One of the biggest advantages of being a resident in a gated community is the privilege of enjoying various facilities that the community has to offer – Swimming pools, playgrounds, gardens, Sport Centres, Gym, Clubhouse/recreational centres, etc. Constant usage of these facilities also means that they will require regular maintenance. This is precisely why flat owners pay Apartment maintenance charges. In simple terms, it is a carefully calculated amount that residents pay on a timely basis to the Resident Welfare Association (RWA) or Society Management for the upkeep of the above-mentioned common areas.
Why pay Apartment maintenance fee?
A valid question. You might think – It should be the responsibility of the builder or project developer to repair and maintain the infrastructure. But according to Section 6 of Real Estate (Regulation and Development) Act 2016, “Every allottee who has entered into an agreement for sale , to take an apartment, plot or building as the case may be under Section 13, shall be necessary payments in the manner within the time as specified in the said agreement for sale and shall pay at the proper time and place, the share of the registration, municipal taxes, water and electricity charges maintenance charges, ground rent and other charges, if any.” Hence, you are legally bound to pay Apartment maintenance charges if you are an apartment owner.
What are the different aspects covered under Apartment maintenance charges?
- Contribution to Repair and Maintenance Fund: At the rate fixed by the general body from time to time, subject to the minimum of 0.75 percent per annum of the construction cost of each flat for meeting expenses of normal recurring repairs.
- Service Charges (Housekeeping, Security, Common Area Electricity, Equipment): Service Charges are borne by all members and divided equally by the number of flats.
- Expenses on Repairs and Maintenance of Lift, Including Charges for running the Lift: Divided equally by all members irrespective of whether they use the lift or don’t.
- Sinking Fund: Apartment maintenance charges for this is decided by the General Body, subject to minimum of 0.25% per annum of the construction cost of each flat.
- Non-Occupancy Charges: These charges are supposed to be paid by flats which are rented or not occupied the apartment owners. It shouldn’t exceed 10% of the service charges.
- Parking Charges: Depends on the total number and size of inlets provided in each flat.
- Property Tax: Not applicable outside Maharashtra as this is paid directly to the municipality.
- Water Charges: Depending upon actual consumption of each flat or number of water inlets.
- Insurance Charges: These are certain charges paid by residents for insurance of building and equipment. You can pass on any insurance premium meant for shops/flats used for commercial purposes to such shops/flats itself.
- Interest on Defaulted Charges: At an amount decided by the general body, this is calculation for late payment of Apartment maintenance charges by method of simple interest not exceeding 21% per annum.
- Lease Rent: This is charged based on per square ft of the built-up area.
- Other Charges: Other charges may include Non-Agriculture Tax, contributions to election fund or any other charges as decided by the association from time-to-time per their specific requirements.
What are the Different Methods of Calculating Apartment maintenance?
After the association decides how much amount it’s going to collect from members as part of maintenance, the next step is for the society to determine which method of maintenance collection will suit appropriately for the society complex. The three most implemented methods of calculating maintenance are as follows:
1. Per Square Feet Charge
In this method, Apartment maintenance charges are based on the total sq. Ft. area of the apartment. This is most implemented in communities where the sizes of flats are different. For example, if the per square feet maintenance charge for a flat is Rs. 2.0 per square feet per month and your apartment measures 1000 sq. Ft. in area, then the maintenance charge is Rs. 2000 per month. A downside to this method is that owners of larger flats and villas would have to pay a larger amount towards the maintenance of common areas which are used by all residents equally.
2. Equal maintenance Fee
Usually, this method is implemented in apartments where the sizes of all flats are equal. The total maintenance charge which is to be collected every month is divided by the number of flats/units. This may seem like the ideal situation, but it can be unfair in apartment complexes where the sizes of flats vary.
3. Hybrid Method
This method is a combination of the two methods above. A part of the Apartment maintenance charges are charged equally among all owners. The combination of bills into different heads is (a) The square feet charges and (b) Equal charges. This is considered as a fair method but it’s a bit more complicated than the other two methods. Read about what constitutes as square feet charges and equal charges in this blog.
Timeline for Payment of Maintenance Charges
The frequency of collecting and payment of maintenance varies from monthly, quarterly, Semi-Annual and Annual. Once the association adopts a method of maintenance charge calculation, it has to decide the timeline on 3 primary factors:
- Frequency of Major Society Expense Bills.
- How willingly are members ready to pay the amount in bulk or advance.
- How easily the association can adopt and implement the methods with less effort or administration.
GST Implications on Apartment maintenance charges
On July 22, 2019, the Finance Ministry issued a circular on the GST payable by RWAs. For GST to be levied on housing societies, they must fulfil two conditions:
- If the monthly contribution of flat owners exceeds Rs. 7,500 they will have to pay GST at 18%.
- If the aggregate of the charges levied by the society exceeds Rs. 20 lakhs in a financial year, GST is applicable.
If even one of these conditions remain unfulfilled, housing societies are not required to pay GST. If you want to know more about input tax credits and reverse charge mechanism, click here.
Best Practices for Apartment Maintenance Charges
- Bigger the size of a Gated Community, larger is the number of apartment owners who are required to pay maintenance to the association from time to time. Often, this is one of the biggest challenged Management Committees face. There are so many factors that go into the final maintenance due that it’s common for errors and miscalculations to take place. This is precisely why societies are switching to Society accounting software. The automated calculations in such softwares almost leaves no room for errors and ensures accurate calculations without much effort or hassle. Read more about the advantages of accounting softwares here.
- Residents have full rights to ask for a complete breakdown of the maintenance fee and proper receipt for deposit, rent and maintenance paid.
- Who even has time these days to go all the way down to the association office to manually pay your Apartment maintenance charges? You can save a lot of time and effort by simply adopting to a Society accounting software like ADDA that will give you timely reminders on maintenance dues, generates instant receipts and keeps a track of all the maintenance dues you have paid up-to date.
And that’s everything about Apartment maintenance charges that you need to know! Which system of maintenance collection does your community use?
Contact us for more information regarding Apartment maintenance charges and how a software can automate that process for you.