Pushpa Viswanthan Nair
I shall be thankful to you if you could give your expert opinion / advice on allocation of fencing work (repair of existing and doing additional fencing work) cost of Rs.3.5 lacs to the society members, whether it is “per flat basis” or “based on the area of the flats (per sq.ft)”.
I C Naik
This is a very good question, probably raised for the first time. There is an outgoing of revenue nature and of deferred (capital) nature.
Costs of Fencing of Society Building, when incurred for the first time it gets capitalized in the total costs of the building and gets apportioned as Capital costs of each flat on per sq ft basis as the selling price of the flats are generally fixed on that basis.
It’s maintenance and recurring repair is to be paid for from the Building Repair Fund to which members contribute at a per cent of costs of the flat from year to year as fixed in the general body meeting with minimum of 0.75% of the costs.
So in both the cases the burden is apportioned on the basis of costs of flats.
Firstly, amount of ` 3.5 lacs should be apportioned in to current repair and New Creation on some approximation if a precise amount is not available.
Current repair costs are chargeable to building repair.
New Fence costs or for that matter costs of any new asset can be funded from the Surplus of Income over expenditure carried forward from year to year. Costs of such assets are spread over estimated useful life of the asset called depreciation, which is also charged to the surplus the same way.
If Bye Laws are properly complied and maintenance rates are fixed strictly as per Bye Laws, every cooperative housing society is bound to generate surplus. Whether such surplus would cover all costs of acquisition of all assets is a matter of fact in each case. This is the ideal and fair method.
An easy alternative is let the general body meeting fix a per cent for funding such assets which is to be applied to costs of each flat like it is done to decide contribution to the Repair Fund and members contribute the amount so arrived at. This is also a fair basis undoubtedly and its logic is drawn from Bye Laws.
