Redevelopment of Housing Societies review: GUIDELINES 5

REDEVELOPMENT OF CO-OPERATIVE HOUSING SOCIETIES IN MUMBAI: PLANNING FOR REDEVELOPMENT? READ THIS………

Redevelopment of properties of existing Co-operative Housing Societies has been a subject of great interest in recent years, both to the societies and to the developers.

Redevelopment has become quite popular in Co-operative Housing Societies since it is a most practical, economical and long term solution in a scenario where old structures are proving uneconomical or obsolete; whereas for the developer it is a cost effective way to construct residential/commercial premises by utilizing the unused potential i.e. the Floor Space Index – Transferable Development Rights with gradual capital investment, in times of heavy land prices and in a situation of unavailability of land in good locations.

With the real estate prices touching a new high, residents in old buildings are now discovering that they have an opportunity to unlock immense value from their property by offering it to a builder/developer for redevelopment.

A Redevelopment arrangement begins with the conception of an idea to redevelop and it ends with the handing over of the agreed constructed area and the corpus money or other monetary consideration to the Society by the developer. Developers, on their part, are also on the lookout for properties with unused development rights where they can build a new structure of a few storeys higher and sell those additional flats for a tidy profit for them.

While it may sound like a typical ‘win-win’ situation, the process of redevelopment isn’t as easy as it sounds. It comes with a set of rules, procedures and implications which you need to understand.

It is needless to mention here that the Redevelopment of housing societies is usually burdened with bitterness and complaints of high-handedness and corruption against the Managing Committee. Hence, with a view to ensure transparency in societies seeking to undertake redevelopment projects, the State Co-Operative Department has, for the first time, issued guidelines for societies to follow under section 79 (A) of the Maharashtra Co-operatives act, 1960.

The recent guidelines are issued by a committee comprising the Co-Operatives Commissioner and CIDCO Chairman pursuant to a deep study of complaints by members of Housing Societies undertaking the redevelopment of their property. According to an important feature in the guidelines, a redevelopment scheme has to be approved by the general body only if three-fourths of the society members are present at the meeting.

The subject of redevelopment has assumed great significance because in Mumbai, majority of the buildings owned by the Co-Operative Housing Societies are quite old and in a dilapidated state. In case of redevelopment of old buildings which have completed 30 years or are beyond repairs as certified by the Govt. approved architect on the basis of his “Structural Audit”.

The first and the foremost step before going in for redevelopment would be a structural audit of the building. The structural audit report will determine whether the building should go in for redevelopment or for major repairs. In the absence of the technical report it would not be legally permissible to pass a resolution in the general body meeting. However, it is a fact that many co-operative societies suddenly call for General Body meeting and decide to go in for redevelopment in the absence of a structural audit report.

By-Laws No.77 of the Co-operative Housing Societies specifies that every Society shall cause the “Structural Audit” of the Building/s of the Society as under:
(1) For the Building ageing 15 to 30 years…….Once in every 5 years.
(2) For the Building ageing above 30years…….Once in 3 years.

There are two important things in a Resident/Developer arrangement. One is from the commercial angle and another is from the technical angle. A Developer usually assures a certain amount of cash by way of corpus, an additional area or a mix of both. He may give an alternative accommodation for your temporary stay, foot your rentals or give you a monthly compensation within which you have to find your temporary accommodation.

Before you negotiate with a Developer, you need to establish the market value of the property you will receive on completion of redevelopment. This is a better approach than quoting a random figure to the builder that would make them feel short-changed or the high amount would make the builder shy on the new project.

The technical angle refers to the finished good. Does it match the quality and terms and conditions assured by the builder? In fact, at the agreement stage itself, the society residents should appoint a lawyer to draft and finalize the agreement. It usually takes a year for a builder to convince the society members and take an in-principle approval. The society members should ensure the timely completion of the project which is the most important detail to be mentioned in the agreement.

The main parties involved in the any redevelopment project are Society and Developer. Committee Members dealing on behalf of cooperative housing society are mostly non-technical and are laymen.
Therefore it is very important that the drafting of the Tender / agreement is done meticulously so that there is no chance of dispute and/or difference between both the parties. Excellent skills and vast Legal & Technical knowledge is required to draft such an important document. It is very important to avail the services of a professional, who is legally as well as technically qualified and a person who has the vision to anticipate future problems and requirements.

