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Tata Capital > Blog > Loan for Home > When Non-Occupancy Charges Do Not Apply: Rates, Calculation, and Exceptions

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When Non-Occupancy Charges Do Not Apply: Rates, Calculation, and Exceptions

When Non-Occupancy Charges Do Not Apply: Rates, Calculation, and Exceptions

When you purchase a house in a housing society, you have to bear some monthly fees and charges. This includes maintenance, property tax, charges for parking and amenities, etc. A lesser-known fee among these is the non-occupancy fee. 

While not all housing societies expect you to pay a non-occupancy charge, you must be aware of it. In this blog, we discuss everything you need to know about non-occupancy charges, how societies calculate them and in what situations you can avoid paying them. 

Let’s dive in and learn about non-occupancy charges in housing societies. 

What are non-occupancy charges?

Non-occupancy charges are fees housing societies impose on property owners who do not reside in their housing units but lease them out to tenants. The society charges this fee because leasing is considered a commercial activity, and you derive a monetary benefit from it. The non-occupancy charges for a rented flat are as per society by-laws which also mention how they will be calculated. 

For the housing society, non-occupancy charges are an additional source of income, and the funds generated can go towards society improvement. Non-occupancy charges should not be confused with maintenance charges, as you pay them in addition to the maintenance and service fee. While every member of the housing society pays maintenance charges, the non-occupancy charges are paid only by members who lease out their units. 

Non-occupancy charges calculation

Over the years, non-occupancy charges have been a highly debated topic in home-owning. There had been a trend where housing societies charged an arbitrary amount from property owners. This amount would usually be considerably large, making owners feel it was unfair and resulting in legal action against the housing societies. 

As a result, the Bombay High Court ruled in 2007 that non-occupancy charges cannot exceed 10% of the maintenance charges collected by the housing society. Based on this legislation, if you pay Rs.3000 as maintenance and service charges, the maximum non-occupancy amount the society can charge you is Rs. 300. 

However, it is essential to know that legislation related to non-occupancy charges varies from state to state. Some states ban levying non-occupancy charges, in which case, if a housing society demands this fee, it would be illegal. Taking time to familiarise yourself with the legislation in your state and your housing society's bylaws will help you protect your interests as a homeowner. 

When are non-occupancy charges not applicable? 

In most housing societies, there are three situations in which the non-occupancy charge would not be applicable:

1. If the housing unit is left empty, that is, no one lives there, and it remains locked. 

2. If family members of the homeowner live in the unit. 

3. If another housing society member lives in the flat without paying rent to the homeowner. 

Note that these criteria may change depending on the specific housing society bylaw. 

What happens if you do not pay non-occupancy charges?

When you do not pay the non-occupancy charges set by the housing society, they will first send you a reminder notice. If you do not make the payment even after receiving the notice, you will be considered a defaulter with outstanding dues. This means if there is a situation where you require a no-dues certificate from the society, they would deny it. 

A no-dues certificate is required by many institutions when you apply for a passport, domicile certificate, or even a bank loan. So, if your society charges a non-occupancy fee following all the legislations of your state, it is advisable not to default on the payments. 

Implications of non-occupancy charges

#1 On the property owner

For the property owner, the non-occupancy charge is the additional amount they must pay after paying maintenance and service charges. This way, they can positively contribute towards the upkeep and maintenance of the housing society, thereby maintaining property value. But what if the housing society does not follow all guidelines when levying non-occupancy charges? In this case, the owner can either pay the unfairly demanded non-occupancy charge or enter a legal battle with the housing society.

 #2 On the tenant

Sometimes, the owner may ask the tenant to pay the non-occupancy charges. In this case, the tenant gets access to all the amenities as the owner of the housing unit. These amenities may include parking spaces, swimming pools, gyms, and other common areas. However, the non-occupancy fee may burden them with an additional expenditure.

#3 On the housing society 

The significant implication of a non-occupation charge on the housing society is that they receive additional funds, which can be used for various development activities. In the long run, it helps the housing society ensure that the property’s value does not decline over time due to a lack of maintenance and upkeep. 

Can tenants pay non-occupancy charges?

According to the new model bye-laws, the owner of the housing unit is responsible for paying the non-occupancy charges. However, in most cases, homeowners ask tenants to pay the non-occupancy and maintenance charges. Both the parties, owner and tenant, usually enter an informal agreement for this arrangement. 

Such an arrangement is convenient because the tenant can pay the non-occupancy and maintenance charges as a single amount instead of two separate payments by the tenant and the owner. Since the non-occupancy charge is only a tiny amount when charged legally, this does not cause major inconvenience to the tenant. 

To sum up

Non-occupancy charges are relatively small charges levied on property owners by the housing society. If you’re planning to buy a new house to rent out, research thoroughly to ensure that the housing society levies only the legally acceptable amount on you.      

But that’s not all. When buying a new house, you must also consider the finances to pay for it. A simple solution to your fund requirements is a home loan. Tata Capital offers multi-purpose home loan with easy eligibility requirements, quick processing, and long repayment tenures. With Tata Capital home loans, you get the most competitive home loan interest rates in the market. Visit our website today to learn more! 

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