This Article is Published in “The Housing Times, April 25, 2018” issue.
After the selected Builder/ Developer is issued the Letter of Intent for carrying out the Redevelopment Project of the Society, the process of Legal Documentation begins.
As per the prevailing practice, the Legal Documents for the Redevelopment Project of the Society are generally drafted by the Solicitors/ Lawyers of the Builder/ Developer. It is imperative for the Society to appoint its Lawyer to advise the Society during the Redevelopment Project of the Society. The advantages of having Society’s Lawyer during the Legal Documentation Stage are as follows.
- Society gets the correct understanding of the terms & conditions incorporated in the Legal Documents & their implications on the Redevelopment Process on the whole & on the interests of the Society & its Members in particular.
- The participation of Lawyer during the discussions with the Solicitors/ Lawyers of the Builder/ Developer is advantageous for the Society.
- All the Legal Documents are properly vetted in the interests of the Society & its Members.
The Real Estate (Regulation and Development) Act, 2016 & the MahaRERA Regulatory Authority set up by the Government of Maharashtra on May 01, 2017 have a great impact on the Real Estate Development activity. The Real Estate projects that are complying properly with the MahaRERA requirements are proceeding smoothly which is really beneficial to all the stakeholders of the project. The Real Estate projects not complying properly are adversely affected thereby negatively impacting all the stakeholders. It is imperative for the Society to build adequate safeguards in the Legal Documents to ensure that the Builder/ Developer maintains the MahaRERA compliance during all the stages of Redevelopment project.
There are many Legal Documents required to be executed by the Society during its Redevelopment Process & explaining all of them in details within the limit of an article is very difficult. However, let’s make an attempt to understand the most critical Legal Documents.
A. Memorandum of Understanding (MoU)
Memorandum of Understanding is the first important & formal agreement executed between the Society & the Builder/ Developer. The terms & conditions in the Tender document of the Society & the Offer made by the Builder/ Developer are primarily considered for inclusion in the Memorandum of Understanding. The Memorandum of Understanding brings out the basis of the mutual Understanding between the Society & the Builder/ Developer with respect to the Redevelopment Project of the Society. The efforts should be made to include comprehensive terms & conditions about various aspects of the Redevelopment Project so that a broader & detailed understanding is achieved by both the Society & the Builder/ Developer.
B. Development Agreement
The Development Agreement is the most important & very detailed Agreement executed between the Society & the Builder/ Developer stating all the terms & conditions of the Redevelopment project. It includes all the duties/ obligations of the Society (& its Members) & the Builder/ Developer. The successful completion of the Redevelopment project largely depends on this Agreement & hence due care must be taken to ensure that both the parties to this agreement are responsible for their just duties/ obligations & are not disadvantaged in any way. The Development Agreement should be drafted in such a way that in the event of any non- compliance of the Redevelopment project with MahaRERA on account of default on part of the Builder/ Developer, the Society’s interests are protected all the time.
C. General Power of Attorney
The Society issues a General Power of Attorney to the Builder/ Developer to carry out his duties for the Redevelopment process. It also includes all the necessary permissions to the Builder/ Developer for liaison with various Government & Municipal departments.
D. Indemnity Bond by the Builder/ Developer
The Builder/ Developer execute the Indemnity Bond in favour of the Society stating that he will carry out all the work as per the Development Agreement by following prevailing rules, regulations & laws. The Builder/ Developer further indemnifies the Society for any wrong performed on his part.
E. Bank Guarantee by Builder/ Developer
The Builder/ Developer furnishes the Bank Guarantee to the Society. The bank Guarantee states that the Builder/ Developer shall perform all his duties under the Development Agreement within the stipulated time period. If the Builder/ Developer fails to perform his duties within the stipulated time period, the Bank shall compensate the Society in behalf of the Builder/ Developer.
F. Power of Attorney by the Society for Sale of Flats
The Society issues the Power of Attorney to the Builder/ Developer for the Sale of Flats built towards the Sale component of the Redevelopment process.
G. Agreement for Allotment of Flat
This Agreement is entered between the Builder/ Developer, the Society & its individual Member for allotment of new Flat to the Member under the Development Agreement of the Society. This Agreement gives details of the Flat allotted & all the other benefits received by the individual Member.
H. Agreement for Sale of Flat
This Agreement is entered between the Builder/ Developer & the Flat Buyer who is buying the Flat from the Sale component of the Redevelopment process. Though the Society is not a party to this Agreement, it is essential that the Society is fully aware of all the commitments of the Builder/ Developer (under the new MahaRERA regime) to the Flat Buyer.
All the Legal Documents are required to be executed by proper stamping & registering (by paying the proper registration charges) wherever required, as per the prevailing rules, regulations & laws. The Society must take professional Legal advice about the same to ensure that all these documents are executed in order & are enforceable by the law.
Legal Documentation is the most important step in the Redevelopment project of the Society & a thoughtful implementation of the same helps in safeguarding the interests of the Society & its Members.
Sanjay Geete