LOADING

LOADING

đť•Ź MEMBER LOGIN
WHITE PAPER ON APARTMENT ASSOCIATION
WHITE PAPER ON APARTMENT ASSOCIATION
SCROLL BELOW TO VIEW CONTENTS

PREFACE
This paper is being published to bring clarity on apartment ownership and formation of apartment associations in Karnataka. This also intends to dispel many misconceptions regarding apartment associations. This paper is part of our humble effort to educate our members and general public about different models of apartment ownership, laws governing different ownership models and practice in the state. This paper is not discussing various compliance requirements of apartment complexes. We are not discussing many aspects of RERA Act 2016 since for the matters concerning ownership model, formation of association and conveyance RERA prefers local law which in the case of Karnataka is KOFA. 

The whitepaper can be downloaded as pdf file by clicking below.
  Download Whitepaper  
BASIC CONCEPTS
What is an apartment association? 
Generally, an association is a group of people organised for a common purpose, having a formal structure and rules of engagement. When a group of people come together to own and manage an apartment complex as a common purpose, the association is called apartment association. Different types of apartment ownership 

Different types of apartment ownership 

1 - Condominium 
Apartment complex co-owned by a group of people who own each apartment unit along with undivided proportionate share in land as heritable and transferable immovable property. Conveyance of each apartment unit taking place through the Karnataka Apartment Ownership Act 1972 and the Registration Act 1908. A declaration is mandatory to establish ownership of the whole property that defines the whole property, list each apartment unit with associated ownership share and establish rule of engagement.

2 - Society 
A society is an organisation formed for a particular purpose or activity. In the case of an apartment, a society is formed to own the whole property and apartment owners hold a share in the society. Allocation of shares and transfer is governed by the respective act under which the society has been formed.
3 - Comparison of ownership models

APARTMENT LAWS IN KARNATAKA 
Karnataka Ownership Flats (Regulation of the promotion of Construction, Sale, Management and Transfer) Act 1972 (KOFA in short), was governing construction, sale and transfer of ownership before enactment of RERA. Though construction, sale and transfer is governed by RERA after its enactment, for the nature of association to be formed RERA looks up to KOFA since RERA prefer to follow local laws for it. KOFA, too, does not impose any specific nature of association on purchasers of apartment units but allows them to choose apartment complexes that will form association with given nature.

KOFA mandates as part of general liabilities of promoter through section 3(2)(h) to state in writing, the precise nature of the organisation of persons to be constituted and to which title is to be passed, and the terms and conditions governing such organisation of persons who have taken or are to take the flats. Since the association decides the precise nature of the ownership model of the apartment complex, it is necessary for a purchaser to know about it before making the decision of purchasing an apartment unit. Karnataka facilitates both models of ownership. If the ownership model is condominium, then Karnataka Apartment Ownership Act 1972 is applicable along with its rules and if the model is society, then Karnataka Cooperative Societies Act 1959 is applicable.

FORMATION OF CONDOMINIUM (AS PER LAW) 
Objects and reasons of the Karnataka Apartment Ownership Act 1972 states “An Act to provide for the ownership of an individual apartment in a building and to make such apartment heritable and transferable property and for matters connected therewith. WHEREAS it is expedient to provide for the ownership of an individual apartment in a building and to make such apartment heritable and transferable property and to provide for matters connected therewith”. Conveyance of apartment units in a complex as heritable and transferable property is facilitated by this act and hence the condominium model in Karnataka is governed by KAOA 1972.

Applicability of KAOA is restricted to complexes with four or more apartment units by definition of building in section 3(e) of KAOA that says ““building” means a building containing four or more apartments, or two or more buildings, each containing two or more apartments, with a total of four or more apartments for all such buildings, and comprising a part of the property” and by section 2 (application of the Act) that says “This Act applies only to property the sole owner or all of the owners of which submit the same to the provisions of this Act by duly executing and registering a Declaration as hereinafter provided: Provided that, no property shall be submitted to the provisions of this Act, unless it is mainly used, or proposed to be used for residential purposes”.

The process start with an apartment purchaser entering into an agreement with promoter as per section 4 of KOFA in which the promoter clearly mention about the ownership model of the property as condominium (in this case) as per section 3(2)(h) of KOFA (and 5(d) of Karnataka Ownership Flat Rules 1975) along with other requirements as mentioned in the act. Once the promoter specifies the nature of association as condominium in the sale agreement, the Karnataka Apartment Ownership Act (KAOA) 1972 being the law governing the model in the state, promoter has to follow the Karnataka Apartment Ownership Act (KAOA) 1972 and rules formed under the act- the Karnataka Apartment Ownership Rules (KAOR) 1974- for the conveyance of the property.

