What is a Housing Society Share Certificate?

Housing societies in India are cooperative organizations formed by residents who own flats or apartments within a larger residential complex. These societies manage common areas, facilities, and services, ensuring the smooth functioning of the residential community. Membership in a housing society is mandatory for apartment owners. To formalize this membership and establish ownership rights, housing societies issue share certificates to each member. In this L&T Realty blog, we answer common queries such as “what is share certificate in property”, and many more.
A share certificate is a legal document that signifies the member’s ownership of a specific number of shares within the society. It grants the member voting rights and potential entitlement to dividends based on the society’s financial performance. Share certificates play a crucial role in housing societies, defining ownership, voting rights, and the member’s stake in the overall community.

Understanding Housing Society Share Certificates

In India, a housing society share certificate is a crucial document issued by a cooperative housing society to its members. It serves as legal proof of ownership of a specific number of “shares” within the society. These shares don’t represent financial investment like company stocks. Instead, they represent a member’s ownership stake in the society’s common areas and property. The number of shares typically correlates with the size of the apartment owned.
Historically, share certificates emerged due to the prevalence of cooperative housing societies in India, offering a path to affordable housing through collective ownership. The legal standing is grounded in the Cooperative Societies Act of various Indian states, which mandates the issuance of share certificates to members, establishing their claim to the society and its assets. They are recognized by courts and play a vital role in property disputes, sale transactions, and exercising voting rights within the society.

The Importance of Share Certificates in Housing Societies

In India, housing societies are a popular choice for affordable and community-driven living. Within these societies, share certificates play a critical role in establishing and safeguarding the rights of members. These certificates are more than just pieces of paper; they hold immense importance for ownership, legal standing, and financial implications for members.

1. Ownership Proof

A share certificate serves as undeniable legal proof of a member’s ownership of a specific number of shares in the society. The number of shares typically corresponds to the size of the member’s apartment. This certificate signifies their claim to common areas, amenities, and even the building itself in a proportionate manner. It empowers them with voting rights in crucial decisions concerning the society’s management and maintenance, ensuring a voice in shaping their environment.

2. Property Transactions and Legal Disputes

When a member decides to sell or transfer their apartment, the share certificate becomes an essential document along with the sale deed. It provides legal transparency and confirms the seller’s right to sell the property. In the unfortunate event of legal disputes regarding ownership or property rights, the share certificate acts as a credible document when it comes to legal proceedings, safeguarding the member’s interests.

3. Loan Approvals and Financial Dealings

Financial institutions often require a share certificate as part of the documentation when a member applies for a loan against their property. This verifies ownership and reduces the risk for the lender. Furthermore, some societies even consider a member’s shareholding when determining maintenance charges or entitlement to potential dividends, further highlighting the financial significance of the certificate.

Navigating the Complexities of Society Share Certificate Rules

While the importance of share certificates in Indian housing societies is undeniable, understanding the rules governing their issuance, transfer, and updates is crucial for both societies and members. This ensures transparency, protects rights, and simplifies property-related transactions.

Issuance and Transfer

The Cooperative Societies Act of each state dictates the issuance of share certificates. Typically, societies issue them within six months of allotment of an apartment. The certificate contains details like member name, number of shares, and society registration number.
Transfer of shares usually follows a prescribed procedure. This typically involves a written application to the society, payment of any applicable transfer fees, and approval by the society committee. It’s crucial for members to be familiar with the specific requirements and timelines set by their society’s by-laws for a smooth transfer process.

Updating Share Certificates

Changes in ownership due to sale or inheritance necessitate updating the share certificate. This involves submitting a transfer application, the original certificate, and relevant documents like sale deed or succession certificate. The society updates the certificate and register after due diligence and fee collection.

By-Law Changes and Updation of Share Certificate Housing Society Rules

In case of changes in society by-laws affecting shareholding, the society follows specific procedures for updating certificates. This may involve issuing amended certificates or updating existing ones based on the state regulations and the nature of the by-law changes.

Staying Informed

Understanding and complying with these regulations is crucial for both societies and members. Consulting legal professionals and staying updated on relevant amendments to the Cooperative Societies Act and by-laws is essential. This ensures smooth share certificate management and protects the rights of all stakeholders. By being informed and adhering to the established procedures, both societies and members can navigate the intricacies of share certificates effectively.

