Non-Occupancy Charges in Mumbai Housing Societies: The 10% Cap

In Maharashtra, a co-operative housing society cannot charge a member more than 10% of the service charges as non-occupancy charges when the member does not personally occupy the flat — for example, when it is rented out. This ceiling comes from a Government of Maharashtra order issued under Section 79A of the Maharashtra Co-operative Societies (MCS) Act, 1960, dated 1 August 2001, and the municipal (property) tax portion is left out of the calculation. The Bombay High Court upheld this cap in 2007, so it is settled law. Members who let their flat to a near relative are fully exempt. Any charge above this limit — such as a percentage of the rent or of the ratable value — is illegal, and you can challenge it before the Registrar or the Co-operative Court.

What are non-occupancy charges?

Non-occupancy charges (sometimes called "non-occupancy fees") are an extra monthly amount that a co-operative housing society adds to the bill of a member whose flat is not occupied by the member themselves. In plain terms, if you own a flat but rent it out, keep it locked, or allow someone other than yourself to live in it, the society may add this charge to your monthly maintenance.

A few terms first, because the rule turns on them:

• Member — the person who holds the flat and the shares in the co-operative society (usually the owner).
• Society — the registered co-operative housing society that manages the building's common affairs through a managing committee.
• Service charges — the society's routine running and maintenance costs, shared among all flats (explained below).

The original idea behind the charge was that a tenanted or non-occupied flat may add a little to the society's administrative work. Over the years, though, many societies turned it into a way to earn revenue from landlords, charging far more than the law permits.

The 10% cap: what the rule actually says

The binding rule is the Government of Maharashtra order under Section 79A of the MCS Act, 1960, dated 1 August 2001. Section 79A gives the State Government power to issue directions to co-operative societies in the public interest, and those directions are binding on every society they cover. This order fixes one uniform ceiling:

Non-occupancy charges shall not exceed 10% of the service charges, excluding municipal taxes.

Two points flow from this wording, and both matter in practice:

• The 10% is calculated on service charges only — not on your total maintenance bill, not on the rent, and not on the flat's ratable value.
• Municipal (property) tax is excluded before the 10% is worked out, so it never forms part of the base figure.

What counts as "service charges"?

Because the cap is a percentage of service charges, it helps to know what sits inside that head. Under the Model Bye-Laws 2014 that most Mumbai societies adopt, service charges are the establishment and common-maintenance expenses shared equally by every flat, whatever its size. Water charges, property tax, the sinking fund and the repair fund are separate heads and are not part of service charges.

Because size-based amounts and the separate funds are left out, service charges are often a modest figure — which is exactly why the lawful non-occupancy charge is small.

A worked example

Suppose a member's monthly bill breaks down like this:

The lawful non-occupancy charge here is 10% of the service charges of Rs 1,800 — that is, Rs 180 per month (Rs 2,160 a year). Now compare that with the shortcuts some societies use:

The gap is dramatic. A landlord charged 10% of rent here would pay 25 times the lawful amount. If you are letting your flat and want to benchmark a fair market rent in the first place, our rent comparison tool can help you check the numbers.

The near-relative exemption

The same 1 August 2001 order carves out an important exemption: if a member lets the flat to a near relative, no non-occupancy charge at all may be levied. Your society's bye-laws define who counts as a near relative — typically spouse, children, parents, siblings and other close family. If a relative in that category is living in your flat, you should not be paying any non-occupancy charge, and you can ask the committee to stop the levy and refund what was collected.

Common ways societies overcharge — and why they are illegal

These are the practices members most often run into. Each of them breaches the government order:

• Charging a percentage of the rent. Rent has nothing to do with the cap; the base is service charges.
• Charging a percentage of the ratable value. Ratable value is a notional annual value the municipal corporation assigns to a property to calculate tax — it is not a permitted base for this charge.
• Applying 10% to the total maintenance bill instead of to service charges alone.
• Including municipal tax in the base before working out the 10%.
• Levying the charge on flats occupied by a near relative, despite the exemption.

Persisting with an inflated levy after a member has objected in writing can amount to an unlawful recovery. If a committee is knowingly extracting money it is not entitled to, that behaviour edges into the territory covered in our guide to frauds and scams in redevelopment and society management.

The Bombay High Court's 2007 ruling

Some societies and their federations challenged the government order in court, arguing that a society should be free to set its own charges. In 2007 the Bombay High Court upheld the order, confirming that the State could validly cap non-occupancy charges at 10% of service charges. So the ceiling is not just an administrative circular that a committee can wave away — it has been tested in court and confirmed. A resolution passed at a general body meeting cannot override it, because a society's internal decision cannot defeat a binding State directive.

How to challenge an excessive non-occupancy charge

If your society is charging more than the cap, you do not have to simply pay. A calm, documented, step-by-step approach usually works:

1. Write to the managing committee. Quote the 1 August 2001 order under Section 79A and the 10% cap, set out how your charge has been wrongly calculated, and ask the committee to correct the levy and refund the excess.
2. Raise it at the general body meeting. Ask for the correction to be minuted. Other landlords in the building are almost certainly affected too.
3. Approach the Deputy Registrar / Registrar of Co-operative Societies. Section 79A gives the Registrar's office oversight of societies. A complaint can prompt a directive to the society to fall in line.
4. File a dispute before the Co-operative Court under Section 91 of the MCS Act, 1960. Section 91 is the forum for disputes between a member and the society. The court can order the society to stop overcharging and to refund amounts already collected.

Keep every maintenance bill and receipt. A clear paper trail showing the service-charge figure and the amount actually levied is usually enough to establish the overcharge.

Where this fits in the co-operative framework

Co-operation is a State subject. The Supreme Court confirmed the States' primacy over co-operative societies in Union of India v. Rajendra N. Shah (2021), when it struck down the parts of the Constitution (97th Amendment) Act, 2011 that intruded on State control of co-operatives. That is precisely why a State-level directive like the 1 August 2001 order governs what your society may charge. You can read more in our note on the 97th Constitutional Amendment and co-operative societies. The practical takeaway for a member is simple: on non-occupancy charges, the State's 10% cap is the law your committee must follow.