Corpus fund and advance maintenance: when the money must reach the association

8.8.1 What is a corpus fund on a new flat’s cost sheet?

A corpus fund is a one-time sum that a builder collects from each buyer for the common areas of the project. The money is meant for the owners’ association. It sits on the flat cost sheet next to advance maintenance, which is maintenance billed for a set number of months ahead. The two are different. Advance maintenance pays running costs such as security, housekeeping and common electricity, so it gets used up. A corpus fund is held for the common areas. No law in force in Karnataka defines the term. The RERA Act, 2016 does not use the words “corpus fund”. The Karnataka Apartment Ownership Act, 1972 does not use them either. Neither law fixes an amount, a basis for each square foot, or a refund rule. So the agreement for sale is the document that sets these terms for your flat.

The Karnataka Apartment (Ownership and Management) Bill, 2026 comes closest to a definition, but it is not in force. Clause 2(j) defines “Common Capital” as funds that owners contribute for “financing, creating, installing, upgrading, refurbishing, replacing or renovating” the common areas. Clauses 16(1)(c) and 21(11)(c) name the “corpus fund” among the sums the promoter must hand over.

Line on the cost sheet	What it pays for	Used up?	Who it belongs to
Advance maintenance	Running costs for a stated number of months	Yes, month by month	Spent on running costs. Ask what happens to any unused balance
Corpus fund	Common areas, held as a fund	No, it is held	Meant for the association. Check that the agreement says so
Maintenance deposit or security deposit	Depends on the builder’s wording	Depends on the wording	Ask in writing

8.8.2 What does the RERA Act say about money collected for maintenance?

The RERA Act, 2016 has no section on the corpus fund, but three duties cover the money a builder collects for maintenance. Section 11(4)(g) makes the builder “pay all outgoings until he transfers the physical possession”. It covers outgoings that the builder “has collected from the allottees”. The list includes “maintenance charges”, “municipal or other local taxes” and charges for water or electricity. The proviso keeps the builder liable “even after the transfer of the property” if it did not pay them. The builder also pays any penal charges and the cost of legal proceedings. Section 11(4)(d) makes the builder provide and maintain essential services “on reasonable charges” until the association takes over maintenance. Section 19(6) makes you pay maintenance charges and other charges “in the manner and within the time” that the agreement for sale sets. Section 19(7) adds interest if you pay late. Section 19(8) lets you and the builder reduce these duties by mutual agreement.

Rule 16 of the Karnataka RERA Rules, 2017 sets the interest rate under the Act. It is the State Bank of India’s highest marginal cost of lending rate plus two percent. The property tax guide applies Section 11(4)(g) to property tax before and after possession.

Duty	What the law says	Section
Outgoings collected from buyers	Builder pays them until physical possession	RERA Act, 11(4)(g)
Unpaid outgoings	Builder stays liable after transfer, with penal charges and legal costs	RERA Act, 11(4)(g), proviso
Essential services	Builder provides them on reasonable charges until the association takes over	RERA Act, 11(4)(d)
Your payments	Maintenance and other charges as the agreement sets	RERA Act, 19(6)
Late payment by you	Interest at SBI’s highest MCLR plus 2 percent	RERA Act, 19(7), and Karnataka RERA Rules, rule 16

8.8.3 When must the corpus fund reach the owners’ association?

No law in force in Karnataka sets a date for the corpus fund to reach the owners’ association. The RERA Act, 2016 sets dates for other handovers. Section 11(4)(e) makes the builder enable the association under the laws applicable. If no local law applies, it must be formed within three months of a majority of allottees booking. Section 17(1) gives the undivided proportionate title in the common areas to the association. Section 17(2) makes the builder hand over the documents, plans and common areas after the OC and possession. If no local law applies, the deadline is thirty days after the completion certificate. None of these sections names the corpus fund or advance maintenance. The Karnataka Apartment Ownership Act, 1972 is silent too, and applies only to a property with a registered deed of declaration. So until a new law is in force, your protection is a date written into the agreement for sale.