Issuance and Transfer of Share Certificates

Obtaining a Share Certificate:

1. Membership Confirmation: Once you become a member of a housing society by purchasing an apartment, ensure you receive a written confirmation letter from the society.
2. Check By-Laws: Familiarize yourself with the society’s by-laws regarding the issuance of share certificates. This includes potential fees and timelines.
3. Application & Documentation: Submit a written application to the society’s secretary requesting the issuance of a share certificate. Attach the confirmation letter, sale agreement (if applicable), and proof of identity and address.
4. Collection: Once processed and approved by the society committee, you will be notified to collect your share certificate, which typically takes a few weeks.

Transferring a Share Certificate:

Transferring a housing society share certificate involves several steps:

1. Collection by Member: The share certificate must be collected in person by the member, ensuring the property is lien-free.
2. Conveyance Deed: The society must possess the conveyance deed from the builder.
3. Certificate Issuance: The certificate should bear the society’s seal and be signed by the Chairman, Secretary, and an authorized committee member.
4. Name Accuracy: The member’s name on the certificate should match the original sale agreement.
5. Indemnity Bond: The member must indemnify the society against any loans, completing any necessary paperwork and clearing dues.
6. Transfer Premium: In case of resale, the new member pays the transfer premium and ensures no dues from the previous owner.
7. Documentation: Necessary documents, including an indemnity bond stating no other transfers or charges on the certificate, must be submitted.
8. Original Sale Agreement: The member must present the original sale agreement when collecting the share certificate.

Handling Lost or Damaged Certificates:

1. Report the Loss: Immediately inform the society secretary about the missing or damaged certificate in writing.
2. Police Report: File a police report (FIR) stating the loss or damage and submit a copy to the society.
3. Application & Indemnity Bond: Submit a written application requesting a duplicate certificate along with a notarized indemnity bond guaranteeing compensation if the original resurfaces.
4. Processing & Fee: The society will verify the report and collect processing fees before issuing a duplicate certificate.

It’s important to remember that this simply works as a rough guide, and specific procedures may vary based on individual society by-laws and state regulations.

Legal Requirements and Documentation:

Transferring share certificates during property transactions necessitates adhering to specific legal requirements and collecting essential documents. These typically include:

• Transfer Application: A written application submitted by the seller to the society requesting transfer of share certificate ownership.
• Sale Deed: A legally registered document outlining the terms and conditions of the property sale.
• Original Share Certificate: The seller must submit the original share certificate for cancellation and issuance of a new one to the buyer.
• No-Objection Certificate (NOC): The society issues an NOC confirming the seller has no outstanding dues or charges before the transfer.
• Transfer Fees: Defined by the society’s by-laws, these fees cover administrative costs associated with the transfer process.

Challenges of Digital Share Certificates

With India witnessing growing interest in digitalization in the realm of real estate, it might be worth considering the digitization of housing society share certificates as well. Doing so offers advantages like faster processing, easier storage, and reduced risk of loss or damage. However, a range of challenges would remain:

• Legislative framework: Existing laws have not yet fully caught up with the intricacies of the digitization of such documents, requiring amendments to explicitly recognize digital certificates in housing societies.
• Technological infrastructure: Smaller societies might lack the resources to implement more secure digital certificate systems.
• Member awareness: Educating residents about the benefits and security measures of digital certificates is crucial for wider adoption.

FAQ’s

1. What is share certificate of society? Are share certificates the same as property ownership titles?

No. Share certificates signify ownership of shares in the society, not the actual apartment itself. A separate sale deed establishes title ownership of the property.

2. Can I sell my flat without transferring my share certificate of flat?

No. To legally transfer property ownership within a society, you must also transfer the corresponding share certificate, ensuring the new owner has rights within the society.

3. What if I lose or damage my share certificate?

Immediately notify the society. You can file a police report and apply for a duplicate certificate after submitting an indemnity bond and paying required fees.

4. Do I need to pay extra fees for obtaining a share certificate?

Societies may charge a nominal fee upon issuance. Additionally, transfer fees often apply during the sale of a property.

5. Do I automatically become a society member by buying a flat?

Not necessarily. Confirm membership status with the society and initiate the process of officially obtaining your share certificate after purchase.

Conclusion

Understanding housing society share certificates in India empowers both members and societies to navigate ownership, legal rights, and financial aspects effectively. Whether navigating issuance, transfer, or updates, adhering to established procedures and staying informed are crucial.