MOFA) was enacted to regulate the promotion, construction, sale, management, and transfer of flats on an ownership basis within the State of Maharashtra.
• It received the assent of the President on December 12, 1963, and was first published in the Maharashtra Government Gazette on December 16, 1963.
• There are 18 sections in the Act
• During a time of severe housing shortage in various areas of the state, MOFA aimed to prevent abuses and malpractices by property promoters and developers.
• The Act outlines the responsibilities of real estate developers and builders, as well as the rights of flat purchasers, ensuring transparency and discipline in flat transactions

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• Application of the Act
• (1) This Act may be called the Maharashtra Ownership Flats (Regulation of the promotion of construction, sale, management and transfer) Act, 1963.
• (2) The Act applies to the entire state of Maharashtra and covers all flats sold on an ownership basis.
• Objects of the Act
• To regulate the promotion, construction, sale, management, and transfer of flats on an ownership basis.
• To protect the interests of flat purchasers by ensuring transparency and discipline in transactions, and by putting checks on malpractices by promoters.
• To ensure the formation of cooperative societies or companies for the management of flats.
• To mandate the conveyance of title and execution of necessary documents by promoters according to the agreement.

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Section 2 Definitions

• a) "Competent Authority" means a Competent Authority appointed under section 5A
• (a-1) "Flat" means a separate and self-contained set of premises used or intended to be used for residence, or office, show-room or shop or godown [or for carrying on any industry or business] (and includes a garage), the premises forming part of a building [and includes an apartment.]
• Explanation: Notwithstanding that provisions is made for sanitary, washing, bathing or other convenience as common to two or more sets of premises, the premises shall be deemed to be separate and self-contained;
• (b) "prescribed" means prescribed by rules made under this Act;
• (c) "promoter" means a person and includes a partnership firm or a body or association of persons whether registered or not] who constructs or causes to be constructed a block or building of flats [or apartments] for the purpose of selling some or all of them to other persons, or to a company, co-operative society or other association of persons, and includes his assignees; and where the person who builds and the person who sells are different persons, the term includes both;

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• d) "Registrar" means the Registrar as defined in the Maharashtra Co-operative Societies Act, 1960, or, as the case may be, in the Companies XV Act, 1956;
• e) "to construct a block or building of flats [or apartments]" includes to convert a building or part thereof into flats [or apartments]; 1956.
• f) the expressions, "apartment" and "apartment owner" shall have the meanings, respectively assigned to them in the Maharashtra Apartment Ownership Act, 1970.

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Section 3 General Liabilities of Promoters

• Promoters must make a full and true disclosure of the nature of their title to the land on which the flats are constructed or are to be constructed.
• They must disclose all encumbrances on the land, including any rights, titles, interests, or claims of any party over the land.
• Promoters are required to give inspection of the plans and specifications of the building on seven days’ notice or demand.
• They must disclose the nature of fixtures, fittings, and amenities provided or to be provided.

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• If the promoter is also the builder, they must disclose the design and materials used in the construction. If not, they must disclose agreements with architects and contractors.
• Promoters must specify in writing the date by which possession of the flat is to be handed over and adhere to this date.
• They must maintain a list of flats with their numbers, names, and addresses of the parties, and the price charged or agreed to be charged.
• Promoters must state the precise nature of the organization of persons to be constituted and to which title is to be passed, along with the terms and conditions governing such an organization.
• These provisions ensure transparency and protect the interests of flat purchasers by holding promoters accountable for their commitments.

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Section 4

• Promoters must enter into a written agreement for sale with each person who is to take or has taken a flat. This agreement must be in the prescribed form.
• The agreement must be registered under the Registration Act, 1908.
• Promoters cannot accept more than 20% of the sale price as an advance payment or deposit before entering into the agreement.
• The agreement must include specific particulars such as:
• The liability of the promoter to construct the building according to approved plans and specifications.
• The date by which possession of the flat is to be handed over to the purchaser.
• The extent of the carpet area of the flat, including the area of balconies.
• The price of the flat, including the proportionate price of common areas and facilities, and the intervals at which installments may be paid.
• The precise nature of the organization to be constituted of the persons who have taken or are to take the flats.

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Section 4A

• Effect of Agreement for Sale under Maharashtra Ownership Flats Act
• Unregistered Agreement Validity:
• Agreements for sale, whether entered before or after the Maharashtra Ownership Flats (Regulation of the Promotion of Construction, Sale, Management, and Transfer) (Amendment and Validating Provisions) Act, 1983, that remain unregistered for any reason, can still be considered valid.
• Despite any existing laws, judgments, decrees, or court orders, an unregistered agreement for sale can be used as evidence in specific legal contexts.
• Such an agreement can be received as evidence of a contract in a suit for specific performance under Chapter II of the Specific Relief Act, 1963.
• It can be used as evidence of part performance of a contract for the purposes of section 53A of the Transfer of Property Act, 1882.
• The agreement can also serve as evidence of any collateral transaction not required to be effected by a registered instrument.

