The Builder Must Pay Taxes and Outgoings Until the Property Is Conveyed to the Society

In Maharashtra, the developer — whom the law calls the "promoter" — must keep paying the property tax, ground rent, water charges and every other outgoing on a redevelopment building until legal ownership of the land and building is conveyed to the housing society. The duty is statutory, and it sits in two provisions you can quote by number: Section 6 of the Maharashtra Ownership Flats Act, 1963 (MOFA), headed "Responsibility for payment of outgoings till property is transferred", and Section 11(4)(g) of the Real Estate (Regulation and Development) Act, 2016 (RERA) for a MahaRERA-registered project. A third layer is contractual: the registered agreement under Section 4 of MOFA and your development agreement.

Taking possession of a flat does not shift this burden. This page is written so a committee can act on it the same week: below you will find the wording of Section 6, the four dates to diarise, the arithmetic that turns "the builder didn't pay" into a rupee claim, the notice to serve and what to enclose, the forum for each situation with its limitation period, and the resolutions to put in your minutes.

Source: Maharashtra Ownership Flats Act, 1963, Sections 4, 6, 10 and 11; Maharashtra Ownership Flats Rules, 1964, Rules 8 and 9; Real Estate (Regulation and Development) Act, 2016, Sections 11(4)(g), 17 and 31; Consumer Protection Act, 2019, Section 69.

The provision to quote: Section 6 of MOFA

MOFA is the Maharashtra law that governs the sale of flats and the duties of a builder toward flat purchasers. The outgoings duty is Section 6, not Section 11 — a distinction worth getting right, because a notice that cites the wrong section invites the builder's lawyer to argue instead of pay. Section 6 is headed "Responsibility for payment of outgoings till property is transferred" and it does two things.

First limb. A promoter shall, while he is in possession — and where he collects sums for outgoings from persons who have taken or are to take flats, even thereafter — pay all outgoings, including ground rent, municipal or other local taxes, taxes on income, water charges, electricity charges, revenue assessment, and interest on any mortgage or other encumbrance, until he transfers the property to the flat takers or to their organisation.

Second limb — the one that survives the builder's exit. Where a promoter fails to pay any outgoing he has collected from members before transferring the property, he continues to be liable even after the transfer to pay those outgoings and any penal charges. So a builder cannot collect maintenance for three years, leave the property tax unpaid, hand over the building and walk away from the arrears. The liability follows him past the conveyance.

Note what that second limb turns on: money collected. This is why the single most valuable document your committee holds is the builder's own maintenance demand or receipt showing an outgoings component. Keep it. It converts a general grievance into a specific statutory claim.

Two things fall outside Section 6, and pretending otherwise weakens a good case. A member's own flat electricity bill and a member's share of day-to-day housekeeping are ordinary occupation costs, payable by the member from the day of possession. Section 6 is about the property-level statutory charges that the Municipal Corporation and the Collector look to the owner of record to pay.

If your project is registered with MahaRERA, cite the RERA provision too

Section 11(4)(g) of RERA, 2016 carries the same rule in near-identical language: the promoter must pay all outgoings he has collected — land cost, ground rent, municipal or other local taxes, water or electricity charges, maintenance charges, mortgage loan and interest on mortgages or other encumbrances — until he transfers physical possession of the project to the allottees or the association of allottees; and where he fails to pay any outgoing he collected, the proviso keeps him liable even after the transfer. Cite Section 6 of MOFA and Section 11(4)(g) of RERA together. The two do not conflict, and the RERA limb is what gives you MahaRERA as a forum.

The four dates to diarise

The law fixes deadlines. Most societies never work out what theirs are, which is why builders drift. Fill this table in at your next committee meeting and put the resulting dates in the minute book.

The practical consequence: if your society was registered more than four months ago, your agreement fixes no conveyance period, and no conveyance deed has been registered, the promoter is already in default of Section 11(1) and your Section 11(3) route is open today. You do not have to wait for anything further.

Source: MOFA 1963, Sections 10, 11(1), 11(3), 11(4); MOFA Rules 1964, Rules 8 and 9; RERA 2016, Sections 11(4)(g) and 17(1).

Why conveyance is the dividing line

Conveyance is the legal step by which ownership of the land and the building passes from the developer or the original landowner to the society. Possession of a flat is not the same as ownership of the property. A member can live in a flat for years while the builder remains the owner on record in the municipal and land registers. As long as the builder is the owner on paper, the builder — not the members — is the person the Municipal Corporation and the collector pursue for property tax, assessment and ground rent.

A conveyance is also not complete just because the parties signed a document. Under Section 17 of the Registration Act, 1908, a conveyance of immovable property must be compulsorily registered before the Sub-Registrar; an unregistered transfer does not pass clear title. So a "society formed" or "possession given" milestone is not the finish line. Until the registered conveyance is in place, the society has no clean title, cannot mortgage or freely repair the building, and stays exposed to the builder's unpaid liabilities. Our detailed conveyance guide walks through the full process, and the possession and corpus guide shows where conveyance fits alongside possession and the corpus fund.

Who bears what, before and after conveyance

Members do, of course, pay for their own flat's electricity and their share of everyday maintenance once they occupy. The point of the law is narrower: the statutory outgoings on the property as a whole stay the builder's responsibility until the title is transferred.

Step 1 — Get these six documents before you write to anyone

A demand backed by paper gets paid. A demand backed by indignation gets a reply asking for particulars. Send your secretary out for these six, and note the office that issues each.

Item 5 is the one committees skip and the one that decides the case. Ask every member for their builder-issued receipts in writing, and record in the minutes how many were received.

