The transformation of any property from ‘OLD’ to ‘NEW’ by way of redevelopment is now proved a nightmare for thousands of housing societies their redevelopment projects in Mumbai are plagued with delay in its completion with many more are being added to this band-wagon every month.

There are unknown Developers of small means with insufficient funds or have pocketed redevelopment projects more than their financial resources or have diverted their funds to other projects that at a later date have stopped paying rentals to the members of societies due to inordinate delay with offering numerous excuses each time

In one of such similar cases, the Bombay High Court in its landmark judgment ruled that the aggrieved housing society can terminate a Development Agreement (DA) executed with a Developer for his non-performance. It was learnt that the Developer has been facing financial problems and had committed gross delay in taking steps under the said Development Agreement which resulted in gross hardship to the members of the society. There was no transparency and integrity from the Developer’s side in executing the terms of Development agreement. Refer to: http://www.redevelopmentofhousingsociety.com/index.php/203-housing-society-can-terminate-the-development-agreement

 

It was observed by the Justice R.D. Dhanuka that if the society has lost the confidence in Developer, it cannot be forced to let the society continue with the redevelopment contract.

 

Considering the adverse situation, the Court allowed the society to appoint another Developer to redevelop its five buildings as the said buildings were in inhabitable condition, it was in the interest of justice that before any untoward incident takes place, the society should be permitted to take steps to appoint another Developer and go ahead with the redevelopment.

 

It was in February 2010, the society passed a resolution at its Special General Body Meeting to appoint a Developer for the redevelopment of their property. The Development Agreement was signed with the Developers in January 2011 for redevelopment. The Developer was required to obtain preliminary permissions to start construction within three months from the execution of the said Agreement, furnish a Bank Guarantee, Indemnity Bond and payment of hardship compensation etc. The said Agreement stipulated that the Developer should complete the redevelopment project within 29 months.

 

When the Developer delayed procuring permissions, the society had granted an extension of 16 months. No progress was made and the said extension expired in September 2011. Five months later, the Developer conveyed to the society that he would offer lesser carpet area to the members in the new building on the pretext that the Development Control Rule (DCR) had been amended and the plans are to be resubmitted resulting the further delay.

 

The society represented to the Court that the builder procured the basic building permission (IOD) in March 2013 i.e. a full 26 months after the execution of Development Agreement. Further, the said IOD was defective as it covered only flats for 56 members and not all the 97 members. The IOD was in the name of Developer’s another undertaking and not in the society's name.

 

The Developer then served a notice on the society, asking its members to vacate their flats by end of December 2013 blatantly ignoring the conditions of the said Development Agreement. The Developer’s representative also expressed to the society about its financial problems, stating that it would be colossal loss to the tune of more than Rs.16 Crores if more carpet area was offered in the redeveloped property as promised in the said Agreement.

 

The members of the society at its General Body Meeting held on November 14, 2014, unanimously agreed and resolved to invoke a clause in the Development Agreement to impose liquidated damages of Rs.18.80 Crores on the Developer by reasoning their dissatisfaction and hardship due to the delay.


The society issued a notice on the Developer asking it to rectify the breaches within 30 days or risk cancellation of the redevelopment deal. The Developer filed for arbitration. The Court appointed an arbitrator and announced that the society must issue a 15-day notice to the Developer if the society decides to appoint another Developer.


The Court took the serious cognizance of the prima-facie evidences which indicates that the Developer committed various breaches and gross delay. Though the Letter of Intent was issued by the society to the Developer in May 2010 and thereafter, no steps were taken by the Developer to get the flats vacated till said Agreement was on the verge of terminating. However, it was further stated by the learned Judge that Developer would be entitled to compensation in case it succeeds in the arbitration proceedings.

 

The above case is between The Jal Ratan Deep Co-operative
Housing Society Limited, Bangur Nagar, M.G. Road,
Goregaon (West), Mumbai 400 104 and M/s Kumar Builders Mumbai Realty Private Limited.