Section 7(1) of KOFA mandates the promoter not to make any alterations in the flat or in the building or construct any additional structures in the building without consent of the apartment purchaser once agreement of sale is registered. Section 7(2) of KOFA mandates the building shall be constructed and completed in accordance with the plans and specifications.

Section 5 (ownership of apartments) of KAOA says “(1) Each apartment owner shall be entitled to the exclusive ownership and possession of his apartment. (2) Each apartment owner shall execute a Declaration that he submits his apartment to the provisions of this Act and a Deed of Apartment in relation to his apartment in the manner prescribed for the purpose”. Rule 5 (conveyance of apartments) of the Karnataka Apartment Ownership Rules (KAOR) 1974mandates conveyance of apartment unit through apartment deed, section 12 of KAOA along with rule 7 of KAOR specifies contents of deed of apartment and section 13(4) of KAOA along with rule 9 of KAOR specifies the memorandum to be submitted along with apartment deed. Rule 6 (parties to deeds of apartments) of KAOR mandates execution of deed of declaration before first conveyance through deed of apartment. Section 11 of KAOA specifies the content of declaration. Section 13 of KAOA mandates floor plan also to be registered along with the declaration showing layout, location, apartment numbers and dimensions along with a verified statement of an architect certifying that it is an accurate copy of portions of the plans of the buildings as filed with and approved by the local authority.

Section 4 (status of apartments) of KAOA 1972 says “Each apartment, together with its undivided interest in the common areas and facilities appurtenant to such apartment, shall for all purposes constitute heritable and transferable immovable property within the meaning of any law for the time being in force in the State: and accordingly, an apartment owner may transfer his apartment and the percentage of undivided interest in the common areas and facilities appurtenant to such apartment by way of sale, mortgage, lease, gift, exchange or in any other manner whatsoever in the same manner to the same extent and subject to the same rights, privileges. obligations, liabilities, legal proceedings and remedies as any other immovable property, or make a bequest of the same under the laws applicable to the transfer and succession of immovable property”. Section 3 of the Transfer of Property Act 1882 says “immovable property does not include standing timber, growing crops or grass” and section 2(6) of the Registration Act 1908 define immovable property as that “includes land, buildings, hereditary allowances, rights to ways, lights, ferries, fisheries or any other benefit to arise out of land, and things attached to the earth, or permanently fastened to anything which is attached to the earth, but not standing timber, growing crops nor grass”. Hence for an apartment unit or a portion of a building to be considered as immovable property, a piece of land has to be associated with it. Therefore, the whole land area of the apartment complex is divided proportionally and attached to each apartment unit as an undivided share. Conveyance of all apartment units result in conveyance of the whole property - building along with land. This has been affirmed by the section 6(2) of KAOA (read with section 3(f) of KAOA) that says “The percentage of the undivided interest in the common areas and facilities shall not be separated from the apartment to which it appertains, and shall be deemed to be conveyed or encumbered with the apartment”.

Section 17(1)(b) of the Registration Act 1908 states that non-testamentary instruments which purport or operate to create, declare, assign, limit or extinguish, whether in present or in future, any right, title or interest, whether vested or contingent, of the value of one hundred rupees and upwards, to or in immovable property has to compulsorily registered. Karnataka High Court in the case of M. Ramakrishna Reddy vs Sub-Registrar, Rajajinagar, on 5 April 1999 observed that “The object and intent of providing for registration of instruments under the Act is to create and maintain a public record of transactions relating to immovable properties, onwhich every person dealing with an immovable property can rely with confidence, for a full and complete account of the transactions by which his title to the immovable property, may be affected”. Hence an apartment deed has to be registered compulsorily since it conveys an apartment unit which is an immovable property. Since this action affects the land by creating interest, an encumbrance record is also created. Though the deed of declaration does not convey interest or title but being a collective declaration of interest of all apartment units, it is also a compulsorily registered document under section 17 of the Registration Act 1908 and hence affect encumbrance of the land.

Section 13(3) of KAOA mandates “In all registration offices a book called “Register of Declarations and Deeds of Apartments under the Karnataka Apartment Ownership Act, 1972” and Index relating thereto shall be kept. The book and the Index shall be kept in such form and shall contain such particulars as may be prescribed”. Rule 8 of KAOR specifies the format for register of declaration and deed of apartments.

