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You are here: Home | Article Showcase | Redevelopment matters | How to Draft Development Agreement
HOW TO DRAFT DEVELOPMENT AGREEMENT
The venture of redevelopment of any property involves a massive volume
of multi-crore of rupees as also the fate and future of all the resident Member In Housing Society
members of the society. Once the property is handed over to the Cannot Merge Flats Without Bmc
Developers, the society has only legal documents in their hand to rely Permission
and fall back upon in case of any adverse situation in accomplishing the
successful task of the redevelopment. Major Important Changes In Mcs
Act, Rules And Bye-Laws - 2014
The timely approach of legal experts/counsellors like us, who are well
versed in redevelopment laws in respect of drafting/analyzing all the legal
District Consumer Forum on
documents pertaining to the redevelopment in a scientific and systematic
Housing Society Can Allot Only
manner, can save the menace of such unforeseen adversities.
One Car Parking Space to Each
Drafting of any document pertaining to the redevelopment is very Member
important component of legal practice and advocacy; one must
understand that perfection in drafting is not achieved, unless one Guidelines on Adoption,
understands the relevant provisions under the Acts, Laws and Rules as Amendments and Submission of
also facts, figures and language of its terms and conditions. Many Bye-Laws 2014
housing societies/landlords suffer in course of litigation due to inferior
drafting, lack of documentation skills and without proper understanding of Car Parking - A Major Threat to
redevelopment laws. Mumbai
Generally, the drafts of all the legal documents pertaining to
redevelopment are prepared by the advocates of the Developers and
sent for approval of the society or the landlord. The societies in turn,
Online Registration of All
approach us for its scrutiny. We, as senior counsellors, are well adept in
Registered Housing Societies is
the field of scrutiny and vetting all types of legal documents in most
Compulsory
defined and methodical manner. After precise and meticulous study,
these drafts are scrupulously vetted, scanned and scrutinized by us.
Redevelopment, A Disgust of
Thereafter, the gray areas, pitfalls and shortfalls are uncovered and a Developers
written report is given to our client societies or landlords by apprising
them the areas of alerts and awareness and impress upon and compel Developers shall be Screened by
the Developers to correct/include/provide due coverage before finalizing Mhada for Redevelopment Work
all the legal documents of redevelopment.
Non-Execution of Indemnity
A Redevelopment Agreement, as the name suggests, is an agreement
Bond by MC Before September
between the residents and the Developers for the reconstruction of a new
6th, 2012
building by demolishing the old building. But it's not as simple as it
sounds; the housing society needs to exercise necessary caution to
TDR Policy Needs to be
ensure that the residents' corporate interest is safeguarded.
Reformed
Even seemingly simple things such as getting the Redevelopment
Agreement registered with the sub-registrar, paying proper stamp duty
and registration charges by the Developers is very important.
In most cases, the Developers negotiate the deal of redevelopment with Bombay HC rescues the majority
the Managing Committee of the society. In which case, the entire onus is of members to win over
on the Managing Committee to ensure that the interests of all the redevelopment
members are protected and they need to take all the precautions to avert
litigation at a later date. Fungible FSI in new DCR
(Development Control Rules)
It's advisable to discuss the draft of Development Agreement in detail at
the General Body Meeting so as to arrive at a consensus about its terms
What is Refuge Area in High
and conditions in order to avoid later hassles. As with any property
Rise Building
dealing, when it comes to a redevelopment contract, it's of utmost
importance to ensure that the Developers have a sound reputation. The

Online Registration of All
Registered Housing Societies is
Compulsory
Car Parking - A Major Threat to
Mumbai
Housing Society Can Terminate
the Development Agreement
members of the Managing Committee must visit the site of some of the
Why Occupancy Certificate is
previous projects redeveloped by the Developers so that they get first-
Important
hand information about the working skills.
Considering that the property of so many residents is at stake, it makes Definitions and rules of car
sense to seek the help of professionals like us in getting a clear picture parking
about the redevelopment contract that the society is entering into. Sound
advice from legal professionals before signing on the dotted line is sure to
help the society make a responsible decision.
