The handover process from a Builder to Society via an Owners Association is a critical phase that requires meticulous planning and execution, which requires a Handover Checklist – your wait is over. This comprehensive guide aims to provide a detailed checklist to ensure a smooth transition, covering everything from workmanship of civil works, legal documents to operational procedures.
Why is a Smooth Handover Important?
A smooth handover is crucial for the long-term well-being of the residential complex. It ensures that all legal, financial, and operational aspects are transparently and efficiently transferred from the builder to the Society i.e. essentially the Owners Association. This process sets the foundation for the future management of the community assets efficiently.
We are trying to share with you a Handover Checklist that any RWA may use in its endeavour of RWA HOTO from a builder
Key Steps for a Smooth Handover
Legal Formalities
1. Formation of Owners Association:
Ensure that the Owners Association is legally formed and registered.
Karnataka Laws Governing the Formation of Owners Association:
According to the Department of Stamps and Registration, Government of Karnataka, the formation and registration of an Owners Association are governed by specific laws. The Karnataka Apartment Ownership Act 1972 and Rules 1975 provide the legal framework for acquiring ownership under the Apartment Act. The deed of the apartment should be signed and registered as per these guidelines.
How can ownership of a common area be acquired?:
Developers of flats are required to transfer the common area to the registered association, co-operative society or company of buyers of flats within the period of agreement. He should also endeavour for the formation of such association, co-operative society or company within prescribed period.
Is it necessary to register transfer deeds executed by or in favour of co-operative society?:
Section 38 of Karnataka Co-operative Societies Act, 1959 is amended w.e.f. 01-04-2001. As per the amendment, documents relating to immovable property executed by or in favour of a co-operative society should be compulsorily registered (Act No.6 of 2001). This amendment applies to flats, apartments built by co-operative societies also.
Source: Department of Stamps and Registration, Government of Karnataka
Karnataka Ownership Flats Act, 1972: PDF from Department of Parliamentary Affairs and Legislation, Karnataka
Registration of Instruments relating to flats and apartments: Website of Department of Stamps and Registration, Government of Karnataka
2. Legal Scrutiny of Documents:
When it comes to the handover from a builder to an Owners Association, legal scrutiny of documents is a crucial step. This process ensures that all legal formalities have been met and that the Owners Association is taking control of a property that is legally sound. Below are some of the key documents that need to be scrutinised, along with what each document signifies:
1. Sale Deed
– Significance: This is the core legal document that acts as proof of sale and transfer of ownership from the builder to the buyer. It should be thoroughly examined to ensure that the property is legally transferred.
2. Occupancy Certificate
– Significance: Issued by the local municipal authority, this certificate signifies that the building complies with all its laid down norms and is ready for occupation.
3. Land Title Deed
– Significance: This document proves the legality of the property. It should be clear and marketable, and it should have a clear history of ownership, without any disputes.
4. Building Approval Plan
– Significance: This document is approved by the local municipal authority. It provides details about the building’s structure and ensures that it adheres to all the legal norms and codes.
5. Allotment Letter
– Significance: Issued by the builder, this letter contains details like the price of the property, payment received, and the date of possession. It is crucial for establishing the terms agreed upon between the builder and the buyer.
6. Encumbrance Certificate
– Significance: This is a mandatory document used in property transactions as evidence of free title/ownership. It is crucial for establishing that the property is not mortgaged and has a clear title.
7. No Objection Certificates (NOCs)
– Significance: Various NOCs need to be obtained from water, electricity, and environment boards. These are essential for legal clearance.
8. Tax Receipts
– Significance: Ensure that all property taxes have been paid up to date. Any pending payments can lead to legal complications.
9. Completion Certificate
– Significance: This certificate is issued by the municipal authorities and signifies that the building has been constructed according to the approved plan and complies with all the given laws.
10. Maintenance Agreement
– Significance: This document outlines the maintenance fees and how they will be increased over time. It’s crucial for the Owners Association to understand their long-term commitments.
11. Power of Attorney (If Applicable)
– Significance: If the property has been bought through a Power of Attorney, it is crucial to ensure that the POA is legally valid and the sale is lawful.
Each of these documents serves a specific purpose and plays a crucial role in the legal scrutiny process. Missing out on even one could lead to complications in the future. Therefore, it’s advisable to consult with legal experts to ensure that all documents are in order.
3. Transfer of Legal Titles:
The transfer of legal titles of common areas to the Owners Association is a critical aspect of the handover process. Common areas typically include gardens, lobbies, swimming pools, clubhouses, and other shared amenities. Here’s how to ensure that the legal titles are correctly transferred:
Builder to Society Handover : Key Learnings from Legal Experts
1. Identify Common Areas
– Action: Make a comprehensive list of all common areas within the property.
– Significance: This list will serve as a reference point for the legal titles that need to be transferred.
2. Verify Ownership Documents
– Action: Request the builder to provide legal documents that prove their ownership of the common areas.
– Significance: These documents are crucial for verifying that the builder has the legal right to transfer ownership of these areas.
3. Legal Scrutiny
– Action: Have a legal expert scrutinise the ownership documents.
– Significance: This ensures that the documents are legitimate and free from any legal complications.
4. Draft a Transfer Agreement
– Action: Draft a legal agreement outlining the terms and conditions of the transfer.
– Significance: This document will serve as the legal basis for the transfer of ownership.
5. Obtain No Objection Certificates (NOCs)
– Action: Obtain NOCs from relevant authorities, if required.
– Significance: These certificates are often necessary for the legal transfer of common areas.