Section 11(2) and 12(2) of KAOA necessitates a true copy of declaration along with bylaws as well as every apartment deed to be filed in the office of the competent authority. In Section 3(i) of KAOA, competent authority is defined as “in relation to building constructed or to be constructed by the Housing Board, the Secretary of the Housing Board and in any other case, the Registrar of Co-operative Societies as defined in the Karnataka Co-operative Societies Act, 1959”.

Section 3(d) of KAOA defines association of apartment owners as “all of the apartment owners acting as a group in accordance with the bye-laws and Declaration”. Hence once declaration, apartment deeds of all units and bylaws are registered and the same filed with competent authority, formation of condominium is complete. Section 11 of KOFA stipulates execution of apartment deeds as per period agreed upon in the sale agreement. In absence of any such period, KOFR rule 10 stipulates the period as 4 months.

SUMMARY OF THE PROCESS 
  1. Promoter enters into an agreement with apartment purchaser for sale of apartment unit with condominium ownership model. [KOFA sections 4 & 3(2)(h), KOFR 5(d)]
  2. For any further alterations in the apartment unit or building, the promoter needs to take prior permission from the apartment purchaser. [KOFA sections 7(1), 7(2)] 
  3. Upon completion of construction of apartment complex, promoter execute deed of declaration that include a verifying statement from an architect certifying that the complex built as per the plan sanctioned by local authority [KAOA sections 5, 11, 13(1), 13(2), KAOR rule 6] 
  4. Promoter file true copy of deed of declaration in the office of competent authority [KAOA section 11(2)] 
  5. Promoter convey apartment unit along with undivided interest in common area and facilities that include land through apartment deed at jurisdictional sub registrar office [KAOA sections 12, 13(1) , KAOR rule 5, KOFA section 11, KOFR rule 10] 
  6. A true copy of the apartment deed is filed in the office of competent authority [KAOA section 12(2)]
FORMATION OF CONDOMINIUM - PRACTICE IN KARNATAKA
In most of the apartment projects, promoters are entering into a sale agreement as per section 4 of KOFA but not do not register. As a normal practice, promoters then convey the apartment unit along with undivided interest in common areas and facilities through a registered sale deed, many a time, even before completing the construction of the complex. A few of them execute a deed of declaration as a process to form an association of apartment owners under KAOA 1972. Promoters even take a special power of attorney from each owner to represent them in the process of execution of the deed of declaration. Some of them attach a copy of layout map or part of sanction plan without any verification from architect with deed of declaration. There are many instances where not all owners or apartment units are made party to declaration. In cases where promoters do not execute declaration, apartment owners come together and form associations under the Karnataka Societies Registration Act (KSRA) 1960 or the Karnataka Cooperative Societies Act (KCSA) 1959. Many apartments got themselves registered under KSRA 1960 even after executing the deed of declaration.

ISSUES WITH PRACTICE IN THE STATE
1. Promoters tend to bypass KAOA 
Despite having a clear law that mandates conveyance through apartment deed (if ownership model is condominium) and execution of deed of declaration before first conveyance, most of the promoters neglect this and convey apartment using sale deed. The requirement of a verifying statement by an architect certifying that the complex has been constructed as per plan sanctioned by competent authority appears to be the major reason behind it. Promoters who execute deeds of declaration before first conveyance also appear to be not keen on obtaining such certification.

2. Building plan modification without consent from flat purchasers 
KOFA (section 7(1)) and RERA (section 14(2)(1)) mandate promoters to take consent of all flat purchasers who have agreed to purchase one or more apartment units before making any alterations in building. But this never happens though promoters get the as built plan approved by competent authority, sometimes paying additional fee as prescribed by the law.

3. Conveyance through sale deed 
Transfer of ownership of immovable property for a consideration to one or more persons by one person or by persons having distinct interests are supported by the Transfer of Property Act 1882. It also supports transfer of interest by one co-owner as well as transfer by co-owners of shares in common property. But the Transfer of Property Act does not confer an apartment unit in a building a distinct property status that can be transferred or inherited. An apartment unit along with interest in common areas and facilities can be transferred as immovable property only if it is conveyed as per provisions of KAOA which is enacted for this purpose. Despite this when an apartment unit conveyed through sale deed in the office of jurisdictional sub registrar office, encumbrance for each apartment unit is created considering them as immovable property. But many times, especially when an apartment property includes more than one survey number, encumbrance on the land not getting recorded though an interest on it is also conveyed through the conveyance deed. This failure of administration of registration of conveyance led to many instances where some promoters found to have mortgaged apartment property without even knowledge of present owners.