 

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We are all aware that in every monsoon, several old and unsafe buildings suddenly collapse killing hundreds and causing huge losses of human lives. If suitable steps are not measured, it is likely that numbers of such casualties will increase in coming years. 

Civic Authorities have identified many buildings in the city as dangerous or extremely dangerous. Numerous buildings from such lot are structurally weak and in need of immediate repairs. Owners of thousands of these old buildings since receiving insignificant and paltry rent from their tenants cannot afford to get even basic repairs done. 

The evacuation notices issued by BMC or MHADA though have caused fear; have been generally ignored by occupiers. Neither repairs nor evacuations are materialized and residents continue to live in such dangerous buildings waiting to collapse. 

The major leap in the area of saving lives of tenants of such unsecured buildings, the BMC, under the shelter of law, can now force-evict residents of private buildings which are in most dilapidated condition endangering the lives of its residents. The Bombay High Court has cleared Civic Body's guidelines with principle recommendation that mandates a week's notice to evict such unsafe residents. The Bombay High Court has issued guiding principles for clas­sification of dilapidated buildings, eviction, demolition and rehabilita­tion of occupants of such buildings. 

The BMC had filed a petition emphasizing difficulties it faced in implementation of notices issued to such residents of unsafe buildings under Section 354 of the Mumbai Municipal Corporation (MMC) Act under which the BMC can evict occupants of pri­vately-owned dilapidated buildings and demolish the precari­ous structures. 

The petition was with regard to South Mumbai based buildings in the C-1 Category that was referred to highly dangerous and di­lapidated structures. It was revealed that in Mumbai, there are presently 1,236 C-l Cate­gory buildings out of which 828 buildings are pri­vately owned. 

In view of the fact that in many of such buildings, the tenants are residing and are unwilling to vacate the premises in spite of the fact that the buildings being risky to stay anymore and likely to collapse and would cause loss of human lives including of those residents refusing to vacate and because of the inaction on the part of the owners of such unsafe buildings neglecting the periodical repairs, it became necessary for BMC to approach the Bombay High Court and get the said order passed. 

The Bombay High Court's go-ahead signal to the BMC's course of proposed action will enable the Civic Body to evict the occu­pants of C-l category buildings including state and corporation-owned as well as privately-owned ones, within seven days of issuing a no­tice under Section 354. If occupants refuse to vacate the premises, the police would use nominal force to assist the BMC to get the residents vacated. It has been stressed that this order is necessitated es­sentially to make Section 354 MMC Act ef­fective and to see that human lives are not in any manner compro­mised. 

The strategy worked out is that the BMC will inspect such dangerous build­ings and identify as highly dangerous and will issue seven days notice to occupants to vacate. The BMC then shall disconnect water, gas and power supply to the building. After the eviction, the BMC shall initiate demolition of such hazardous buildings.

However, the Bombay High Court specifically emphasized that the police may use such force as is reasonably necessary to re­move such occupants along with their be­longings from the said premises, without causing damage to their movables. 

The BMC had contended that in the absence of any specific provision as in the MMC Act for re­moval or evacuation of occupants of dilapidated buildings and to make it effective and practically workable con­sidering the human problems, it was necessary to issue certain guide­lines. The guidelines, approved by the State Government were submit­ted to the Bombay High Court on June 20th, 2014 for its approval and implementation thereof. 

However, the BMC in its guidelines, covered the right of evicted occupants that such evicted tenants or occupiers or the owner himself if residing in the building, will be enti­tled to reoccupy the premises in re­spect of the same area after the re­construction of the building, subject to the prevalent provisions of law pertaining to redevelopment of the property or subject to any arrange­ment or agreement arrived at by and between such tenants or occupiers with the owner of the building. 