Step 2 — Do the reconciliation that becomes your claim

Section 6 gives you a number, not just a principle. The number is: what the builder collected from members towards outgoings, minus what the builder actually paid the authority, plus the penal charges the authority has levied on the unpaid amount. Prepare it as a single sheet, signed by the treasurer, and annex it to your notice. The figures below are illustrative — replace every one of them with your own.

Two rules when you build this sheet. Count only what the builder billed as outgoings — do not sweep in housekeeping, lift AMC or security, because that weakens the whole statement. And take the "paid" figure from the authority's own receipts or dues statement, not from the builder's account, so the two columns come from independent sources.

Note also the pecuniary figure this produces. It decides your forum: on the illustration above, a claim of Rs 10,18,000 is inside the District Commission's limit, while a large building with a decade of arrears can cross Rs 50 lakh and belong before the State Commission.

Source: MOFA 1963, Section 6, second limb (promoter continues liable after transfer for outgoings collected but not paid, with penal charges). Figures above are illustrative only.

Step 3 — Serve the notice, in this form

Do not open with a lawyer's notice and do not open with a phone call. Open with a written demand from the society under its own signature. It costs nothing, it starts the clock, and if the matter later goes to MahaRERA or a consumer commission, the first question you will be asked is what you demanded and when.

Send it over the signature of the Chairman and Secretary, under a committee resolution, and file the AD card in the society's records with the resolution number written on it. You can read more about the promoter's continuing duties in our note on MahaRERA promoter obligations.

Step 4 — Deemed conveyance: the exact filing when a builder stalls

The most common problem in Mumbai is not a builder who refuses conveyance on paper, but one who simply never gets around to it — often precisely so it can keep control of unsold flats and avoid clearing dues. MOFA answers this with Section 11(3). Here is the route, step by named step, so your committee knows exactly where it is going.

Two practical points. First, the Authority decides on documents, so the six items in Step 1 above are the same file you will hand up — assemble them once. Second, the deemed-conveyance order settles title; it does not by itself refund the outgoings the builder collected and kept. That money is a separate claim, made in the forum table below, and the two can run in parallel.

Deemed conveyance still attracts stamp duty and registration charges, and stamp duty on a conveyance is generally worked out on the ready reckoner (annual statement of rates) value of the property. Our explainer on ready reckoner rates in redevelopment covers how those figures are set, so your committee can budget for the transfer rather than be surprised by it, and our conveyance guide sets out the document checklist in full.

Source: MOFA 1963, Section 11(3), (4) and (5); Registration Act, 1908, Section 17; Maharashtra Stamp Act, 1958, Section 31.

Step 5 — Where to file, and under which provision

Which consumer tier. Under the Consumer Protection (Jurisdiction of the District Commission, the State Commission and the National Commission) Rules, 2021, notified on 30 December 2021, jurisdiction is fixed by the value of the consideration paid: District Commission up to Rs 50 lakh; State Commission above Rs 50 lakh and up to Rs 2 crore; National Commission above Rs 2 crore. Work out your figure from the reconciliation in Step 2 before you draft, because filing in the wrong tier costs you months.

One forum to avoid. Committees often assume any builder dispute goes to the Co-operative Court under Section 91 of the Maharashtra Co-operative Societies Act, 1960. Read the section: it lists disputes between the society and its members, past members, officers, agents, servants and other societies. A promoter who is not a member of your society does not appear on that list, so Section 91 is normally the wrong door for a claim against the builder. Use Section 91 for disputes with your own members; use the forums above for the builder.

Source: RERA 2016, Sections 31 and 44; Maharashtra RERA (Recovery of Interest, Penalty, Compensation, Fine payable, Forms of Complaints and Appeal, etc.) Rules, 2017, Rule 6; Consumer Protection Act, 2019, Section 69; Consumer Protection (Jurisdiction of the District Commission, the State Commission and the National Commission) Rules, 2021 (notified 30 December 2021); MCS Act 1960, Section 91.

If you are still unsure which door is yours, our sibling explainer on which forum hears a redevelopment dispute lays out the options, and comparing developers up front on the offer comparison tool helps you avoid builders who leave these obligations deliberately vague.

Step 6 — What to put in the minute book, and when

Every step above needs a resolution behind it, or the builder's first defence will be that the committee had no authority. Record these four, each with a number and a date.

Also minute, expressly, any amount the society has itself paid towards an outgoing that was the builder's duty, with the receipt number. That entry is what supports a later claim for set-off or refund.

The contractual limb: fix it in the agreement, not in litigation

Statute sets the floor. The agreement is where societies still lose, because a clause that says "all outgoings from the date of possession shall be borne by the members" is signed without anyone noticing that it tries to contract out of Section 6. If your society is still at the agreement stage, this is far cheaper than any of the steps above. Ask your advocate to insert or check four things.

• A defined conveyance date. Section 11(1) lets the agreement fix the period; only if it is silent does the four-month default in Rule 9 apply. Fix a date, so a breach is obvious on the face of the document.
• An outgoings clause that tracks Section 6. The promoter pays ground rent, municipal and local taxes, water charges, electricity charges, revenue assessment and mortgage interest until conveyance, and gives the society a half-yearly statement of account of what was collected and what was paid.
• A no-set-off clause on the corpus. That the promoter shall not adjust unpaid outgoings against the corpus, rent or hardship compensation payable to members.
• Registration. The redevelopment agreement must be registered — the Government's directive under Section 79A of the MCS Act, 1960 dated 4 July 2019 governs the society redevelopment process. Keep the registered copy and the Index-II in the society's file, because you will need both for the deemed-conveyance application.

Our guide on red flags in a development agreement covers the clause traps in detail, and our tender and agreement review service can flag them before you sign. If your society is not yet formally set up, start with register your society, and if the builder has already stalled, read what to do when a builder delays.