The 2026 Apartment Bill would set a deadline. Clause 16(1)(c) makes the promoter transfer the maintenance deposits, security deposits, corpus fund and advance maintenance, “together with the interest accrued thereon”. The deadline is sixty days from the Occupancy Certificate. The transfer must come with an audited statement showing “project-wise and allottee-wise details”. Clause 1(2) says the Bill comes into force only on a notified date. Sachi found no such notification on 11 October 2026, so the Bill is not in force. As news, Deccan Herald reported on 10 September 2026 that the Governor returned the Bill to the state government for clarifications. The same report quotes an Urban Development Department official who said the Governor only sought clarity.

Point	Law in force today	2026 Apartment Bill (not in force)
Deadline to transfer the corpus	None stated	Sixty days from the Occupancy Certificate (clause 16(1)(c))
Interest earned on the fund	Not addressed	Must be transferred with the fund (clause 16(1)(c))
Statement of accounts	Not addressed	Audited, project-wise and allottee-wise (clause 16(1)(c))
Where the association keeps funds	Not addressed	A bank account in its own name with a scheduled bank (clause 28(1))
Common areas and documents	RERA Act, 17(1) and 17(2)	Clause 21(11): common areas, documents and all funds at transfer of management

8.8.4 How is maintenance shared after the association takes over?

After the association takes over, maintenance is a common expense that every owner shares, and the rules depend on how the association is set up. For a property under the Karnataka Apartment Ownership Act, 1972, section 3(g) defines “common expenses”. They include the costs to administer, maintain, repair or replace the common areas. Section 10 charges them to each owner in the percentage of the undivided interest that the declaration sets. Section 16(2) makes the bye-laws cover maintenance and repair, how owners’ shares are collected, and the election of a Treasurer who keeps the accounts. Section 17 says an owner cannot avoid paying by not using a common area or by leaving the flat. Section 19 makes an unpaid share a charge on the flat. That charge ranks after government and municipal taxes and a first mortgage. If the project is not under the 1972 Act, the association’s own bye-laws and your agreement set these rules.

Section 20 of the 1972 Act matters at resale. A buyer is jointly liable with the seller for the seller’s unpaid share up to the sale. The buyer can ask the Secretary or the Board of Managers for a statement of the unpaid amount. GST on the monthly charge depends on the amount and the association’s turnover. The apartment amenities guide covers that rule.

Rule	1972 Act (projects with a registered declaration)	2026 Bill (not in force)
Basis of each owner’s share	Percentage of undivided interest in the declaration (section 10)	Generally the flat’s super built-up area against the total (clause 25(2)(a))
Not using a facility	Does not remove the duty to pay (section 17)	Does not remove the duty to pay (clause 25(3))
Unpaid dues	A charge on the flat, after taxes and a first mortgage (section 19)	A charge on the flat, after taxes, statutory dues and a prior registered mortgage (clause 25(7))
Penalty for late payment	Not stated	Capped at one month’s maintenance charge (clause 25(2), proviso)
Unsold flats	Not stated	The promoter pays maintenance on them (clause 25(6))

8.8.5 What must you get in writing about the corpus fund?

Get five facts about the corpus fund and advance maintenance written into the agreement for sale before you pay. No law in force in Karnataka fixes them, so the agreement is your only record. First, the amount for your flat, and the basis, such as a rate for each square foot of a named area. Second, the account that holds the money until handover. Ask whether it is kept apart from the builder’s own funds. Sachi did not find a rule that says where a builder must hold a corpus before handover. Third, whether the fund earns interest, and whether that interest passes to the association. Fourth, the date or event on which the builder transfers the fund to the association. Fifth, the statement you will get at that point: the amount collected from each flat, the amount spent and the balance. Also ask what happens to the corpus and advance maintenance if you cancel the booking. The property tax guide lists the wider maintenance questions to ask, such as the billing basis and budget approval.

1. Ask the builder for the corpus amount and its basis for your unit.
2. Ask which bank account holds the corpus until handover.
3. Ask whether the corpus earns interest, and who gets it.
4. Ask for the transfer date to the association in the agreement for sale.
5. Ask for an audited statement for each flat at transfer.
6. Ask what happens to these sums if you cancel.

Keep every receipt. Section 11(4)(a) of the RERA Act makes the builder responsible for its obligations under the agreement for sale. Section 31 lets an aggrieved person file a complaint with K-RERA, and its Explanation includes an association of allottees. The RERA complaint guide explains the steps.

Sachi can read a builder’s cost sheet against its K-RERA filing and point out the corpus and maintenance lines to ask about. To do that for a Bangalore project, Ask Sachi.