According to the guidelines, if the building that needs to be pulled down is owned by BMC, it will have to provide an alternate accommoda­tion to its occupants till the building is restructured. If it is a privately-owned building under the cessed category, the Maharashtra Hous­ing and Development Authority (MHADA) or the Maharashtra Buildings Re­pair and Reconstruction Board (MBRRB) will provide transit accommodation to the evicted occupants of the build­ing. 

In case of privately-owned buildings, the BMC will not issue a Commencement Certificate to redevelop the structure unless beforehand, a permanent alternate accommoda­tion is provided to the erstwhile oc­cupants of the building or a settle­ment is arrived at between the occupants and the owners.

 

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There are many alarming factors that contribute to the miserable failure of redevelopment projects including unwarranted delay.  One of the major factors is delay in completion of redevelopment project by the Developers. 

Housing Societies under redevelopment and its members usually become restless on the day when redevelopment construction stops and the bulldozers are silent. The silence may signal the Developer's default on the project, leaving them also to worry about completion of their redevelopment project. There are many factors/questions that arise during the ongoing process of redevelopment and they are to be taken care of diligently while any Society is opting for Redevelopment. 

There are numerous factors which are responsible for a failure/delay of any redevelopment project. The Developers go bankrupt and they abandon their projects before completing all the units and amenities they promised in their glowing brochures. More often, slower sales of saleable areas of their one or more projects mean that generation of working capital is at a halt or diversion of funds from one project to another is one more cause of concern and the redevelopment projects that were supposed to be completed in two years, are stretched out to six or seven years followed by non-payment of further rent to the members of the Society. 

In either abandoned or delayed redevelopment projects, the member of the Societies that are staying in hired homes with high expectations of their new flats are left with their whacked dreams contrary to the plethora of promises that were given by the malicious and dishonest Developers. 

While selecting a Builder, both financial and quality aspects need to be considered. Most Societies focus on only quantitative financial terms which include the carpet area offered to each member, the corpus amount offered, rent for alternate accommodation, shifting charges and penalties. What are ignored here are the qualitative aspects of the Builder which would include past experience and track record. Extensive research needs to be done on the Builder's construction, marketing and legal track record. 

Selection of Developer should not be scaled on the basis of various exorbitant offers but should be according to his standing/reliability/integrity and market credibility. Avoid litigation with the Developer since it is basically the Society and its members who may be at a loss due to time consuming process of Law. 

Selecting an accountable and trustworthy Builder is a difficult task to ensure successful redevelopment. A redevelopment project going wrong can have disastrous consequences for all residents and it is invariably the Housing Society's honest and efficient Managing Committee that becomes the scapegoat in few cases. 

The Society should carry out analytical check of at least two or three other Societies where the Developer has constructed and delivered the similar projects. It is essential to establish whether he adheres to promises on quality and timelines as documented in the Development Agreement and provides sound infrastructure and finishes. 

Numerous cases are on record of the Press where the dreams of innocent middle class families are crashed when the redevelopment assignments undertaken are neither accomplished in given time by Developers chosen by Housing Societies nor are the promised facilities made available to them or never provided. There are types of voracious Developers of III Class Category who have held the Societies at ransom by delaying the redevelopment projects due to paucity of inflow or diversion of funds from the assigned projects in order to acquire more and more projects beyond their financial means or are simply not capable to execute the projects due to lack of competency. 

Please remember that going in for redevelopment without knowing the precise procedures and processes involved is like walking on the edge of a cliff blindfolded as you have no idea when a wrong step could send you tumbling downwards. Essential information about any Developer is one concept where half knowledge is infinitely more dangerous than ignorance. Selection of a Developer without carrying due diligence study will translate all your efforts null and void. Clearly, the need of the hour is that those standing on the threshold of redevelopment receive advice from counsellors like us having the integrated knowledge, experience and expertise and are able to assist your Society in selecting the meritorious Developer.                                                                                                                                     

Redevelopment is the magic mantra that turns dreams in to a reality provided the Society members are aware of the procedures and processes involved. The adage 'Knowledge is Power' applies impeccably to the redevelopment process. Knowledge is basically what differentiates Housing Societies that have successfully undergone redevelopment from those who are still languishing in dilapidated buildings. 

