2. DEVELOPMENT OR JOINT VENTURE OF LAND
1. Land Owner Duty :
Verifying the background of a developer or builder before providing land for development is a crucial step to ensure the safety of your investment. You should check their past projects and deals in the market, as well as their reputation in the industry. You can also consult with other landowners who have worked with the same developer or builder before to get their feedback and opinion.
It is also important to clarify the terms of the agreement with the developer or builder, such as the duration of the project, the payment terms, and the responsibilities of each party. You should ensure that the agreement is legally binding and includes provisions for dispute resolution.
If the person you are dealing with is an agent, you should clarify their role in the project and their commission structure. You should also verify their credentials and reputation in the market before entering into your property deal with them.
2. Document Activities :
Generally the developer/builder takes care of the documentation process when a landowner decides to develop their land with the help of a builder. However, it is always advisable for the landowner to be aware of the documentation process and ensure that all necessary legal formalities are completed properly. It is also important for the landowner to review the documents carefully before signing them, as they are legally binding and can have long-term implications.
As a landowner, it is crucial to read and understand each clause in the document before signing it. It is recommended to take the help of a legal expert if necessary to understand the terms and conditions of the agreement. Signing on all pages of the document also ensures that the builder cannot change any part of the document without the landowner's consent or signature. This is essential to protect the landowner's interests and prevent any fraudulent activities by the builder. Any changes made to the document should be mutually agreed upon by both parties and recorded in writing.
3. Development Main Point :
A. DEPOSIT :
The deposit amount paid by the developer to the landowner is usually meant to act as a security or assurance that the developer is serious about the deal and has the financial capability to carry out the project.
The deposit amount can be of two types : Refundable & Non Refundable
Refundable Deposit :
In this the amount provided by the Developer to the landowners will be returned back to the developer once the project is completed and the landowners have received allotted flats possession, as you mentioned earlier.
Non Refundable Deposit :
In this the entire amount is retained by the landowner even if the project does not take off for reasons beyond the developer's control. Non-refundable deposits are usually considered as a sign of good faith and commitment from the developer towards the landowner.
B. AREA OF CONSTRUCTION :
The landowner and developer negotiate on the area of consideration to ensure that both parties are satisfied with the deal. The area of consideration can be in the form of built-up area in the project, a fixed amount of land, or a combination of both. It is important to document the agreed-upon area of consideration in the development agreement to avoid any future disputes.
Percentage Ratio wise :
Mostly area is allotted on the basis of Percentage Ratio wise such as 70-30, 55-45, 50-50. The percentage ratio can vary depending on the negotiations between the landowner and the developer, and even higher in favor of the developer.
The Developers to provide area on the built-up basis rather than carpet basis. The built-up area includes the carpet area along with the thickness of the walls, balcony, and other spaces. This means that the actual usable space is less than the built-up area. Hence, it is important for landowners to understand the difference between built-up area and carpet area and negotiate accordingly. It is also advisable to ask for a clear breakup of the area calculation in the agreement to avoid any future disputes.
Residential or Commercial :
This area is another part of negotiation, where developer is unwilling to allot you Commercial area, he tries to handover you max to max residential units and get the benefits of profit in commercial and holding those till possession to get good returns.
Floor Wise :
Negotiations can also take place on a floor-wise basis where the landowner may have specific preferences for the units they want to be allotted. The developer may consider these preferences and try to accommodate them to the best of their ability. It's also possible that the landowner may be given a choice between multiple units on a particular floor, and they can choose the one that they prefer.
Alternatively, the developer may offer units to the landowner in an alternate manner, where they are allotted units on different floors in a rotating fashion to ensure that each landowner gets an equal share of units on different levels. This can also help in avoiding disputes over which units are better or more desirable.
Front & Back Side Units in one Building :
It is also an issue of negotiation between the landowner and developer.
More than One Building :
To avoid such allotment, where one building is given to the landowner and another to the developer, as it may lead to differences in the quality of construction. If the developer has a cost-cutting bias, it may affect the quality of the building given to the landowner.
If both the developer and landowner are keeping units in same building to ensure uniformity in the construction with the same level of quality and no discrimination is made between the developer and landowner buildings.
If both the developer and landowner are keeping units in same building to ensure uniformity in the construction with the same level of quality and no discrimination is made between the developer and landowner buildings.
C. SPECIFICATION of AMENITIES & INSTALLATION:
It is important for landowners and unit purchasers to ensure that the developer has provided the promised installations and amenities in the completed project. As you mentioned, The Real Estate Regulation and Development Act, 2016 was enacted to protect unit purchasers and ensure that developers provide the units as per their commitments. The act also requires developers to register their projects and disclose all the necessary information, including the timelines for completion and the amenities provided, to the regulatory authorities.
To verify if the installations and amenities have been provided as per the commitment, landowners and unit purchasers can inspect the completed project and compare it with the information provided by the developer during the registration process. They can also approach the regulatory authorities for any discrepancies or issues with the completed project.
It is important to note that the act also provides for penalties and compensation in case the developer fails to provide the promised installations and amenities. Therefore, it is essential for landowners and unit purchasers to take necessary measures to ensure that their rights are protected and they receive the units as per their commitments.
D. PAID FLOOR SPACE INDEX (F.S.I.) :
If the developer is purchasing additional FSI through TDR, and the landowner is interested in getting additional area in the project, then the developer may offer the landowner to contribute towards the cost of purchasing the additional FSI. The contribution amount can be determined based on the proportion of the additional area that the landowner would like to receive.