4. Formation of apartment association 
The main thought process behind forming an apartment association is to form a legal entity that can engage in contracts, employ workforce and represent apartment owners in legal proceedings. Some people suggest apartment associations to have a juristic person status to perform their activities. Hence most of the apartment owners and promoters choose KSRA 1960 or KCSA 1959 to register the apartment association. Incomplete reading of section 10 of KOFA also encourages this.

The definition of “person” which is a legal entity by itself that can be found in various legislations right from the General Clauses Act 1897 to the RERA 2016 is person shall include, an individual, any company, an association of persons or a body of individuals whether incorporated or not. RERA defines a cooperative society also as a person. The KAOA defines an apartment association as all apartment owners acting as a group in accordance with bylaws and declaration. This definition is apparently derived from the definition of person. Hence apartment owners in a condominium do not need to form any other registered organisation to engage in contracts or employ workforce or represent apartment owners in legal proceedings (to sue or get sued). If go by RERA definition of person, a cooperative society and a group of owners in a condominium acting as per a mutually agreed rule have the same legal status as a person.

The concept of juristic person is only applicable to intangible entities such as cooperative society or a company that may want to own, manage and transfer assetsand liabilities. A group of people called shareholders own an interest in the entity through shareholding. In a condominium, since an apartment has a legal status of immovable property and the group of owners have a legal status of person, any other legal status is not necessary. Seeking another legal status to apartment owners is equivalent to seeking additional legal status to the group of shareholders in a company or cooperative society.

Section 10 (Promoter to take steps for formation of co-operative society or company) of KOFA states that “(1) As soon as a minimum number of persons required to form a co-operative society or a company have taken flats, the promoter shall within the prescribed period submit an application to the Registrar for registration of the organisation of persons who take the flats as a co-operative society, or as the case may be, as a company; and the promoter shall join, in respect of the flats which have not been taken, in such application for membership of a co-operative society or as the case may be, of a company”. Choice of persons to take flat as cooperative society or company or condominium is facilitated by section 3(2)(h) of KOFA while entering into an agreement with the promoter. Section 10 of KOFA is only applicable to persons who purchase flats in a cooperative society or company, and it is necessary since the KCSA 1959 or the companies act do not specify when to form an association. This section of KOFA is not applicable if persons take flats in a condominium. Being a special legislation for condominium model of ownership, KAOA defines the process of conveyance, ownership and management.

5. Competent Authority 
Both KAOA and KOFA define registrar of cooperative societies as competent authority. But citing absence of necessary notification from Government of Karnataka bestowing the responsibility on the registrar, they refuse to act as competent authority for these legislations. Competent authority of any act is responsible for its proper implementation and makes rules for it from time to time. Absence of a functioning competent authority renders important legislations of KAOA and KOFA ineffective in addressing rights of apartment purchasers to a large extent and also subject to incorrect interpretations.

FORMATION OF SOCIETY
In this model of ownership, apartment property is owned by the society and apartment purchasers hold shares in the society. In Karnataka the law governing this model is The Karnataka Cooperative Societies Act 1959.

The process starts with an apartment purchaser entering into an agreement with promoter as per section 4 of KOFA in which the promoter clearly mention about the ownership model of the property as cooperative society (in this case) as per section 3(2)(h) of KOFA (and 5(d) of Karnataka Ownership Flat Rules 1975) along with other requirements as mentioned in the act. The Karnataka Cooperative Societies Act 1959 provides for registration and management of society including its assets but does not mention when to form a cooperative society in a housing complex or conveyance of property to the society. KOFA sections 10 and 11 fill this gap. Section 10 of KOFA (read with rule 9 of KOFR) mandates that promoters submit applications for registration of cooperative society as soon as the minimum number of persons required to form a society has taken flats. Section 11 of KOFA (read with rule 10 of KOFR) mandates conveyance of property to the society as per agreement or in the absence of any agreed period, within 4 months from the date of registration of society. But absence of functioning competent authority for KOFA leave sections 10 and 11 without any supervision or enforcement.

