Own a property in a cooperative housing society? Here is why nomination is important

By virtue of being a nominee in the records of a Society, the complete title to the shares and property of the deceased member does not automatically vest in or transfer in favour of such a nominee. The nominee is supposed to merely hold such shares and property for the benefit of the actual legal heirs of the deceased member.

Increase in population density in major cities led to increase in Floor Space Index (FSI) and this coupled with advancement in construction technologies has led to both requirement and ease of construction of high-rise buildings with multiple units or flats in such cities instead of traditional open plot bungalows. This has led to the concept of common ownership and interest in respect of the areas not forming part of individual units/flats i.e. common areas.

To avoid conflicts as well as for better maintenance of common areas, a concept of association of persons/owners such as co-operative society, condominium etc. came into being. Cooperative societies are most common forms of association, which are required to be formed by developers upon achieving certain sales/bookings in the relevant real estate project.

Cooperative societies are preferred by most since they have multiple benefits, including time and energy savings where a flat owner is not required to personally ensure things - which would otherwise be required in an independent bungalow/plot such as filling up of water tanks, maintenance including cleaning of common areas, security and so on.

Also, due to the divided costs many societies are also able to provide for various luxury amenities for its members which include theatres, auditoriums, squash courts, badminton courts, SPA, jacuzzi, swimming pool and provide for play areas for children, garden, gymnasium, swimming pool, clubhouse, library, study areas, conference rooms etc.

What is Nomination and who is a Nominee?

As a member of a cooperative society, an important aspect that one should keep in mind is submission of a nomination form. In simple words, nomination is an instruction given to the society as to how the relevant member’s shares should be transferred upon his death. The same assumes significance for estate planning purposes as well. A nominee can be any person and may not necessarily be the legal heir of the member. More than one nominee can also be appointed. He can have varied percentages in the shares held by the member.

Rights of a Nominee

Over the past couple of years messages have been circulated on social media which claim that a nominee is absolutely entitled to the ownership of a unit in a society and that the legal heirship certificate, succession certificate, probate for will etc. are not required.

However, the messages are not particularly accurate and have caused a lot of confusion. These messages discuss only a part of what was mentioned by the Supreme Court in its judgement pronounced in 2016 in the matter of Indrani Wahi Vs. Registrar of Co-operative Societies & Others.

A detailed analysis of this judgement makes it clear that upon the demise of the member, the nominee becomes entitled to the rights in the deceased member’s shares and the society has to transfer the shares in favour of such a nominee.

However, by virtue of being a nominee in the records of a Society, the complete title to the shares and property of the deceased member does not automatically vest in or transfer in favour of such a nominee. The nominee is supposed to merely hold such shares and property for the benefit of the actual legal heirs of the deceased member.

If any one of the legal heirs claims entire ownership and title of the property based merely on the transfer of shares by society pursuant to nomination forms that were submitted by the deceased- then such ownership and title can be challenged by other legal heirs and they can claim their share in the relevant property.

This is akin to bank accounts where a bank would provide all details to the nominee of account but the heirs mentioned under the will of the deceased account holder would be the rightful owners of the amounts lying in such an account.

A recent amendment to Maharashtra Co-operative Societies Act, 1960 also clarifies the position that on the death of a member the society has to transfer the share, right, title and interest in the property of the deceased member to a person(s) on the basis of testamentary documents or succession certificate or legal heirship certificate or document of family arrangement executed by the persons who are entitled to inherit the property of the deceased member.

As previously mentioned, these shares can also be transferred to a person duly nominated in accordance with the rules. This nominee is to be admitted as a provisional member till legal heirs or a person who is entitled to the flat and shares in accordance with succession law or under will or testamentary document is admitted as a member in place of such a deceased member.

Therefore, one should have a proper succession plan in place so that disputes between legal heirs can be minimised and future generations can live amicably.

Bharat Jain, Principal Associate, Economic Laws Practice, Advocates & Solicitors also contributed to the article.

Source: moneycontrol.com

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