In any scheme of redevelopment, the primary objective is to ensure guarantee of performance. Performance is principally in the area of timely construction, quality control and adherence to rules, and regulations.

The best way to select the builder is to invite sealed tenders through a public notice and such tenders should have the basic eligibility criteria mentioned. This will bring in more transparency in selecting the developer. Brief details and advantages of the tendering process are given below.

BRIEF DETAIL OF TENDERING
 Preparation of Tender Document including Technical, Commercial and Legal conditions, detailed Specifications and offer etc
 Advertisement in 3 local News paper
 Selling Tender documents
 Identification of Developer and evaluation of offers and Recommendation
 Guidance in Negotiation
 Formation of suitable agreement

ADVANTAGES OF TENDERING

 As advertisement is given in 3 prominent newspapers society will get good offers from reputed developers.
 As offers are invited in a sealed tender form, there is a severe competition among the bidders.
 As all the specifications and terms and conditions are same for all the bidders, it becomes easy for comparison and evaluation.
 Earnest Money Deposit in the form of PAY ORDER payable to the society is taken from each and every bidder so that unwanted or non interested parties do not bid for the work
 Mode of measurement of carpet area and person who will certify the same is clearly defined.
 Entire redevelopment proposal to be done in society’s name making it safer for society in case of any problems faced by developer.
 Right to change and or remove developer stays with the society.
 As all the details pertaining to commercial terms such as Bank Guarantee, temporary accommodation, cost of additional area etc is clearly defined the chances of ambiguity and disputes are virtually non-existent.
 Detailed technical methodology of work is laid out in the tender document under the head of technical specification.
 Basic rates are mentioned in the tender document enabling members to change any specification for their individual uses.
 Right to check amendments of plans during the progress of work is kept with the society.
 Material to be used is spelt out with brand names to avoid any confusion.
 As all the items are defined clearly the chances of getting realistic offer are excellent.
 Consequences of delay are defined in tender document.
 Tender is a legally binding document.
 Bye Law No 158 recommends need of tender document for construction of building.

After a proper feasibility report is submitted, the next step in the process of Redevelopment of any society is the most important one, viz: Selection of the PERFECT DEVELOPER, who will meet all the needs of the society, and at the same time be financially stable, and having a lot of experience of Redevelopment because unrealistic offers can often lead to redevelopment projects being stalled and leave residents in a fix.

This is achieved by the process of tendering, wherein the PROJECT MANAGEMENT CONSULTANT will float a tender document containing all the Legal, Technical, and Commercial & Other important Terms & Conditions, whereby maximum safety of the society members is ensured, as they are parting with their life's most valuable possession... their house, in the hands of a perfect stranger.

Before we agree to re-development plan, please read carefully, the procedural aspects are strictly followed as per the Govt. guidelines at the Meetings of the Society.

The Government of Maharashtra has issued a Circular bearing No. CHS 2007/CR554/14-C, Co-operation, Marketing and Textiles Department Date: 3rd January 2009 which contains a Directive under Section 79 (A) of Maharashtra Co-operative Societies Act 1960 for all the Co-operative Housing Societies in the State of Maharashtra regarding the Redevelopment of Buildings of Co-operative Housing Societies that wherever, the buildings of Co-operative Housing Societies in the State of Maharashtra are being redeveloped on a large scale, a number of complaints were received from members against managements of Co-operative Societies in which redevelopment is taking place. In respect of most of the Co-operative Housing societies, nature of complaints relating to redevelopment is as under:-

1. Not taking the members in confidence in the process of redevelopment.

2. There is no transparency in tender process.

3. Appointing contractors arbitrarily.

4. To work by violating provisions of Co-operative Act, Rules and Bye-Laws.

5. No orderliness in the work of Architect and Project Consultant.

6. Not planning Redevelopment Project Report.

7. Not adopting proper procedure in finalizing tenders.

Whereas there is no concrete policy in respect of all above points of complaint and therefore Co-operation Commissioner and Registrar, Co-operative Societies, Maharashtra State, Pune had appointed a Study Group under the Chairmanship of Joint Registrar, Co-operative Societies (CIDCO) to study the complaints received at various levels and for consultations with all constituents working in the relevant fields. The said Study Group has expressed the opinion that it is essential to frame regulations for redevelopment of buildings of Co-operative Housing Societies after consultation with all the constituents in the field of Co-operative Housing.