6. Execute the Transfer Deed
– Action: Once all documents are in place and verified, execute the transfer deed in the presence of a legal advisor.
– Significance: This is the final step in the legal transfer of the title and should be done meticulously to avoid any future disputes.
7. Registration of Transfer Deed
– Action: Register the transfer deed with the local sub-registrar office.
– Significance: Registration provides a legal backing to the transfer, making it legally binding.
8. Update Land Records
– Action: Ensure that the land records are updated to reflect the new ownership status of the common areas.
– Significance: This is a crucial administrative step that confirms the transfer of ownership in public records.
9. Handover Physical Possession
– Action: Take physical possession of the common areas and ensure they are in the agreed condition.
– Significance: Physical possession completes the transfer process and allows the Owners Association to take over the management of these areas.
10. Document Storage
– Action: Safely store all legal documents related to the transfer.
– Significance: These documents may be required for future reference or in case of legal disputes.
By following these steps meticulously, you can ensure a smooth and legally sound transfer of the legal titles of common areas to the Owners Association. The information shared here is generic to all projects. As individual cases differ and given the legal implications, it’s advisable to consult with legal experts throughout this process.
Financial Aspects
The financial aspects of the handover process are equally important as the legal and operational ones. Proper financial planning and execution can set the Owners Association on a path of financial stability and effective management. Here’s a breakdown of the key financial aspects:
Audit of Accounts
Hire a certified auditor to conduct a thorough audit of all financial transactions related to the property.
Significance: An audit will provide a clear picture of the financial health of the property. It will identify any discrepancies, unpaid bills, or unaccounted funds that need to be addressed before the handover.
Transfer of Funds
Request a detailed statement from the builder outlining all funds collected on behalf of the Owners Association, including maintenance fees, security deposits, and any other collections.
Significance: This ensures transparency in financial dealings and confirms that the builder has not withheld any funds. Once verified, these funds should be transferred to an account controlled by the Owners Association.
Budget Planning
Form a budget committee within the Owners Association to prepare a detailed budget for the first year. This should include estimates for maintenance, security, utilities, and any planned improvements.
Significance: A well-prepared budget will serve as a financial roadmap for the Owners Association. It helps in allocating resources efficiently and sets the stage for financial planning for subsequent years.
Each of these financial aspects serves a specific purpose and is crucial for the smooth functioning of the Owners Association. Missing out on even one could lead to financial complications in the future. Therefore, it’s advisable to consult with financial experts to ensure that all aspects are meticulously planned and executed.
Operational Transition
Property Check: Conduct a Comprehensive Property Inspection
A comprehensive property inspection is crucial for identifying any defects, safety hazards, or areas that require immediate attention. This ensures that the property is in optimal condition before the handover.
What to Inspect?
The inspection should cover various areas in residential properties, including but not limited to basements, lifts/elevators, electrical rooms, water treatment plants, and firefighting systems. This means Civil, MEP, Legal and Technical Documentation
Significance: Each of these areas has its own set of regulations and standards that need to be met. A thorough inspection ensures compliance and safety.
The Role of Third-Party Auditors
Consider hiring a third-party auditor like Nemmadi who specialise in property inspections for RWAs.
Significance: Third-party auditors bring in expertise and an unbiased perspective, ensuring a more thorough and reliable inspection.
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Inventory Check:
Conduct a comprehensive inventory check of all movable and immovable assets, including furniture, equipment, and fixtures. This is done in conjunction with the Deed of Declaration (DoD) that the builder and the RWA would have signed together. This DoD is ‘the’ document that has all the assets and other important details contained in it.
Significance: An inventory check ensures that all assets are accounted for and in good condition. This is crucial for future maintenance and asset management.
Utility Transfer:
Coordinate with the builder and local utility providers to transfer utilities like water, electricity, and gas to the Owners Association.
Significance: Ensuring the smooth transfer of utilities is vital for uninterrupted services. This also helps in establishing the Owners Association’s control over the property’s utilities.
Maintenance Contracts:
Review all existing maintenance contracts for services like security, cleaning, and landscaping. Make sure to transfer these contracts from the builder to the Owners Association.
Significance: Transferring maintenance contracts ensures continuity of essential services. It also gives the Owners Association the opportunity to renegotiate terms if necessary.
Additional Information for Handover from Builder to Apartment Owners Association
A technical Documentation Audit is also advised. During this documentation audit the MC will be made aware of various documents the Builder would need to provide the MC for the smooth running of their property. This will include the following but not limited to them only…
- As Built Drawings:
- Certificates from Local Authorities
- Completion Certificate (CC)
- Occupancy Certificate (OC)
- Transfer of Utility Connections (proof of)
- Design Brief Review (DBR)
Financial Documents
Building’s Insurance Policy: A copy of the insurance policy for the building should be handed over.
Tax Payment Receipts: These include property and construction tax payment receipts.
Utility Deposit Information: Certifications of no delinquency and security deposit information for utilities like water and electricity.
Account Statements: A detailed accounting of all member payments received, beyond the purchase price, and audited account statements for those should be provided.
By following this comprehensive handover checklist and understanding the essential documents and procedures involved, you can ensure a smooth and hassle-free handover from the builder to the Owners Association. This process is not just a formality but a critical step in safeguarding the interests of all stakeholders involved.
Feel free to use this blog as a guide for your handover process. If you have any questions or need further clarification, don’t hesitate to reach out.
Source/References:
https://www.commonfloor.com/guide/handover-of-apartment-to-association-1691.html
Further Reading
RWA HOTO Audit by FMS — Will it serve the objective of Builder to Society Handover-Takeover audit