BAF PROPOSITION
Given the ever-increasing population of our cities, ensuring affordable homes with clear titles to every family is increasingly becoming a big challenge to the State. While group housing schemes have been widely accepted as a good solution to this problem, the State has the responsibility to ensure


PREFACE
This paper is being published to bring clarity on apartment ownership and formation of apartment associations in Karnataka. This also intends to dispel many misconceptions regarding apartment associations. This paper is part of our humble effort to educate our members and general public about different models of apartment ownership, laws governing different ownership models and practice in the state. This paper is not discussing various compliance requirements of apartment complexes. We are not discussing many aspects of RERA Act 2016 since for the matters concerning ownership model, formation of association and conveyance RERA prefers local law which in the case of Karnataka is KOFA. 

The whitepaper can be downloaded as pdf file by clicking below.
  Download Whitepaper  
BASIC CONCEPTS
What is an apartment association? 
Generally, an association is a group of people organised for a common purpose, having a formal structure and rules of engagement. When a group of people come together to own and manage an apartment complex as a common purpose, the association is called apartment association. Different types of apartment ownership 

Different types of apartment ownership 

1 - Condominium 
Apartment complex co-owned by a group of people who own each apartment unit along with undivided proportionate share in land as heritable and transferable immovable property. Conveyance of each apartment unit taking place through the Karnataka Apartment Ownership Act 1972 and the Registration Act 1908. A declaration is mandatory to establish ownership of the whole property that defines the whole property, list each apartment unit with associated ownership share and establish rule of engagement.

2 - Society 
A society is an organisation formed for a particular purpose or activity. In the case of an apartment, a society is formed to own the whole property and apartment owners hold a share in the society. Allocation of shares and transfer is governed by the respective act under which the society has been formed.
3 - Comparison of ownership models

APARTMENT LAWS IN KARNATAKA 
Karnataka Ownership Flats (Regulation of the promotion of Construction, Sale, Management and Transfer) Act 1972 (KOFA in short), was governing construction, sale and transfer of ownership before enactment of RERA. Though construction, sale and transfer is governed by RERA after its enactment, for the nature of association to be formed RERA looks up to KOFA since RERA prefer to follow local laws for it. KOFA, too, does not impose any specific nature of association on purchasers of apartment units but allows them to choose apartment complexes that will form association with given nature.

KOFA mandates as part of general liabilities of promoter through section 3(2)(h) to state in writing, the precise nature of the organisation of persons to be constituted and to which title is to be passed, and the terms and conditions governing such organisation of persons who have taken or are to take the flats. Since the association decides the precise nature of the ownership model of the apartment complex, it is necessary for a purchaser to know about it before making the decision of purchasing an apartment unit. Karnataka facilitates both models of ownership. If the ownership model is condominium, then Karnataka Apartment Ownership Act 1972 is applicable along with its rules and if the model is society, then Karnataka Cooperative Societies Act 1959 is applicable.

FORMATION OF CONDOMINIUM (AS PER LAW) 
Objects and reasons of the Karnataka Apartment Ownership Act 1972 states “An Act to provide for the ownership of an individual apartment in a building and to make such apartment heritable and transferable property and for matters connected therewith. WHEREAS it is expedient to provide for the ownership of an individual apartment in a building and to make such apartment heritable and transferable property and to provide for matters connected therewith”. Conveyance of apartment units in a complex as heritable and transferable property is facilitated by this act and hence the condominium model in Karnataka is governed by KAOA 1972.

Applicability of KAOA is restricted to complexes with four or more apartment units by definition of building in section 3(e) of KAOA that says ““building” means a building containing four or more apartments, or two or more buildings, each containing two or more apartments, with a total of four or more apartments for all such buildings, and comprising a part of the property” and by section 2 (application of the Act) that says “This Act applies only to property the sole owner or all of the owners of which submit the same to the provisions of this Act by duly executing and registering a Declaration as hereinafter provided: Provided that, no property shall be submitted to the provisions of this Act, unless it is mainly used, or proposed to be used for residential purposes”.

The process start with an apartment purchaser entering into an agreement with promoter as per section 4 of KOFA in which the promoter clearly mention about the ownership model of the property as condominium (in this case) as per section 3(2)(h) of KOFA (and 5(d) of Karnataka Ownership Flat Rules 1975) along with other requirements as mentioned in the act. Once the promoter specifies the nature of association as condominium in the sale agreement, the Karnataka Apartment Ownership Act (KAOA) 1972 being the law governing the model in the state, promoter has to follow the Karnataka Apartment Ownership Act (KAOA) 1972 and rules formed under the act- the Karnataka Apartment Ownership Rules (KAOR) 1974- for the conveyance of the property.