Directive for Redevelopment of Building of Co-operative Housing Society

1. Requisition for convening Special General Body Meeting for Redevelopment of Society’s Building:-

Not less that ¼ members of the Society the building of which is to be redeveloped should submit a requisition to Secretary on the Managing Committee elected as per provisions of Bye-Laws and lawfully formed along with their scheme and suggestions for redevelopment of the Society’s building for convening Special General Body Meeting to finalize the policy on redevelopment of the building.

2. Convening Special General Body Meeting :-

On receipt of an application as per Directive No. 1 above, Managing Committee should take a note thereof within 8 days and Secretary of the society should convene General Body Meeting of all the members of the society, Agenda of the Meeting should be furnished to each member 14 days prior to the day of meeting and acknowledgement thereof should be kept on record of the society.

Before convening the said meeting, Society should obtain list of Architects / Project Management Consultants on the panel of Government / Local Authority and obtain quotations from minimum 5 experienced and expert persons for preparing project report for redevelopment work of the building and one expert person from among them will be selected in the Special General Body Meeting.

Following business will be transacted in the said Special General Body Meeting:-

1. To take preliminary decision by taking into consideration demand of the members for redevelopment of society’s building and suggestions received in respect of the same.

2. To select expert and experienced Architect / Project Management Consultant on the panel of the Government / Local Authority for work of redevelopment of the building and to finalize items of work to be done by them and terms and conditions of work.

3. To submit outline of the program for redevelopment of the building.

3. To accept written suggestions from members relating to redevelopment of the building:-

Members of the Society will be entitled to submit in writing to the committee eight days prior to the meeting their realistic scheme, Suggestions and recommendations for redevelopment of the building in the name of experienced and expert Architect / Project Management Consultant known to them. However, that Architect / Project Management Consultant should submit a letter that he is desirous of doing work of redevelopment.

4. Decisions to be taken in the Special General Body Meeting:-

Quorum for the Special General Body Meeting convened for redevelopment of building of the Co-operative Housing Society will be ¾ of the total members of the society. If quorum is not formed, meeting will be adjourned for eight days and if there is no quorum for the adjourned meeting, it will be deemed that members are not interested in redevelopment of the building and meeting will be cancelled.

On formation of quorum for the meeting, suggestions, recommendations and objections from all the members with regard to redevelopment of the society’s building will be taken into consideration and opinions expressed by all the members will be recorded in the minutes book with names of concerned members. Therefore a preliminary decision will be taken whether to redevelop society’s building or not. Such decision must be taken with majority vote of more than ¾ of the members. On preliminary resolution about doing the work of redevelopment getting passed, following business will be transacted in the meeting.

a) To selected expert and experienced Architect / Project Management Consultant

from the panel of the Government / Local Authority for work of redevelopment of the building and to finalize items of work to be done by them and terms and conditions for the same.

b) To submit an outline of the program for redevelopment of building.

5. Providing minutes of Meeting to all members:-

Secretary of the Society should prepare minutes of Special General Body Meeting as above within ten days and a copy thereof should be furnished to all members and acknowledgement therefore be kept on record of the society. Also one copy should be forwarded to the office of the Registrar.

6. Issuing Appointment Letter to the Architect / Project Management Consultant:-

Secretary of the society will within 15 days of the meeting issue Appointment Letter to the Architect / Project Management Consultant selected in Special General Body Meeting and Society will enter into an agreement with Architect / Project Management Consultant incorporating therein terms and conditions approved in Special General Body Meeting.

7. Work to be done in the initial stage by Architect / Project management consultant:-

a) To survey Society’s building and land.

b) To obtain information about conveyance of land to the society.

c) To take into consideration prevailing policy of the Government and the regulations applicable from time to time depending on ownership of the land (MHADA/SRA/Municipal Corporation) and to obtain information about FSI and TDR, which would be available in relation to building and land of the society.

d) To take into consideration suggestions and recommendations from the members for redevelopment of the building as also the residential area to be made available to the members, commercial area, vacant area, garden, parking, building specifications etc. and to prepare a realistic project report.

e) Architect / Project Management Consultant should prepare the project report within two months of date of his appointment and to submit the same to committee of the society.

