Most cooperative housing societies (CHS) across India transfer the share and interest of a deceased member in the Society in favour of his or her nominee without insisting on probate, a Will or letters of administration in respect of the estate of the deceased. The most important question here is whether the process is entirely legal. Some of you will be surprised to know that it is not.
Upon the death of a housing society member, the managing committee may give effect to the nomination by transferring the shares in the Society in favour of the nominee. However, such a nominee will only be admitted as a provisional member, since a nominee remains only a trustee of the said property and has no ownership rights. In case the legal heirs of the deceased member furnish relevant evidence either as testamentary documents, succession certificate, legal heirship certificate or a probated Will, the Society will transfer the shares of the deceased member in favour of the legal heirs.
A nominee cannot become a true owner and will only hold the property in trust for the legal heir of the deceased member. A Society cannot transfer property ownership to a nominee unless due process is followed. This week, I will provide solutions to two such problems—one where the Society has asked for a release deed from the legal heirs and another where the deceased has not made a Will but only a nomination. We will also look at the charges and taxes applicable to a gift deed.
The appendix numbers referenced in the below solutions are made to the cooperative housing societies bylaws book of 2014.
Requirement of a Release Deed for Transfer of Flat, in Case of Will
Question: My father had a shop in a CHS in Mumbai's western suburbs. My sister and I are the legal heirs. He left a Will bequeathing the property to my husband, but the Society is asking for a release deed, both from me and my sister, before transferring the shop in my husband's name. I wanted to know whether a release deed is necessary since my husband is not a blood relative.
Answer: As your father has made a Will giving his shop to your husband, it will go to him. However, you and your sister are legatees of your father. Therefore, you, your husband and your sister, all three of you, would be required to make a release deed.
This release deed should be made on Rs500 non-judicial stamp paper and registered with sub-registrar of assurances office. It should also be witnessed by two witnesses. There is no need to notarise the release deed.
Following are the documents that you need to submit along with the release deed.
1. A copy of your father's Will.
2. A copy of your father's shop agreement's Index-2.
3. A copy of your father's shop's share certificate.
4. A copy of your father's shop's latest maintenance receipt.
5. A copy of your father's shop's latest municipal property tax bill.
6. A copy of your father's shop's latest electricity bill.
7. A copy of your father's shop's gumasta licence.
8. A copy of PAN card, Aadhaar and voter card of all three of you, to confirm your identities.
9. A copy of the Aadhaar of the two witnesses.
These copies should have an index and are to be attached at the end of the release deed.
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Transfer of Flat in Case of Nomination and Absence of a Will
Question: My father-in-law had purchased a flat in a CHS in his name. He had made a nomination in favour of my wife, which is duly registered with the CHS. My wife has a younger brother and a younger sister. My father-in-law has now passed away without leaving a Will. My mother-in-law had passed away even before him. As such, my wife and her two siblings are the only three legal heirs of the flat. I believe, notwithstanding the nomination in favour of my wife, all three siblings have an equal share in the property. In the circumstances, can the Society transfer the flat straight away in my wife's name? If yes, what steps does she need to take? How will she compensate her siblings for their share, assuming they are entitled to it?
If my wife and her sister wish to relinquish their share in the flat in favour of their brother, can this be done without first transferring the apartment in my wife's name (being the nominee)? If so, do both sisters have to sign a release deed or do all three have to execute such a deed? Where can a draft of such a release deed be found?
Answer: If your father-in-law has made your wife a nominee of his flat, she is only considered a trustee of his flat. The Society cannot legally transfer the flat in her name.
If she and her sister want to give up their right on their father's flat in favour of their brother, then all three of them together have to make a release deed on Rs500 non-judicial stamp paper, and it should be registered with sub-registrar of assurances office.
To make your brother-in-law a sole owner of your father's flat, he should give the following documents in a file to the Society.
1. Sub-registrar of assurances certified copy of the release deed with its index-2.
2. Membership application form in appendix-2.
3. Undertaking on Rs200 non-judicial stamp paper.
4. Nomination form as a set of 3 copies in appendix-14.
5. Your father-in-law's flat's original share certificate. (This share certificate will be returned to him after it is transferred in his name.)
6. Rs600 as a crossed cheque in the name of the Society, Rs100 as membership entrance fee, and ₹500 membership fee.
Gift Deed Charges & Tax Implications
Question: My wife has a flat in a CHS in Mumbai. She has a 100% ownership share in the flat and now wants to gift me 50% of her share. Will she/I be chargeable for any gift or income tax? How much stamp duty and registration charges would be payable to the government?
The flat is given on rent and earns Rs82,000 per month. The Society maintenance charges are Rs10,000 per month. Both are currently accounted for in my wife's income-tax returns. What will be the income-tax treatment for both of these post-gift deed?
There is also a loan against the same property taken by my son, who pays Rs1 lakh per month as EMI. Would we need any NOC from the bank as there would be joint ownership now, instead of a single ownership?
Answer: Considering the high value of the flat, it is a good decision to go for joint ownership with your wife. As your son is repaying a home loan taken against this flat, to make a gift deed, you will require a no objection certificate (NOC) from the bank. After completion of the process, a copy of the gift deed should also be given to the bank.
Your wife will initiate the gift deed, by gifting 50% market value of her flat to you, her husband. On this gift deed, stamp duty is calculated as 1% of the 50% market value of the flat (i.e., your share in the flat), as per ready reckoner value. Registration charges applicable will be only Rs200.
After you do the gift deed with your wife, you will be the co-owner of her flat, and to further include your name in the share certificate, you should apply with a co-membership application form, as in appendix-5, as given in the bye-laws book of your Society.
You will be charged Rs100 co-membership entrance fee and your name will be entered in the share certificate, as co-member along with your wife. There are no other fees or charges that one needs to pay.
Now there are two 50% members to the flat. Therefore, you and your wife should give a nomination form for their shares in the flat, as in appendix-14, in triplicate to the Society. You will jointly provide an undertaking on Rs200 non-judicial stamp paper, as in the form of appendix-3.
After your name is entered as a co-member, when you make a leave & licence agreement of your flat, your wife and you will be jointly stated as licensors for the tenant. However, only your wife will receive the licence fee (i.e., rent) as her name appears first in the now jointly held flat. Therefore, the income-tax situation will continue to remain as it was for your wife.
(Shirish Shanbhag has an MSc in Organic Chemistry, Diploma in Higher Education, and a Diploma in French and has completed his LL.B. in first class in 2021. Before his retirement, he was a junior college teacher at Patkar College from July 1980 to May 2012, teaching theoretical and practical chemistry. Post-retirement in 2012, he started providing guidance and counselling to people on several issues, specifically focusing on cooperative housing society-related matters. He has over 30 years of hands-on experience in all matters about housing societies and can provide out-of-box solutions for any practical issue.)