The terms of the agreement between the developer and the landowner with regards to the contribution towards the additional FSI should be clearly defined in the agreement. The agreement should also clearly state the share of the additional FSI that the landowner will receive based on their contribution.
It is important for the landowner to carefully review and understand the terms of the agreement before agreeing to contribute towards the additional FSI. They should also ensure that the terms are fair and reasonable and protect their interests.
If the landowner decides not to contribute towards the additional FSI, then the developer may use the entire additional area that they are entitled to base on the purchased FSI. However, the terms of the agreement should clearly state the exact amount of additional FSI that the developer is entitled to use if the landowner does not contribute towards the additional FSI.
E. TENURE OF CONSTRUCTION :
The duration or tenure of a construction project depends on various factors, as you have mentioned, such as the size of the land, project type, capital investment, and negotiation between the developer and the landowner(s). Other factors that can affect the construction tenure include the complexity of the project, availability of resources, and the regulatory environment.
Small or medium-sized projects usually have a minimum tenure of 24-36 months, although this can vary depending on the project's specifics. In cases where there are delays due to shortage of raw materials, pending government permissions, strikes, pandemics, or other unforeseen circumstances, the tenure may need to be extended.
Big projects, on the other hand, typically have longer construction tenures, with a minimum of 5 years. This is because big projects often involve a larger land area, higher investment, and more complex planning and execution.
It is important for developers to provide a realistic and achievable construction tenure to the landowners and unit holders. Any delays or extensions to the tenure should be communicated clearly to all parties involved, and the developer should take necessary steps to minimize any impact on the project's completion timeline. It is also important for the landowners and unit holders to have a clear understanding of the construction tenure and to factor it into their plans and expectations.
F. ALLOTMENT OF UNITS :
It is important for the landowner to have the option to select the units they would like to receive in the project as soon as the developer gets the plan sanction from the local authorities. This will ensure that the landowner gets the units that they prefer and that the developer does not sell the units to others before the landowner has made their selection.
To protect the interests of the landowner, it is recommended to include a clause in the development agreement that prohibits the developer from selling any unit on their name until they have allotted the units to the landowner. This will give the landowner the time they need to select their preferred units and complete the registration process.
By inserting such a clause in the development agreement, the landowner can ensure that their rights are protected and that they have a say in the selection of the units they will receive. It will also ensure that the developer does not prioritize their own profits over the interests of the landowner.
It is important for the landowner to carefully review the development agreement and negotiate any necessary changes to protect their interests before signing the agreement.
G. RENT RELATED :
It is a good practice for the developer to provide rent to the landowners for their inconvenience for residence during the construction period, especially if they were residing on the land before the construction started. This can be negotiated between the developer and landowner during the agreement negotiations.
In case the construction tenure is extended for a genuine reason and the landowners are not able to get possession of the allotted units within the fixed tenure, the developer can consider providing rent to the landowners until they get the possession of the allotted units. This can be seen as a penalty charge for the delay in possession, as if the units were received on time, the landowners would have received rental income.
However, the terms and conditions for such rent payments should be clearly defined in the development agreement to avoid any confusion or disputes later on. The amount of rent and the duration for which it will be provided should be clearly specified in the agreement.
It is important for the landowners to carefully review the terms and conditions of such rent payments and negotiate any necessary changes to protect their interests before signing the agreement.
H. LOAN :
The landowners should seek clarification from the developer on whether the developer is going to raise a loan on the entire project or only on the remaining area excluding their area and units.
If the developer is going to raise a loan on the entire project, then the landowners should clarify whether their area and units will be excluded from the loan liability.
In case the landowners' units are not excluded from the loan liability, in case of nonpayment of loan installments by the developer, the consequences is that the landowners' units might get sealed for auctions under the SARFAESI Act.
G. VARIOUS PERMISSIONS & APPOINTING PROFESSIONALS :
The developer is responsible for carrying out all the work activities related to the construction project, and the landowner gives consent to the developer to carry out these activities through a power of attorney. The developer is responsible for appointing technical and non-technical workers, purchasing raw materials, obtaining various sanctions and permissions required for the project, and paying all the fees, charges, and premiums associated with these activities.
Additionally, the developer is also responsible for bearing the stamp duty, registration fees, and advocate fees related to the project. These expenses are typically borne by the purchaser of the property, but in this case, the developer is responsible for paying these fees as part of the agreement between the developer and the landowner.
The power of attorney given by the landowner to the developer should clearly outline the scope of activities that the developer is authorized to carry out on behalf of the landowner. It is important for the landowner to carefully review the power of attorney before executing it to ensure that they are comfortable with the activities that the developer is authorized to carry out on their behalf.
H. BREACH OF CONTRACT RELIEF :
Breach of contract relief refers to the legal remedies available to parties in case of a breach of the terms of the agreement by either party. If one party fails to fulfill their obligations as per the terms of the agreement, the other party may seek relief for the losses incurred as a result of the breach.
The relief for breach of contract can take different forms depending on the nature of the breach and the terms of the agreement. Some common forms of relief include:
Damages:
This is a monetary compensation awarded to the aggrieved party to cover the losses suffered as a result of the breach.
Specific Performance:
This is a court order requiring the breaching party to perform their obligations as per the terms of the agreement. This remedy is usually sought in cases where monetary compensation is not sufficient to remedy the breach.
Rescission:
This is a remedy that allows the aggrieved party to terminate the contract and be released from any further obligations under the agreement. The party may also seek restitution of any payments made under the agreement.
It is important to note that the availability of these remedies may depend on the specific terms of the agreement and the applicable laws. Therefore, parties are advised to carefully review and understand the terms of the agreement before signing, and seek legal advice in case of any disputes or breaches.