8. Action to be taken on receipt of redevelopment Project Report:-

a) On receipt of Redevelopment Project Report as above, Secretary of the society will convene a joint meeting to approve the Project Report with majority vote by taking into consideration suggestions received from Committee Members and Architect / Project Management Consultant. Notice in that behalf will be published on the Notice Board of the Society mentioning time venue etc. of the meeting.

b) It should be mentioned in the notice that a copy of the Project Report is available in the society’s office for members to see and the notice should be served on all the members that they should submit their suggestions eight days prior to the next Committee Meeting and acknowledgement of such notice should be kept on record of the Society.

c) Seven days prior to joint meeting, suggestions received from the members will be forwarded by Society’s Secretary to the Architect / Project Management Consultant for his Information.

d) There will be a detailed discussion in the Joint meeting on the suggestions / recommendations from members and opinion thereon of the Architect / Project Management Consultant and project report will be approved with necessary changes. Thereafter draft of tender from will be prepared and date of next joint meeting will be fixed for discussion on draft tender form and finalizing the same.

e) While preparing draft tender form, in order to get competitive quotations from renowned experts and experienced Developer, either carpet area or corpus fund fixed (not to be changed) and by finalizing other technical matters, the Architect / Project Management Consultant will invite tenders. Society’s members will be entitled to furnish information about it to the reputed and experienced Developer known to them.

9. Preparing List of Bids Received:-

a) On the Last day for receiving quotations, Secretary of the Society will prepare a list of offers received and display the same on the notice board of the society.

After 15 days of the last day for receiving quotations, Secretary of the society will convene special meeting of Managing Committee of the society. Authorized representatives of bidders and members of the society desirous of remaining present can remain present for the meeting as observers.

Tenders so received will be opened in the presence of all and the Architect / Project management consultant will scrutinize all tenders and prepare a comparative chart and after checking merit, reputation, experience and comparative rate etc. and select minimum 5 bids and if the bids received are less than 5, all the bids for putting up before Special General Meeting and concerned bidders will be informed about it immediately.

10. Selection of Developer:-

a) Office of the Registrar to appoint Authorized officer for attending General Body Meeting:-

An application with list of the members should be sent within eight days to the registrar for appointment of Authorized officer to attend the Special General Meeting of the Society for selecting a Developer out of those selected by committee of the Society with the help of the consultant, by taking into consideration his experience, merit, financial capacity, technical capacity and competitive rate etc.

b) Convening Special General Body Meeting for finalizing tender:-

After appointment of authorized officer, with his prior permission Secretary of the Society will fix the time and venue convene Special General Body Meeting for appointment of Developer and Agenda of this meeting will be sent to all the members 14 days prior to the meeting by hand delivery and by registered post and keep acknowledgement thereof on record of the Society. Also, office of the Registrar will make arrangement to keep his authorized representative present for the meeting.

Also arrangement will be made for video shooting of the meeting at the cost of the Society. Any person other than formal members will not be entitled to attend this meeting. Therefore members will be required to present at the venue of the meeting with their Identity Cards. At the time of submitting redevelopment proposal to the concerned authority for sanctioning, selection of Developer and other work should have been done in the presence of authorized officer from Registrar’s office.

c) If there is no quorum for Special General Body Meeting:-

If the quorum of ¾ members out of total members is not formed for Special General Body Meeting, the meeting will be adjourned for eight days. If quorum does not get formed for adjourned meeting, it will be deemed that the members have no interest in redevelopment of the building and the meeting will be cancelled and thereafter the said subject will not be taken up before the Special General Body Meeting for approval.

d) In the Special General Body Meeting to be convened for selection of Developer, authorized representative from the office of the Registrar will be present and observe proceedings of the meeting. Also, on concerned representatives and authorized officer remaining present at the venue and at the time of meeting and on quorum of ¾ members getting formed, following business will be transacted in the meeting.

i) Providing comparative information in respect of tenders selected for presentation (for redevelopment work).

ii) Presentation by bidders one by one.

iii) To select Developer for redevelopment of the building, to finalize terms and conditions and finalize the tender.

iv) To obtain consent from the selected Developer.

v) Give information about further work. It will be essential to take written approval by ¾ majority vote of the members present for the meeting for selection of Developer. If the selected Developer of his representative does not remain present for the meeting, further action will be taken by presuming that they have given their consent for the project.