Section 7(1) of KOFA mandates the promoter not to make any alterations in the flat or in the building or construct any additional structures in the building without consent of the apartment purchaser once agreement of sale is registered. Section 7(2) of KOFA mandates the building shall be constructed and completed in accordance with the plans and specifications.

Section 5 (ownership of apartments) of KAOA says “(1) Each apartment owner shall be entitled to the exclusive ownership and possession of his apartment. (2) Each apartment owner shall execute a Declaration that he submits his apartment to the provisions of this Act and a Deed of Apartment in relation to his apartment in the manner prescribed for the purpose”. Rule 5 (conveyance of apartments) of the Karnataka Apartment Ownership Rules (KAOR) 1974mandates conveyance of apartment unit through apartment deed, section 12 of KAOA along with rule 7 of KAOR specifies contents of deed of apartment and section 13(4) of KAOA along with rule 9 of KAOR specifies the memorandum to be submitted along with apartment deed. Rule 6 (parties to deeds of apartments) of KAOR mandates execution of deed of declaration before first conveyance through deed of apartment. Section 11 of KAOA specifies the content of declaration. Section 13 of KAOA mandates floor plan also to be registered along with the declaration showing layout, location, apartment numbers and dimensions along with a verified statement of an architect certifying that it is an accurate copy of portions of the plans of the buildings as filed with and approved by the local authority.

Section 4 (status of apartments) of KAOA 1972 says “Each apartment, together with its undivided interest in the common areas and facilities appurtenant to such apartment, shall for all purposes constitute heritable and transferable immovable property within the meaning of any law for the time being in force in the State: and accordingly, an apartment owner may transfer his apartment and the percentage of undivided interest in the common areas and facilities appurtenant to such apartment by way of sale, mortgage, lease, gift, exchange or in any other manner whatsoever in the same manner to the same extent and subject to the same rights, privileges. obligations, liabilities, legal proceedings and remedies as any other immovable property, or make a bequest of the same under the laws applicable to the transfer and succession of immovable property”. Section 3 of the Transfer of Property Act 1882 says “immovable property does not include standing timber, growing crops or grass” and section 2(6) of the Registration Act 1908 define immovable property as that “includes land, buildings, hereditary allowances, rights to ways, lights, ferries, fisheries or any other benefit to arise out of land, and things attached to the earth, or permanently fastened to anything which is attached to the earth, but not standing timber, growing crops nor grass”. Hence for an apartment unit or a portion of a building to be considered as immovable property, a piece of land has to be associated with it. Therefore, the whole land area of the apartment complex is divided proportionally and attached to each apartment unit as an undivided share. Conveyance of all apartment units result in conveyance of the whole property - building along with land. This has been affirmed by the section 6(2) of KAOA (read with section 3(f) of KAOA) that says “The percentage of the undivided interest in the common areas and facilities shall not be separated from the apartment to which it appertains, and shall be deemed to be conveyed or encumbered with the apartment”.

Section 17(1)(b) of the Registration Act 1908 states that non-testamentary instruments which purport or operate to create, declare, assign, limit or extinguish, whether in present or in future, any right, title or interest, whether vested or contingent, of the value of one hundred rupees and upwards, to or in immovable property has to compulsorily registered. Karnataka High Court in the case of M. Ramakrishna Reddy vs Sub-Registrar, Rajajinagar, on 5 April 1999 observed that “The object and intent of providing for registration of instruments under the Act is to create and maintain a public record of transactions relating to immovable properties, onwhich every person dealing with an immovable property can rely with confidence, for a full and complete account of the transactions by which his title to the immovable property, may be affected”. Hence an apartment deed has to be registered compulsorily since it conveys an apartment unit which is an immovable property. Since this action affects the land by creating interest, an encumbrance record is also created. Though the deed of declaration does not convey interest or title but being a collective declaration of interest of all apartment units, it is also a compulsorily registered document under section 17 of the Registration Act 1908 and hence affect encumbrance of the land.

Section 13(3) of KAOA mandates “In all registration offices a book called “Register of Declarations and Deeds of Apartments under the Karnataka Apartment Ownership Act, 1972” and Index relating thereto shall be kept. The book and the Index shall be kept in such form and shall contain such particulars as may be prescribed”. Rule 8 of KAOR specifies the format for register of declaration and deed of apartments.

