Collection of ‘transfer fee’ on resale of flats: Madras High Court stays single judge’s order

A Division Bench of the Madras High Court has stayed an order passed by a single judge who had prevented an apartment owners’ welfare association from demanding a ‘transfer fee’ of ₹50 per square foot or 1% of the sale consideration (whichever was higher) during every resale of a flat on its premises.

A Division Bench of the Madras High Court has stayed an order passed by a single judge who had prevented an apartment owners’ welfare association from demanding a ‘transfer fee’ of ₹50 per square foot or 1% of the sale consideration (whichever was higher) during every resale of a flat on its premises.

The Division Bench of Justices D. Krishnakumar and P.B. Balaji granted the interim stay for a period of eight weeks following a writ appeal filed by Ankur Grand Owners Association (AGOA) at Kilpauk in Chennai. The appellant association had challenged the verdict passed by the single judge on May 25, 2023.

Representing the association, senior counsel T. Mohan told the court that the authority of the District Registrar to declare the ‘transfer fee’ clause in the association bylaws as null and void had been questioned in the present appeal and therefore, the single judge’s order must be stayed until the disposal of the appeal.

It was in 2016 that AGOA had filed a writ petition in the High Court challenging the District Registrar’s declaration on the basis of a complaint lodged by one of the flat owners. Justice S.M. Subramaniam had dismissed the petition in 2023 and ordered a refund of the ‘transfer fee’ collected from the flat owner.

While doing so, the single judge had held that the corpus fund of a flat owners’ welfare association could not be enhanced by demanding a ‘transfer fee’ during every resale of a flat on the basis of its super built-up area. He said it would amount to collecting corpus fund on multiple occasions for the same flat.

“In the absence of any statutory provision, the flat owners’ association, which is a society, cannot levy and collect the transfer fee from the sellers/purchasers of pre-owned flats... The apartment owners association is not a profit-making association,” the judge had said.

He went on to state: “It is a right conferred on a property owner to sell or transfer his flat to any person. Such basic right cannot be interfered with by the apartment owners’ association. The owners’ association cannot physically or otherwise prevent any owner from dealing with his own property.”