11. Agreement to be entered into with Developer:-

Subject to the terms and conditions approved by General Body Meeting of the Society, an agreement should be entered into with the Developer within one month under guidance from the Architect / Project Management Consultant. Along with the points suggested by the Architect / Project Management Consultant appointed by the Society, following points will also be included in the agreement.

(1) The period for completing redevelopment project of the Society will not exceed more than two years and in exceptional cases, it will not exceed three years.

(2) Developer will give a Bank Guarantee for amount equal to 20% of the project cost.

(3) During the period of redevelopment, the Developer will make available to the members alternative accommodation in the same area as far as possible or arrange to pay monthly rent and deposit as acceptable to members or make available transit camp accommodation.

(4) The said agreement will be registered under Registration Act, 1908.

(5) On completion of redevelopment project, new members will be admitted in the Society only with approval of General Body Meeting of the Society.

(6) Carpet area to be allotted should be clearly mentioned in the agreement.

(7) Development right vested in the Developer will be non-transferable.

(8) Members will vacate their respective premises only after all legal approvals are received for redevelopment of the building.

(9) Rights of those who are in possession of the flats will remain unaffected.

(10) If any dispute arises in the work of redevelopment, provision should be made in the agreement to resolve the same as per provisions of Section 91 of the Act.

(11) After receipt of Occupation Certificate, flats in the redeveloped building should as far as possible be allotted as per present conditions floor-wise and if it becomes necessary to allot flats by drawing lots, on completion of construction, Developer should make arrangement drawing lots, and at that time flats should be allotted in the presence of Registrar’s representative and this process be recorded by video shooting.

(12) Any Committee member or Office Bearer of the Society should not be the Developer or relative of the Developer.

(13) Building plans sanctioned by the Municipal Corporation / Competent Authority should be put up before the General Body Meeting for information and if any member wants copies of approved documents, he should submit application for the same to the Society and it will be binding on the Committee to furnish the information by charging necessary fee.

By order and in the name of the Governor of Maharashtra (Dr. Sudhirkumar Goyal) Principal Secretary (Co-operation and Marketing)

Copy to:

1) Co-operation Commissioner and Registrar, Co-operative Societies, Maharashtra State, Pune.

2) Divisional Joint Registrars, Co-operative Societies (All).

3) District Deputy Registrars, Co-operative Societies (All).

Select File (14-C).

Ref.: Z:00 - 5002 GOVERNMENT CIRCULARS & COURT JUDGEMENTS 20082 GOVT CIRCULARS 2007142 Directive for Redevelopment of Building of Co-operative Housing Society [English] 03-01-2009.

A well drafted consent of at least ¾ of the Society members must be obtained in writing during the Society meetings when the subject of redevelopment is discussed. The consent has to be tendered by the members in favour of Redevelopment has to be given once only. However, the minority members of co-operative housing society cannot obstruct a redevelopment project unless they show that here is some prejudice caused to them or a fraud has been committed.

There are four judgments given by High Court of Mumbai in the matter of Minority v/s majority of members agreeing to the proposal of Redevelopment which are contradictory to each other. However, the High Court Judgments dated 11/12/2009 and 28/06/2010 overrule all the earlier Judgments the High Court has given in September, 2007 and on dated 09/12/2009. All the three cases are summarized hereunder:

1. HC JUDGMENT DATED 31ST AUGUST 07: RULED THAT DISSENTING MINORITY MEMBERS COULD BE EVICTED FORCIBLY: In the case of Sahara Co-op Hsg Society (Khar), Justice A M Khanwilkar of the Bombay High Court paved the way for easy redevelopment by ruling that 2 members who had not given their consent to the builder, could be evicted forcibly. He ruled that a dissenting minority of flat owners cannot stall redevelopment plans of their building and could be forcibly evicted from their homes with the help of the police if necessary. The Judgment was passed in the favor of the Raja builders on 31st August 07, Mumbai, leaving the flat owners with no option but to give their flats to the builder.