In order to ensure the smooth implementation of such a contract, the
obligations of the Developers and all the consequences of the breach, if
any, need to be put down in writing clearly in the Development
Agreement. For instance, the time of completion of the project and the
consequences of non-completion in the stipulated time must be specified
in the Development Agreement so that the Developers do not drag on the
work.
When drafting a Development Agreement, some of the important points
and clauses are to be taken care of. As preamble, there should be a brief
history of how the conveyance deed was executed with the society. The
registration number of the society under the Maharashtra Co-Operative
Societies Act, 1960 (MCS Act, 1960) should be mentioned in the
Development Agreement.
There should be particulars of the existing flats with carpet area of the
flats occupied by each of the member of the buildings. The area of the
plot as per the 'Property Register Card' should be mentioned. The total
estimated FSI area that can be constructed by premium FSI or by utilizing
the TDR on the plot should be mentioned.
Transparency in floor area, (carpet, built-up, super built-up, hyper built-
up), status of project (cause of delay, approximate completion time etc),
quality of products used, design philosophy adopted, quality and
construction standards adopted etc are very important to be taken care of
while analyzing/drafting of the Development Agreement.
The Development Agreement should clearly mention the additional carpet
area which will be made available to the members in the new building.
The schedule of payment of various considerations such as corpus fund,
rentals, brokerage and transportation should be specified in the
Development Agreement. There should be a mention of the tentative date
of procuring the IOD followed by vacating the flats by the members which
should also be linked with the plans being approved by the concerned
authority.
The number of open car parking space, stilt car parking, staked parking
and closed parking which will be given to the members in the new
building should be mentioned in the Development Agreement. Usually the
Developers obtain at their own costs the rights under the Development
Right Certificate (DRC) in accordance with the provisions of the
Development Control Regulations for Greater Bombay, 1991 (DCR).
Further, the Developers get the building plans approved, obtain the
commencement certificate and sanction of building plans from the MCGM
and pay all the requisite deposits, fees and premiums to various
authorities including the MCGM and the same should be clarified in the
Development Agreement.
It should be spelt out in the Development Agreement that neither the
society nor the members shall be expected to pay any type of expenses.
It must be clarified in the Development Agreement that each prospective
buyer of a flat in the new building who intends to be a member of the
society will be required to pay to the society an entrance fee and share
allotment money as well as a sum as approved by the society towards the
capital and sinking fund of the society.
The time period for completion of the new building on the plot owned by
the society shall be defined in the Development Agreement. In the event
the Developers fail to complete the entire work within the stipulated
period, a penalty clause must be mentioned in the Development
Agreement.
It should be specified in the Development Agreement that from the date
of taking complete vacant possession of the existing structure till the date
of receipt of Occupation Certificate (OC) in respect of the new building
and till such time that the Developers intimate the members to take
possession of their respective flats, the Developers shall bear and pay all
municipal taxes and other payments required to be paid to the concerned
authorities.
The Development Agreement should list out the broad specifications and
amenities to be provided for the flats in the new building on the plot
owned by the society. It should have a proper schedule of the property at
the end of the agreement which should specify the location of the
property along with the name of the suburb, final plot number, CTS
number, area of the plot and municipal ward number.
Another distinguishing feature of Development Agreement is the fact that
the property viz. the land and building continues to remain the property of
 the society in the Property Card. What is given to the Developers is the
right of development to exploit the percentage of development potential of
the area to be kept by him as free sale area which he is entitled to
dispose of and make profit there from.
This was clearly stated by the Bombay High Court in Chaturbhuj
Dwarkanath Kapadia V/s. CIT 260 ITR 491 when it observed that the
object of entering into a Development Agreement is to enable a
professional builder/contractor to make profits by completing the building
and selling the flats at a profit. The aim of these professional contractors
is only to make profits by completing the building and, therefore, no
interest in the land stands created in their favour under such
agreements. Such agreements are only a mode of remunerating the
Developers for their services of constructing the building as stated in
Gurinder Developers Vs. Kurla Konkan Niwas Co-operative Housing
Society (2000) 3 Mah Lj 131.
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