Mridul KumbalathPartner
Ganashruthi MUPrincipal Consultant
Key Developments
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New regime for apartment ownership in Tamil Nadu to revive ageing buildings and boost redevelopment
At a time where real estate is in constant demand, especially in a growing metropolis like Chennai, unlocking the potential for redevelopment of properties in prime locations has become crucial. Until recently, no clear legal framework for redevelopment existed in the state of Tamil Nadu. The state government has streamlined this process and at the same time provided a framework to govern apartment complexes and resolve disputes between relevant stakeholders, namely, apartment owners and long term tenants. This move is likely to be welcomed both by developers, who can now access highly valued real estate for redevelopment, and owners, who can benefit from having their buildings upgraded through better construction and modern facilities.
The previous legislation of 1994 was repealed through the Tamil Nadu Apartment Ownership Act, 2022 (Act), which came into effect on 6 March 2024. On 24 September 2024, the Tamil Nadu Apartment Ownership Rules, 2024 (Rules) were also notified.
Some salient features of the Act read with the Rules (New Regime) are as under.
- The New Regime applies to both residential and commercial buildings comprising four or more apartments.
- The term ‘apartment owner’ has been defined to include not only the persons owning apartments but also persons who take an apartment on lease for a period of 30 years or longer.
- Ownership of undivided shares in project land and common areas of a project will be in proportion to the carpet area of an individual apartment, relative to the total carpet area of the project.
- Each apartment, together with an undivided share in project land and common areas, will be deemed as separate property for the purposes of tax assessment, while common areas and facilities will not be assessed to any tax separately.
- The New Regime provides a redressal mechanism in the event of non-performance by the board of managers representative of the owners’ association as well as against defaulting owners.
- The New Regime recognises existing societies registered under the Tamil Nadu Co-Operative Societies Act, 1983 and the Tamil Nadu Societies Registration Act, 1975.
- In the event of transfer of an apartment, the previous owner along with subsequent transferee will be jointly and severally liable for all unpaid tax assessments up to the time of transfer.
- Unpaid common expenses will constitute a charge on the apartment.
- Redevelopment of an existing project can be initiated if the association, either of its own accord or on request of one-fourth of apartment owners, convenes a special general meeting where a resolution for redevelopment is passed with the consent of two-third of the apartment owners in a project, or if appropriate authority has certified that building is in ruinous condition or in a condition that may endanger lives.
Concerns have been raised in relation to misuse of the provisions relating to redevelopment, where prominent developers may make lucrative offers to existing owners which may undermine the rights of dissenting apartment owners who may be in minority and not agreeable to the redevelopment process. This can create an environment where the voices of those who are less willing to redevelop are overshadowed, leading to a sense of injustice and exclusion.
Some aspects which the state government could consider clarifying would be:
- nature of services that can be withheld by an association from a defaulting apartment owner;
- what constitutes ‘majority’, i.e., whether this means simple majority of 51% or two-third majority, since decisions under certain provisions of the Act, for instance relating to submission of declaration and procuring insurance, are to be undertaken by majority of apartment owners;
- how the ‘eligible vote’ of each apartment owner is ascertained since the Act only provides that each member of the association is entitled to a percentage of vote assigned under the declaration but does not provide clarity as to how such percentage is calculated; and
- lessee holding an apartment on lease for a period of 30 years or more, who is also construed as an apartment owner. While the New Regime sets out how to ascertain who can represent the apartment in the event of co-owners, there is no guidelines in relation to an apartment leased for more than 30 years where both the owner and lessee are construed as an apartment owner.
The state government may also consider identifying a separate authority or entity to facilitate seamless registration of associations. Digitalisation of the application and registration processes under the New Regime along with the option to convene association meetings online will also go a long way in enhancing efficiency and accessibility.