2. HC JUDGMENT DATED: 09/12/2009: EVEN ONE OBJECTOR CAN’T BE IGNORED DESPITE MAJORITY NOD: Justice S C Dharmadhikari of the Bombay High Court held that even a single dissenting member of a co-op housing Society cannot be thrown out by a builder based on a mere development agreement with the Society and a majority of its flat owners for redevelopment of the building. The Court clearly indicated that a Development Agreement entered into by the Housing Society with a builder, despite having the consent of a majority of members, cannot bind the minority if the reconstruction is not in the interest of "ALL" members of the Society.

3. HC JUDGMENT DATED: 11/12/2009: MINORITY CAN’T OBSTRUCT A REDEVELOPMENT PROJECT: In the case of Godi Kamgar CHS (Madhuvan) in Andheri (West), a Division Bench of the Bombay HC overturned the single judge verdict dated 09/12/2009 and the then Chief Justice Swatanter Kumar and Justice Ajay Khanwilkar held that “merely because some members in minority disapprove of the decision, it cannot be the basis to negate the resolution of the General Body unless they show that there is some prejudice caused to them or a fraud has been committed”.

4. HC JUDGMENT DATED: 28/06/2010: ORDER AGAINST APPEAL PASSED THAT THE “OBSTRUCTING MINORITY’’ TO VACATE THEIR FLATS WITHIN TWO WEEKS.
On June 28, 2010 in the case of Godi Kamgar CHS (Madhuvan) in Andheri (West), the Bombay High Court has once again ruled that members of a co-operative housing society who are in minority cannot obstruct a redevelopment project and must abide by the majority decision of the society.

The Bombay high court dismissed an appeal filed by the members who were in minority to challenge an earlier order Dated 11/12/2010 of the court which too had gone against them. A bench of Chief Justice Mohit Shah and Justice S C Dharmadhikari ordered the members to vacate their flats within two weeks.

In case of tenanted Societies also, in a recent ruling, the Bombay High Court has stated that the issue of minority of tenants cannot be an obstacle for redeveloping a property if minimum 70% of the tenants are ready for the same.

The judgment came against a matter of a redevelopment in Dadar where 17 members were opposing the redevelopment of an old Parsi chawl. Based on the writ petition filed by the group of dissenting members, Justice D.B.Bhosale granted the permission to BMC to forcibly evict the families with the police help in case of any opposition from the others against the redevelopment.

It is important to note that as per the section 103B of Maharashtra Housing and Area Development Act, 1976, with the guidelines for redevelopment of old Municipal Properties by the Municipal Tenants Co-Operative Housing Societies on the land owned by the Corporation under regulation 33(7) of the Development Control Regulations for Greater Bombay, 1991, it is necessary that more than 70% of the eligible existing Municipal tenants should give written consent to redevelop the property under the scheme with a formation of a Co- Operative Society / Association and an initiative proposal for the redevelopment.

The court has held that once 70% or more occupants /tenants give their consent for redevelopment by forming a co-operative body and if the scheme is approved by the Corporation, it is binding to all other occupants. As per the guidelines, the tenants / occupants with separate stand, have no choice but to follow the norms. Being in minority (about 30% or less than that) the only choice for them remains is, to give up their tenancy rights and quit from the scheme.

It is an established position of law that a Development Agreement by itself does not create rights in a property in a developer’s favour. The developer, thus, has no locus standi and cannot be entertained for eviction of such dissenting members of the Society. But the society can approach the cooperative court to enforce its resolution.

In a society, decisions are not necessarily taken by the application of mind by all. More often than not, some individuals influence the majority. That is because normally, only a handful are able to evaluate right and wrong and distinguish between what is talked about and what is actually being done.

If the minority dissenting members do not have points on merits and the society has gone by the law, the minority may ultimately lose before the law. What is important is the merit in the objections raised by such minority dissenting members. Per se, rule of majority is not the solution, whether it is redevelopment or any other matter in a cooperative society.

