Sunday, July 18, 2010

Redevelopment of Building/s by Landlord

v     General
A landlord may consider redevelopment of existing cessed building/s to his advantage and in turn tenants/ occupiers will also get benefit. If the landlord has his own resources both financial and technical he can embark upon redevelopment on his own. The landlord may give a right of redevelopment of the building/s which is in dilapidated condition with the right to sell additional units. The landlord may be an individual/s, an HUF, a partnership firm, a company or a trust. If the landlord is a Public charitable trust it has to get permission from the Charity Commissioner. The advantage to landlord (co-operative housing society), developer and tenants/occupiers (members) are almost the same as discussed in the first chapter. The tenants/occupiers may from their association to get the best out of redevelopment arrangement and protect their rights. The association may be registered.

v     Development with authority to sell
Here the landlord enters in to an agreement with the developer for redevelopment of the property with an understanding that the present tenant’s occupiers will get the same area in the newly constructed building as they were occupying in the building prior to redevelopment or may be some extra area. The developer gets right of sale (on ownership basis), of additional units/flats in the redevelopment building/s. the land with newly constructed building will be conveyed directly to a co-operative housing society on completion of the project.

v     Right and obligation of a developer
A developer has rights as well as obligations qua the owner as well as qua the flat purchasers in an arrangement was the property to be developed remains the property of the owner in the records and the developer develops the property even though the ownership of property in government records remains unchanged.

v     Qua the purchasers/society/company
As stated earlier, in a development agreement the owner agrees that the developer shall construct the building(s), sell the flats and property will be conveyed by the owner and the developers (as confirming party) to the purchasers or the Society/Company formed by them. A question arises as to the legal position when the developer raises money from the intending purchaser, must perform the same duties and is subject to the same liabilities and disabilities as if he were a trustee of the property for the person for whose benefit he holds it.

Further, the Maharashtra Ownership Flats (Regulation of the Promotion of Construction, sale, Management and Transfer) Act, 1963 (MOFA) defines ‘Promoter’ in wide and explicit terms to include the lessor who constructs or causes to be constructed the building which includes a developer or builder of flats for the purpose of selling them to other persons. The provisions confer a fiduciary capacity or fiduciary obligation on the promoter for the benefit of the flat purchases. Therefore, when an owner or developer decides to develop a property by construction, propose to sell flats on ownership basis and ultimately to convey it to the Society/Company, the owner or developer, as the case may be assumes a fiduciary capacity at the time of entering into an agreement for the sale of flats and receiving consideration from the flat purchasers.

v     Document with tenants/occupiers
An agreement is entered into between the landlord and tenants/occupiers in individually wherein all the terms and condition are given. The tenants/occupiers have to surrender their flat/unit to the landlord or his nominee for redevelopment. The tenants/occupiers will get alternative accommodation/rent for the period until the new flat/units are ready for occupation, the actual area plus extra area if agreed etc.

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