It is worth to mention here that in the name of redevelopment of old Housing Societies in Mumbai, the various authorities, in last few years have carpeted free ground to breed rampant corruption to benefit the private Developers to sub serve their illegal and deceitful objectives to garner huge profit. This is most required of the Government to impede the members of Managing Committees to enjoy the sleep with the Developers for few greens and thrust redevelopment idea on the innocent and gullible members. 

With regard to Law & Order, the Indian Police has always remained in forefront to protect the cold-blooded Developers and milk them as often as needed. Even basic functions like lodging a FIR against the fraud and cheat Developers is firstly not registered, victims are encouraged and even threatened for not to file an official complaint. If a case somehow gets registered, the police usually do not take any action as the con Developers, corrupt politicians and policemen go like hand in glove to share their piece of meat. 

There are numerous instances where firstly, the members of the Managing Committee are hooked by certain unscrupulous Developers and entice them of unlawful gratifications with substantial cash or in kind and use these Managing Committee Members as agents to pursue and pass over the rosy dreams and benefits to innocent members of the Society and criminally ensure that the redevelopment project is bagged by the Developer of their choice. 

The corrupt members of the Managing Committees also resort to arm twisting, harassment and threatening method to the flat owners into submission as per the Developer’s orders. Scared by such hounding tactics, most society members accept and tender their consent towards the redevelopment of their society without any protest and prefer to go along with whatever the members of the whole Managing Committee decides.                                                                                                                    

It is well known fact that the illegal gratifications and lavish spending by a large cartel of unscrupulous Builders entice the members of the Managing Committees of Co-operative Housing Societies and provoke them to turn against their own members of the Society in the matter of obtaining consent and force implementation of redevelopment. 

 

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Recent judgments delivered by the Bombay High Court have shut the doors for the minority members who have been obstructing the redevelopment of their societies on flimsy grounds. The prime observation of Court is that few members cannot be permitted to hold the Developer and the whole of the society to ransom and are bound by the Development Agreement executed between the society and the Developer.

The Maharashtra Co-operative Societies Act (MCS Act) says that if a redevelopment proposal has been passed by following a proper procedure in the society’s General Body Meeting and at least 75% of the members present have agreed and hence, the decision automatically binds the minority members not agreeing to the redevelopment.

The only option for such minority members is to take the legal recourse if they have substantial reasons over the protest, acceptable to the Court as also normally they take the stance that they have their flats and should have a say in the redevelopment.

The reasons for their objection could be varied, such as the process of redevelopment being not taken up in transparent manner, elements of frauds or favouritism involved, ungrateful benefits received by members managing Committee as also are being offered larger flats in the new building with free furnishing, arm-twisting tactics or high handed attitude by the administrative body etc. However, it has to be proved that there is some prejudice caused with an act of deception meted out to them.

If the reasons for objection are valid, the Court may ask the society to restart the bidding process for redevelopment. Objections by a few members are the main reasons why redevelopment projects get held up or stalled. But generally when the majority of the members are in favour of the redevelopment proposal, the Court allows them to go ahead with the project.

In November 2013, the Bombay High Court had rejected a plea filed by 45 members who were objecting to the redevelopment of a society. The Court held that out of 224 members, 179 had given consent and hence the minority members were bound by the agreement executed between society and developer. The opposing 45 members had approached the Court in 2009 and filed a plea against the redevelopment.

Redevelopment of housing societies in Mumbai witnesses a number of issues, lack of co-operation from the members being one of the many. Many housing societies are unable to undergo redevelopment since senior and aged members refuse to shift themselves to rental houses and try to avoid redevelopment.

On the other hand, forcible eviction from old and dangerous building of any housing society cannot be executed by civic authorities since it is not legally possible. According to the Mumbai Municipal Corporation Act of 1888, BMC cannot enforce forcible eviction of any member from private buildings i.e. housing societies.