Section 11(2) and 12(2) of KAOA necessitates a true copy of declaration along with bylaws as well as every apartment deed to be filed in the office of the competent authority. In Section 3(i) of KAOA, competent authority is defined as “in relation to building constructed or to be constructed by the Housing Board, the Secretary of the Housing Board and in any other case, the Registrar of Co-operative Societies as defined in the Karnataka Co-operative Societies Act, 1959”.

Section 3(d) of KAOA defines association of apartment owners as “all of the apartment owners acting as a group in accordance with the bye-laws and Declaration”. Hence once declaration, apartment deeds of all units and bylaws are registered and the same filed with competent authority, formation of condominium is complete. Section 11 of KOFA stipulates execution of apartment deeds as per period agreed upon in the sale agreement. In absence of any such period, KOFR rule 10 stipulates the period as 4 months.

SUMMARY OF THE PROCESS 
  1. Promoter enters into an agreement with apartment purchaser for sale of apartment unit with condominium ownership model. [KOFA sections 4 & 3(2)(h), KOFR 5(d)]
  2. For any further alterations in the apartment unit or building, the promoter needs to take prior permission from the apartment purchaser. [KOFA sections 7(1), 7(2)] 
  3. Upon completion of construction of apartment complex, promoter execute deed of declaration that include a verifying statement from an architect certifying that the complex built as per the plan sanctioned by local authority [KAOA sections 5, 11, 13(1), 13(2), KAOR rule 6] 
  4. Promoter file true copy of deed of declaration in the office of competent authority [KAOA section 11(2)] 
  5. Promoter convey apartment unit along with undivided interest in common area and facilities that include land through apartment deed at jurisdictional sub registrar office [KAOA sections 12, 13(1) , KAOR rule 5, KOFA section 11, KOFR rule 10] 
  6. A true copy of the apartment deed is filed in the office of competent authority [KAOA section 12(2)]
FORMATION OF CONDOMINIUM - PRACTICE IN KARNATAKA
In most of the apartment projects, promoters are entering into a sale agreement as per section 4 of KOFA but not do not register. As a normal practice, promoters then convey the apartment unit along with undivided interest in common areas and facilities through a registered sale deed, many a time, even before completing the construction of the complex. A few of them execute a deed of declaration as a process to form an association of apartment owners under KAOA 1972. Promoters even take a special power of attorney from each owner to represent them in the process of execution of the deed of declaration. Some of them attach a copy of layout map or part of sanction plan without any verification from architect with deed of declaration. There are many instances where not all owners or apartment units are made party to declaration. In cases where promoters do not execute declaration, apartment owners come together and form associations under the Karnataka Societies Registration Act (KSRA) 1960 or the Karnataka Cooperative Societies Act (KCSA) 1959. Many apartments got themselves registered under KSRA 1960 even after executing the deed of declaration.

ISSUES WITH PRACTICE IN THE STATE
1. Promoters tend to bypass KAOA 
Despite having a clear law that mandates conveyance through apartment deed (if ownership model is condominium) and execution of deed of declaration before first conveyance, most of the promoters neglect this and convey apartment using sale deed. The requirement of a verifying statement by an architect certifying that the complex has been constructed as per plan sanctioned by competent authority appears to be the major reason behind it. Promoters who execute deeds of declaration before first conveyance also appear to be not keen on obtaining such certification.

2. Building plan modification without consent from flat purchasers 
KOFA (section 7(1)) and RERA (section 14(2)(1)) mandate promoters to take consent of all flat purchasers who have agreed to purchase one or more apartment units before making any alterations in building. But this never happens though promoters get the as built plan approved by competent authority, sometimes paying additional fee as prescribed by the law.

3. Conveyance through sale deed 
Transfer of ownership of immovable property for a consideration to one or more persons by one person or by persons having distinct interests are supported by the Transfer of Property Act 1882. It also supports transfer of interest by one co-owner as well as transfer by co-owners of shares in common property. But the Transfer of Property Act does not confer an apartment unit in a building a distinct property status that can be transferred or inherited. An apartment unit along with interest in common areas and facilities can be transferred as immovable property only if it is conveyed as per provisions of KAOA which is enacted for this purpose. Despite this when an apartment unit conveyed through sale deed in the office of jurisdictional sub registrar office, encumbrance for each apartment unit is created considering them as immovable property. But many times, especially when an apartment property includes more than one survey number, encumbrance on the land not getting recorded though an interest on it is also conveyed through the conveyance deed. This failure of administration of registration of conveyance led to many instances where some promoters found to have mortgaged apartment property without even knowledge of present owners.

