Love thy Neighbor: Addressing Disputes among Apartment owners in Tamil Nadu

Introduction

Since the 1990s when India opened its economy and witnessed a resultant spike in urban income and population growth, the residential real estate market, particularly apartments, too grew exponentially to, quite literally, accommodate the demand coming from the then novel concept of nuclear families with disposable incomes. As the country grows and land becomes scarce, builders and homeowners are thinking vertically. Apartments in Tier 1 Indian cities now command exorbitant price points and rental rates.

The increasing demand has underscored the necessity for statutory regulation. While the majority of states enacted apartment ownership laws in the last century, it is noteworthy that Maharashtra and West Bengal have undertaken amendments to their earlier statutes in an effort to modernize their regulatory frameworks.

In Tamil Nadu, specifically, there existed a dead letter law relating to apartment ownership that was passed in 1994 but the “competent authorities” under the Act were never notified. Over the past forty years, the housing sector has evolved substantially, witnessing not only the rise of standalone high-rises but also the development of large complexes and townships featuring a mix of residential and commercial spaces, including phased projects. Given these significant changes, it became necessary to replace the existing Act with new provisions that are more aligned with contemporary requirements.

Hence, the Tamil Nadu Apartment Ownership Act, 2022 was enacted and its recent 2024 Rules were notified. Inter alia, the Act introduces key reforms including standardized project declarations, unified apartment owners' associations, model bye-laws, provisions for federation of associations in large complexes, a single regulatory authority, uniform calculation of undivided interests, redevelopment guidelines, enforcement mechanisms, and RERA-compliant definitions for better adjudication.

However, as pointed out in other literature, the Act and Rules do have unaddressed lacunae. There is no clarity on the nature of the services that may be withheld by the Apartment Association (‘Association’) to a defaulting owner, or whether “majority” of votes required for redevelopment discussed in the Act is simple majority or a special majority. Additionally, there is no prescribed method of calculation for the percentage of eligible vote or a procedure in place if both lessee and title holder wish to represent the apartment (The Act recognises a lessee as an apartment owner if the lease is for more than 30 years) , and a dispute resolution mechanism in case of disputes arising between apartment owners.

In this article, the authors will focus on the last issue highlighted, discuss the potential disputes that could arise inter-se apartment owners and propose a possible resolution framework that may be adopted through necessary statutory amendments.

Apartment Ownership Disputes: Key Challenges and the Struggle to Form Associations

Shared apartment ownership breeds conflicts over finances, maintenance, and communal rules. Financial disputes arise from opaque fee structures and cost-sharing inequities, while ambiguous repair responsibilities strain relationships and risk legal liability. Contention over shared spaces (e.g., parking, amenities) and noise/behavioral issues (e.g., late-night noise, cultural clashes) further erode harmony. Large-scale redevelopment projects often spark discord between proponents and opponents, with dissenters blocking progress via litigation.

A Critical Barrier: Association Formation

Formalizing governance via apartment associations remains exceptionally challenging. In Chennai, for instance, only 150 associations are registered, despite legal frameworks. This shortfall stems from internal power struggles, mistrust in fund management, and resistance to regulatory compliance. Owners view associations as bureaucratic, unaccountable entities, perpetuating ad-hoc, crisis-driven governance. This systemic distrust leaves communities vulnerable to recurring conflicts.

Need for a Dispute Resolution Framework

Prima facie, it may seem that the ideal way to resolve a dispute between apartment owners would be how landlord-tenant disputes are handled i.e. submitting to the jurisdiction of and the Rent Court or any civil court with competent jurisdiction seeking an enforceable order. This authority could also be vested with the competent authority under the Act. However, these methods, while conclusive, are litigious, time-consuming, costly and may fracture the amicable relationship that should be maintained between the owners, who may share a common space.

Additionally, the competent authorities notified under the Act are District Registrars (“DR”)of the Registration Department who have a myriad of portfolios in addition to their statutory role. The DR is also the Registrar of Societies,  Registrar of Marriages, Registrar of Partnership Firms, Deputy Registrar of Chits and Issuer of Licenses to Stamp Vendors, to name a few. It may not be reasonable to empower a DR with the powers of an arbiter for apartment disputes in light of the burden it poses on them and possible delays due to the sheer amount of responsibilities they have.

An alternative to this would be to settle the matter between the parties without judicial interference vis-a-vis Alternative Dispute Resolution (‘ADR’). The following types of ADRs are potential solutions:

In case of a dispute inter-se apartment owners,’ the Board of Managers of the Apartment Association, after exhausting the option of an informal negotiation, can refer the matter to a third-party conciliator if the quantum of dispute is under Rs. 5 lakhs and a mediator if the quantum of dispute exceeds this threshold. The mediator should have been pre-decided and the parties in conflict must assent to the appointment. Ergo, the settlement reached would be final and binding on the parties with limited scope of challenge which would only be allowed if the impartiality of the mediator is in question. The jurisdiction of enforcement of settlement and challenge may be given to the Rent Court of that jurisdiction. Arbitrating such an issue would result in an enforceable award which is essentially a judgment and may fracture the relationship between the parties, who possibly need to cohabit a space together for the foreseeable future.

On the other hand, the Mediation Act, 2023 contains provisions relating to community mediation, a form of mediation for disputes affecting harmony arising within a specific locality or area where the mediation panel comprises people of standing in the community. This form of mediation may be made applicable to apartment complexes and be used to resolve disputes in a similar manner.

Before addressing the myriad of issues that come up invariably within an Apartment Association by using the above proposed frameworks, one must first tackle the problem of establishing an Association in the first place. The authors propose using the age-old method of the carrot-and-the-stick to resolve this hurdle: A limitation period of 6 months may be imposed to refer any dispute to the Apartment Association and if the apartment complex does not have an Association, the parties, obviously, cannot refer their disputes to it and lose the opportunity to do so. This would ensure that Apartment Associations are formed and registered promptly; to provide a forum to resolve disputes at the very least.

Conclusion 

The Tamil Nadu Apartment Ownership Act, 2022 is a timely and much-needed update to address the evolving needs of apartment communities. By introducing clearer guidelines for the management of common areas, streamlining the association of apartment owners, and ensuring a consistent framework for redevelopment and dispute resolution, the Act seeks to create a more harmonious and efficient system for apartment living.

However, to truly serve its purpose, the Act should focus on practical and accessible solutions for dispute resolution. Establishing mediation mechanisms and empowering associations to resolve conflicts amicably can reduce the reliance on lengthy legal battles. This will not only save time and resources but also promote a spirit of collaboration among residents.