In the first part of this series, we explored the legal and practical challenges faced by apartment owners and associations and the need for clarity about the legislations that govern apartment ownership in Karnataka. Part 2 focused on frequently asked questions about the registration of apartment associations and took a closer look at the regulatory landscape in the State.
Effective management of apartment associations is critical to ensure the smooth functioning of residential communities. However, disputes over maintenance charges, redevelopment processes, financial mismanagement and compliance with legal norms often create conflicts between stakeholders.
Part 3 of our series on apartment ownership regulations focuses on ways to protect stakeholders. It highlights the importance of clear dispute resolution, digital transparency, standard governance practices, and strong regulatory oversight to ensure fairness, efficiency, and accountability in apartment associations.
Resolving disputes
An organised and step-by-step approach is essential to deal with various disputes depending on their complexity.
| Over the past few years, Bengaluru has seen clashes between builders and flat owners over construction in common areas. Recently, builders and flat owners of the HM Tambourine apartments in Bengaluru got into a tussle, as representatives of the builder damaged flex banners and an internal fence erected by the residents. This tussle dates back to confusion about ownership over the common areas, which stems from a lack of clarity on laws about apartment associations in Karnataka. |
The absence of a dedicated grievance redressal mechanism within the current laws such as Karnataka Apartment Ownership Act (KAOA) and Karnataka Ownership Flats Act (KOFA) often results in:
- Prolonged disputes
- Lack of accountability
- Financial distress for apartment owners.
- Challenges for residents, such as arbitrary maintenance charges, lack of clarity on builder obligations and delays in obtaining necessary approvals.
Disputes related to property ownership, maintenance charges and builder obligations are presently being addressed through:
- RERA complaints (Section 31 of the Real Estate (Regulation and Development) Act, 2016)
- Civil court proceedings under the Civil Procedure Code, 1908
- Alternative dispute resolution methods such as arbitration (under the Arbitration and Conciliation Act, 1996, Section 7)
- Mediation (under the Mediation Act, 2023, Section 5).
However, these existing mechanisms can be time-consuming. Without a structured system, minor issues may escalate into major conflicts, leading to unnecessary legal proceedings and strained community relationships.
Settling for minor disputes
As a first step, an internal ‘ombudsman’ within the association can handle minor disputes such as disagreements over maintenance charges, minor construction defects and delays in routine repairs. This helps resolve conflicts without involving external authorities. The presence of an ombudsman offers a quick, cost-effective solution and prevents minor issues from escalating into prolonged disputes.
For more complex issues, such as disputes concerning construction quality, compensation for redevelopment or delays in title transfers, a competent authority should be empowered to mediate and regulate. This authority should have a well-defined mandate, including:
- Authorisation and certification: Ensuring that redevelopment plans and construction activities comply with legal norms and regulations.
- Registration and verification: Overseeing the registration of apartment associations and verifying their financial and operational records to prevent fraudulent activities.
- Investigative and punitive actions: The competent authority should be empowered to investigate and take punitive action against developers or association officials violating legal provisions. This may include imposing penalties, issuing warnings or even suspending developer registrations when redevelopment agreements are not honoured or legal procedures are bypassed.
Moreover, the State Government can establish a specialised appellate authority under the Real Estate (Regulation and Development) Act (RERA) to handle unresolved matters efficiently, separate from general civil courts. This would allow the Real Estate Appellate Tribunal, under Section 84, to entertain cases arising from the jurisdiction of the competent authority.
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Digital transparency
Transparency in finances and operations is crucial for trust among stakeholders in apartment associations. Digitalising records and granting residents access to financial statements, expense reports, meeting minutes, and decisions enhances accountability. An online portal should be created to upload key documents like financial records and audit reports.
This allows residents to review them regularly, ensuring compliance with rules, boosting confidence in management, and preventing financial irregularities.
Model bye-laws for efficient governance
Uniform model bye-laws can help in effective management of apartment associations. These bye-laws should cover key aspects such as:
- Financial management: Clear rules on budgeting, expenditure and financial disclosures to prevent mismanagement.
- Operational responsibilities: Guidelines on maintenance, repair obligations and other administrative duties.
- Member rights: Provisions outlining residents’ rights regarding decision-making, voting and dispute resolution.
Moreover, apartment associations should undergo regular external audits conducted by independent certified auditors or registered auditing firms with no direct relationship to the management. Auditor rotation every few years would help maintain impartiality and prevent undue influence.
Residents must have access to audit reports ahead of the Annual General Meeting (AGM), allowing adequate time for review and queries. The AGM should include a transparent discussion of the audit findings, with corrective actions tracked and reported at subsequent meetings. This ensures accountability and prevents financial mismanagement within apartment associations.
Frequently asked questions on safeguarding stakeholders in apartment associations
Q: What are the key stakeholders involved in apartment ownership?
A: Apartment owners, associations, developers, and regulatory authorities play key roles in managing residential complexes. Each stakeholder has legal responsibilities under KAOA, KOFA, and RERA.
Q: What are the challenges faced by apartment associations in financial management?
A: Apartment associations may encounter difficulties in collecting maintenance fees, managing funds and ensuring financial transparency. Proper auditing and compliance with financial disclosure regulations can help address these challenges.
Q: What legislation mandates provisions related to the financial management of apartment associations?
A: Currently, no single law comprehensively governs financial management for apartment associations in Karnataka.
Q: What dispute resolution mechanisms are available for apartment-related conflicts?
A: Disputes related to property ownership, maintenance charges and builder obligations can be addressed through RERA complaints (Section 31 of the Real Estate (Regulation and Development) Act, 2016), civil court proceedings under the Civil Procedure Code, 1908, or alternative dispute resolution methods such as arbitration (under the Arbitration and Conciliation Act, 1996, Section 7) and mediation (under the Mediation Act, 2023, Section 5).
Q: What legal reforms can improve governance in apartment associations?/ How can governance in apartment associations be strengthened through legal frameworks?
A: Potential reforms include stricter enforcement of KAOA registration, mandatory digital documentation of title transfers and clearer guidelines on redevelopment consent requirements. Improved grievance redressal mechanisms can also enhance stakeholder protections.
Role of competent authorities
Competent authorities protect stakeholder interests and ensure compliance with laws. Their responsibilities should include:
- Addressing disputes, certifying compliance and facilitating transfer of common areas, among other things.
- An impartial mechanism should resolve conflicts in redevelopment, construction quality and maintenance disputes, ensuring fairness and transparency.
- Timely and legally compliant transfer of common areas to residents’ associations is essential to avoid disputes and ensure clear ownership and maintenance responsibilities.
- Apartment associations must also strictly follow statutory regulations, including RERA guidelines, to enhance accountability and prevent developer misconduct.
- Moreover, competent authorities can introduce training programmes for apartment association members and residents to increase awareness of their legal rights and responsibilities.
A clear framework to protect stakeholders in apartment associations is crucial for building trust, ensuring smooth operations, and holding everyone accountable. It helps make fair decisions, reduces conflicts, and improves the quality of life for residents.