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Section 5

• The promoter must maintain a separate bank account for sums taken as advance or deposit from flat purchasers.
• Purpose of Funds: These funds include amounts taken towards:
• Share capital for the formation of a co-operative society or a company.
• Advance outgoings such as ground rent, municipal or other local taxes, income taxes, water charges, electricity charges, revenue assessment, and interest on any mortgage or other encumbrances.
• The promoter acts as a trustee for these funds and must use them solely for the purposes for which they were collected.
• Upon demand in writing by an officer appointed by the State Government, the promoter must make a full and true disclosure of all transactions related to that account.

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Section 5 A

• The State Government may appoint an officer through a notification in the Official Gazette.
• The appointed officer must be at least of the rank of the District Deputy Registrar of Co-operative Societies.
• The appointed officer will be the Competent Authority for specified areas.
• Different officers may be appointed as Competent Authorities for different local areas.
• The Competent Authority will exercise powers and perform duties under sections 5, 10, and 11 of the Act.

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Section 6

• The promoter must pay all outgoings (including ground rent, municipal or other local taxes, income taxes, water charges, electricity charges, revenue assessment, interest on any mortgage or other encumbrances) while in possession and even after collecting sums from flat purchasers.
• This responsibility continues until the property is transferred to the flat purchasers or their organization.
• If the promoter fails to pay any outgoings collected from flat purchasers before transferring the property, the promoter remains liable to pay these outgoings and any penal charges even after the transfer.
• The promoter is responsible for any legal proceedings initiated by the authority or person to whom the outgoings are payable.

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Section 7

• After the plans and specifications of the building, as approved by the local authority, are disclosed to the flat purchasers, the promoter must not make:
• Any alteration in the structure of the flat(s) agreed to be taken, without the previous consent of the purchaser(s).
• Any other alterations or additions in the structure of the building without the previous consent of all the purchasers who have agreed to take flats in that building.

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• The building must be constructed and completed in accordance with the disclosed plans and specifications.
• If any defect in the building or material used, or any unauthorized change in the construction is noticed within three years from the date of handing over possession, the promoter must rectify it without further charge to the purchasers. If rectification is not possible, the purchasers are entitled to reasonable compensation1.
• Disputes regarding defects, unauthorized changes, or compensation must be referred to the competent authority or designated officer within three years from the date of possession

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Duties, liabilities, responsibilities and disabilities of a promoter � � �

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• The promoter must make a full and true disclosure of their title to the land, any encumbrances on it, and all outgoings related to the property.
• They are required to maintain a separate account for sums taken as advance or deposit and act as a trustee for the same.
• After plans and specifications are disclosed, no alterations or additions can be made without the consent of the persons who have agreed to take the flats.
• The promoter is responsible for rectifying any defects noticed within three years.
• They must refund amounts paid with interest for failure to give possession within the specified time.

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• The promoter cannot create a mortgage or charge on the property without the consent of the parties after the execution of the agreement for sale.
• The promoter must take steps for the formation of a co-operative society or company.
• They are also responsible for conveying the title and executing documents according to the agreement.
• Liabilities include being held accountable for any misrepresentation and fraud, especially in the prospectus, and they may face legal consequences if found guilty of such offenses.
• The act also outlines the disabilities of a promoter, which restrict certain actions without the consent of the flat buyers.

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�Alterations, additions and defects to structure and building � �

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• As per Section 7 of the Act, once the plans and specifications of a flat are disclosed,
• no alterations or additions are allowed to the structure without the consent of the person or persons who have agreed to take the flats.
• This is to ensure that the buyers get the property as per the agreed specifications.
• The same section also states that if any defect in the building or material used, or if any unauthorized change in the construction is brought to the notice of the promoter within a period specified from the date of handing over possession, it shall wherever possible be rectified by the promoter without further charge to the persons who have agreed to take the flats.

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• In cases where rectification is not possible, the persons are entitled to receive reasonable compensation for such defect or change.
• These provisions are designed to protect the interests of the flat buyers and ensure that they receive the property in the condition that was promised to them.
• It’s important for both promoters and flat buyers to be aware of these regulations to avoid any disputes related to property alterations, additions, and defects.

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� Flat purchase agreement, and its registration � �

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• Before accepting any payment as an advance or deposit from a flat purchaser, the promoter is required to execute a written agreement in the prescribed format with every flat purchaser.
• This agreement must be registered under the Registration Act to be legally binding.
• The registration provides a layer of security to the transaction and ensures that the agreement is officially recorded.
• Section 4A of MOFA outlines the consequences of non-registration of such an agreement.
• An unregistered agreement for sale may be received as evidence in a suit for specific performance under the Specific Relief Act, 1963, or as evidence of part performance of a contract for the purposes of section 53A of the Transfer of Property Act, 1882, or as evidence of any collateral transaction not required to be effected by a registered instrument.