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In case of lawsuits, the legal documents related to redevelopment play very important role in all Court Cases under Indian Evidence Act. The definition of document has broader and wider meaning, including 'Deeds' and 'Agreements'. All the documents related to redevelopment are important components of evidence in all cases before judicial as well as quasi-judicial authorities.

The Documents must be drafted carefully making sure that they are drafted following all principles of redevelopment and perfect legal terms are being used in its content.

Section 3 of Indian Evidence Act: 1872 says "Document" means any matter expressed or described upon any substance by means of letters, figures or marks, or by more than one of those means, intended to be used, or which may be used, for the purpose of recording that matter. Illustrations:

  • A writing is a document
  • Words printed lithographed or photographed are documents
  • A map or plan is a document
  • An inscription on a metal plate or stone is a document
  • A caricature is a document." 

Evidence: "Evidence" means and includes-

  1. All statements which the Court permits or requires to be made before it by witnesses, in relation to matters of fact under inquiry; such statements are called oral evidence; 
  2. All documents produced for the inspection of the Court; such documents are called documentary evidence."

    General Clauses Act 1897: Section 3 (18) says; "Document" shall include any matter written, expressed or described upon any substance by means of letters, figures or marks, or by more than one of those means which is intended to be used, or which may be used, for the purpose of recording that matter.

    In redevelopment, it is a must that the Landlords of Tenanted Buildings and Housing Societies are required to get their legal documents theoretically scrutinized and methodically vetted by the legal experts/counsellors who are well adept in integrated laws governing the redevelopment.

    Documents like Feasibility Reports, Tender Documents, Draft of Memorandum of Understanding, Development Agreement, Power of Attorney, Bank Guarantee and Individual Agreement to be executed with each member of the Society that are generally provided by the Developers to the Housing Societies.

    These documents are drafted by the Advocates of Developers in a deceitful manner with lack of transparency and thus, provide escape routes and full protection to the Developers by neglecting the vital terms and conditions that are protecting the interest of the Tenants and the Members of Housing Societies.

    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 Members of the Society. Once the property is handed over to the Developer, the Society has only legal documents in their hand to rely and fall back upon in case of any adverse situation in accomplishing the successful task of the redevelopment.

    The timely approach of legal experts/counsellors, who are well versed in redevelopment laws in respect of drafting/analyzing all the legal documents pertaining to the redevelopment in a scientific and systematic manner, can save the menace of such unforeseen adversities.

    We, as senior counsellors, are well adept in the field of scrutiny and vetting all types of legal documents in most defined and methodical manner. After precise and meticulous study, these drafts are scrupulously vetted, scanned and scrutinized by us and the gray areas/pitfalls and shortfalls are exposed and a written report is given to our Client Societies/Landlords apprising them the areas of alerts and awareness and to impress upon and compel the Developer to correct/include/provide due coverage before finalizing all the legal documents of redevelopment in corporate interest and safety of the Societies and Landlords to achieve the desired results.

    It is required that the Housing Societies/Landlords must study and understand and try to forestall the negative aspects under Financial/Legal and Technical areas to be termed principally in Development Agreement affecting the rights and interest of Members/Tenants.

    Senior Counsellors and Professionals can help you to understand the legal documents which require professional assistance. The Housing Societies/Landlords must consider the complexity of the texting and the potential risks and losses if the document is not prepared correctly. The cost of hiring an expert to vet the legal documents is justified by unfolding the potential risk of errors and omissions.

    Drafting of any document pertaining to the redevelopment is very important component of legal practice and advocacy; one must understand that perfection in drafting is not achieved, unless one understands the relevant provisions under the Acts, Laws and Rules as also facts and language. Many Housing Societies/Landlords suffer in course of litigation due to inferior drafting, lack of documentation skills and without proper understanding of redevelopment laws.

 

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