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NOC on resale: Crucial issues unresolved

Nov 03 2012, 09:40 IST
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SummaryUnless penalties are put in place and banks roped in, decision may not achieve much.

The Maharashtra government’s decision to abolish the requirement of ‘no objection certificate’ (NOC) from a developer at the time of resale of a flat is a long overdue step that would reduce the time taken for resale transaction and also eliminate the harassment that buyers routinely undergo. It is also a major relief coming at a time when the cost of property is reaching stratospheric levels.

The practice is prevalent in other states too, and the Maharashtra example would hopefully be emulated in due course.

Need for NOC

The rationale behind the NOC is actually very simple. It gives the land-owner or society the opportunity to know the new buyer and also ensure that the seller has settled all existing dues before the sale. It is like a bona fide certificate for the seller and a surety about the seller that the land-owner gives the buyer. It can also be understood as a status report about the premises and the legal position of ownership to the government, and the banks for loan processing etc.

The rider, however, is that no money can be charged for this procedure. That is not how it has worked.

Navin Shah (name changed) had to sell his newly bought 1 BHK flat of 460 sq ft at Goregaon, Mumbai. To get the sale registered, he had to get the NOC from the developer, as the housing society was yet to be formed. The developer charged Rs 600 per sq ft, calling it ‘transfer charges’ to be paid in cash. Shah had no recourse but to succumb to this demand and pay up Rs 2.76 lakh.

If the flat is in a registered society, which also owns the land, then the NOC from the land-owner i.e. the society is required. No money is usually demanded for this NOC. However, once the sale agreement is registered and submitted, most societies charge Rs 25,000 as transfer fee to make the new flat-owner a member of the society. This is valid. However, many societies also charge an additional amount from the seller or the buyer as ‘donation’.

In Shah’s case, the developer could charge because that project had not become a society then, which meant that the developer was the landlord. According to the Maharashtra Ownership Flats Act (MOFA) 1963 and 1964, the developer has the responsibility to issue the NOC, but has no right to charge for this service.

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