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� �Rights, liabilities of a flat-taker

• Rights of a Flat-Taker:
• The right to receive possession of the flat as per the terms agreed upon.
• The right to full and true information regarding the property, including title, plans, and specifications.
• The right to inspect the plans and documents related to the property.
• The right to participate in the formation of a co-operative society or any other association of flat-takers.

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• Liabilities of a Flat-Taker:
• The liability to pay the agreed price, municipal taxes, water and electricity charges, ground rent (if any), and other public charges.
• The liability to make these payments at the proper time and place as per the agreement with the promoter.
• The liability to co-operate in the formation of a co-operative society or company of persons taking the flats.

These rights and liabilities are designed to protect the interests of the flat-taker and ensure a fair transaction between the promoter and the flat-taker.

It’s important for flat-takers to be aware of these provisions to safeguard their interests and for promoters to adhere to these regulations to maintain transparency and accountability in their dealings.

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Essential supplies and services � �

• “Essential supplies and services” refer to the basic amenities that must not be cut off, withheld, or curtailed by the manager of a building of flats.
• Ensuring an uninterrupted water supply to the flats.
• Providing a continuous electricity supply to the flats and common areas.
• Maintaining adequate lighting in common passages and staircases for safety and convenience.
• If lifts are installed, they must be kept in working order.
• Ensuring proper sanitation and waste management services.
• Section 12A of MOFA specifically prohibits the manager from cutting off, withholding, or in any manner curtailing or reducing any essential supply or service without just and sufficient cause.
• If such an incident occurs, the flat-taker has the right to approach the court for a direction to restore the supply or service.

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Offences by promoters and by companies � �

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• Section 12A:
• Any manager who contravenes the provisions of sub-section (1) by cutting off, withholding, or in any manner curtailing or reducing any essential supply or service without just and sufficient cause, shall, on conviction, be punished with imprisonment for a term which may extend to three months, or with fine, or with both.
• Section 13:
• A promoter who fails to comply with or contravenes the provisions of sections 3, 4, 5 (except as provided in sub-section (2)), 10, or 11, without reasonable excuse, shall be punished with imprisonment for a term which may extend to three years or with fine, or with both.
• If a promoter commits criminal breach of trust with any amount advanced or deposited with him for the purposes mentioned in section 5, they shall be punished with imprisonment for a term which may extend to five years, or with fine, or with both.

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• For failing to comply with or contravening any other provision of the Act or any rule made thereunder, if no other penalty is expressly provided, the promoter shall be punished with imprisonment for a term which shall not be less than six months but which may extend to one year, or with fine which shall not be less than ten thousand rupees but which may extend to fifty thousand rupees, or with both.
• Upon conviction of any offence under this Act (except offence under Section 12A), the promoter shall be disqualified from undertaking construction of flats for a period of five years from the date of such conviction.
• However, this disqualification does not affect permissions for construction already granted before incurring such disqualification and does not debar the promoter from seeking or being granted any additional requisite permissions for completion of constructions already undertaken.
• Section 14:
• If a company commits an offence under the Act, every person who was in charge of, and was responsible to the company for the conduct of the business of the company, as well as the company itself, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly.
• However, if a person proves that the offence was committed without their knowledge or that they exercised all due diligence to prevent the commission of such an offence, they may not be held liable.

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Current Scenario

• MOFA was effectively repealed by the Maharashtra Housing (Regulation & Development) Act, 2012 (MHA), which in turn was superseded by RERA.
• Although MOFA was not explicitly repealed initially due to partial implementation of the MHA, the introduction of RERA, a more comprehensive central legislation, implied the repeal of MOFA as per the doctrine of repugnancy.
• RERA’s provisions are more exhaustive and are intended to provide a robust regulatory framework for the real estate sector across India​​.
• Despite RERA’s overarching influence, some provisions of MOFA still apply in specific circumstances where RERA registration is not required.
• These include provisions related to non-registration of sale agreements, the right of flat purchasers to form a society if the promoter fails to do so, and the process for deemed conveyance

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• The Real Estate (Regulation and Development) Act, 2016 (RERA), being a central law, aims to regulate the real estate sector comprehensively across India.
• MOFA, being a state law, contains provisions that overlap with those of RERA. According to the doctrine of repugnancy, RERA would prevail over MOFA in cases of conflict or inconsistency.
• The Supreme Court’s reasoning in the Forum for People's Collective Efforts (FPCE) v. State of West Bengal 2021 case, which highlighted the overlap between state laws and RERA, further supports this interpretation​

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Thank You…!

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