4. Formation of apartment association 
The main thought process behind forming an apartment association is to form a legal entity that can engage in contracts, employ workforce and represent apartment owners in legal proceedings. Some people suggest apartment associations to have a juristic person status to perform their activities. Hence most of the apartment owners and promoters choose KSRA 1960 or KCSA 1959 to register the apartment association. Incomplete reading of section 10 of KOFA also encourages this.

The definition of “person” which is a legal entity by itself that can be found in various legislations right from the General Clauses Act 1897 to the RERA 2016 is person shall include, an individual, any company, an association of persons or a body of individuals whether incorporated or not. RERA defines a cooperative society also as a person. The KAOA defines an apartment association as all apartment owners acting as a group in accordance with bylaws and declaration. This definition is apparently derived from the definition of person. Hence apartment owners in a condominium do not need to form any other registered organisation to engage in contracts or employ workforce or represent apartment owners in legal proceedings (to sue or get sued). If go by RERA definition of person, a cooperative society and a group of owners in a condominium acting as per a mutually agreed rule have the same legal status as a person.

The concept of juristic person is only applicable to intangible entities such as cooperative society or a company that may want to own, manage and transfer assetsand liabilities. A group of people called shareholders own an interest in the entity through shareholding. In a condominium, since an apartment has a legal status of immovable property and the group of owners have a legal status of person, any other legal status is not necessary. Seeking another legal status to apartment owners is equivalent to seeking additional legal status to the group of shareholders in a company or cooperative society.

Section 10 (Promoter to take steps for formation of co-operative society or company) of KOFA states that “(1) As soon as a minimum number of persons required to form a co-operative society or a company have taken flats, the promoter shall within the prescribed period submit an application to the Registrar for registration of the organisation of persons who take the flats as a co-operative society, or as the case may be, as a company; and the promoter shall join, in respect of the flats which have not been taken, in such application for membership of a co-operative society or as the case may be, of a company”. Choice of persons to take flat as cooperative society or company or condominium is facilitated by section 3(2)(h) of KOFA while entering into an agreement with the promoter. Section 10 of KOFA is only applicable to persons who purchase flats in a cooperative society or company, and it is necessary since the KCSA 1959 or the companies act do not specify when to form an association. This section of KOFA is not applicable if persons take flats in a condominium. Being a special legislation for condominium model of ownership, KAOA defines the process of conveyance, ownership and management.

5. Competent Authority 
Both KAOA and KOFA define registrar of cooperative societies as competent authority. But citing absence of necessary notification from Government of Karnataka bestowing the responsibility on the registrar, they refuse to act as competent authority for these legislations. Competent authority of any act is responsible for its proper implementation and makes rules for it from time to time. Absence of a functioning competent authority renders important legislations of KAOA and KOFA ineffective in addressing rights of apartment purchasers to a large extent and also subject to incorrect interpretations.

FORMATION OF SOCIETY
In this model of ownership, apartment property is owned by the society and apartment purchasers hold shares in the society. In Karnataka the law governing this model is The Karnataka Cooperative Societies Act 1959.

The process starts with an apartment purchaser entering into an agreement with promoter as per section 4 of KOFA in which the promoter clearly mention about the ownership model of the property as cooperative society (in this case) as per section 3(2)(h) of KOFA (and 5(d) of Karnataka Ownership Flat Rules 1975) along with other requirements as mentioned in the act. The Karnataka Cooperative Societies Act 1959 provides for registration and management of society including its assets but does not mention when to form a cooperative society in a housing complex or conveyance of property to the society. KOFA sections 10 and 11 fill this gap. Section 10 of KOFA (read with rule 9 of KOFR) mandates that promoters submit applications for registration of cooperative society as soon as the minimum number of persons required to form a society has taken flats. Section 11 of KOFA (read with rule 10 of KOFR) mandates conveyance of property to the society as per agreement or in the absence of any agreed period, within 4 months from the date of registration of society. But absence of functioning competent authority for KOFA leave sections 10 and 11 without any supervision or enforcement.

BAF PROPOSITION
Given the ever-increasing population of our cities, ensuring affordable homes with clear titles to every family is increasingly becoming a big challenge to the State. While group housing schemes have been widely accepted as a good solution to this problem, the State has the responsibility to ensure