Is Your Housing Society Asking For Admission Fee? It Is Illegal

Did you buy a flat in a housing society, and the management is asking you to pay an admission fee? They have no right to do so, the Bombay High Court (HC) has recently ruled. Giving its verdict in a case that has been pending with various courts for 25 years now, the high court said that the demand of an admission fee for the purpose of admitting a new member in a housing society has no sanctity under the current laws.

“Membership of a cooperative society is an open membership. It is not possible to put any restriction on such membership, save and except as may be provided under the law," the HC ruled.

"If any person were to be refused admission on account of nonpayment of a certain fee or charge, such fee or charge must be legally justified so as to give rise to such sufficient cause,” it further added.

Case study

In 1993, the Sea Face Park Society in south Mumbai passed a resolution to charge admission fee of five per cent of the sale price for admitting new members. After this, the seller of a unit paid Rs 15 lakh as admission fee (which was five percent of the sale value) on behalf of the buyer to complete the transaction. After six years, the buyer dragged the housing society to the cooperative court, challenging its authority to take such a decision, and claiming refund. The court ruled in the favour of the buyer, and asked the housing society to refund the buyer, along with six per cent interest per annum. Later, the appellate court also upheld the decision, after which the housing society moved the HC.

The housing society argued that since the money was paid by a former member, the new entrant had no right to seek refund. It also argued that the new member had taken a long time to move court. Both the arguments were trashed by the HC. 

While stating that any contention with regard to a co-operative society could be raised within six years, the HC said that since the money was paid on behalf of the buyer, he was well within his right to challenge the move. 

“Such payment is not having any sanction of law and is, accordingly, wrongly recovered from the new member. It is wholly immaterial as to whether the respondent has made this payment willingly or under protest. As long as it is money wrongly paid, it can be recovered by the payer from the payee within the period of limitation,” the HC order dated April 2 said.