A further question, though it did not arise in this case is, when can a building be demolished under the provisions of the law? A building cannot be demolished without a commencement certificate (CC). The law is misinterpreted by many that a building can be demolished on the basis of IOD (intimation of disapproval). The literal law and logic is that a building can be demolished only after the receipt of CC only.

The special general body has to approve the bid of the successful bidder in a meeting attended by the registrar. The entire proceedings have to be video-recorded. Once the agreement is accepted in terms of area and corpus fund, it cannot be revised. The successful bidder has to give a bank guarantee equivalent to 20% of the total project cost to show his financial strength, and proof that he will not throw away the project midway.

The Developer values the kind of Societies that either have some open plot of land or are willing to demolish the old structures to reconstruct new buildings. Where such redevelopment is possible, Developer normally agree to pay some consideration by way of Corpus Fund including more area in their existing flats to the members and seek permission to construct a building on the open plot of land or to construct a new, bigger building using the Transferable Development Right (TDR), Floor space index (FSI) after demolishing the existing structure.

Depending upon the offer from the Developer and subsequent negotiations him, he either provides alternate residential flats to the members of the Society or pay rent in advance by way of post dated cheques, one month rent as brokerage and transportation charge etc. to secure an alternate accommodation till the new building is constructed and the members are rehabilitated in their new flats.

All the demands and negotiations have to be carefully recorded in the 'Development Agreement' for successful execution of redevelopment in a housing society and the office bearers and the managing committee members have a strong role to play.

In any process of redevelopment, one must be aware of various documentations that are required and also one must understand the tax implications on redevelopment of immovable property. The principal documents are 'Development Agreement' and ‘Power of Attorney’ which are to be registered by paying appropriate stamp duty.

By executing the Development Agreement' with the Society, the Developer gets the required permission to develop the land and submits the papers to concerned civic authorities. Upon various sanctions available to him, the Developer constructs the buildings at his cost, retains some flats for him to be sold in the open market and earn profit.

It is important for a Society to have a valid conveyance of land and building in its favor for it to be redeveloped at a later date and that includes acquiring marketable title, permission for reconstruction and construction of additional floors by use of TDR and FSI, or else, Society may not get any approval of plan from Municipal Corporation. But due to our ignorance, majority of Builders fail to convey the title to a Co-Operative Society after the flats initially constructed on a plot of land.

In fact, the greater majority of the Co-Operative Housing Societies, formed in Mumbai in the last twenty years, do not have the land conveyed in their favor which results in the Developer or the earlier owner continues to remain the owner of the property. This results in a situation where these Societies have only possessor rights and not the ownership rights over the land, depriving them of the additional TDR FSI that is the main driving force for entering into such redevelopment agreements when required at a later date.

What is FSI? Floor Space Index (FSI) means the quotient of the ratio of the combined gross floor area of all floors excepting areas specifically exempted under these Regulations to the total area of the plot.

What is TDR? TDR stands for Transfer of Development Rights. It is a certificate from the Municipal Corporation that the owner of a property gets where his/her property (either part or whole) is reserved for the purpose of public utilities such as road, garden, school etc. The rights/ certificate, which are equivalent to the reserved portion, are obtained by the owner on surrendering his property to the Municipal Corporation. These rights/ certificate can then be sold to builders who use it for additional construction on their property.

Rule 34 of the Development Control Regulations for Greater Bombay, 1991 defines TDR which stands for Transferable Development Rights as under: ‘In certain circumstances, the development potential of a plot of land may be separated from the land itself and may be made available to the owner of the land in the form of Transferable Development Rights. These rights may be made available and be subject to the Regulations in Appendix VII hereto. Appendix VII lays down the rules for the grant of Transferable Development Rights to owners/developers and conditions for grant of such rights:

1. The owner (or lessee) of a plot of land which is reserved for a public purpose in the development plan and for additional amenities deemed to be reservations provided in accordance with these Regulations excepting under certain conditions shall be eligible for the award of TDR in the form of Floor Space Index (FSI) to the extent and on the following conditions set out below. Such award will entitle the owner of the land to FSI in the form of a Development Rights Certificate (DRC) which he may use himself or transfer to any other person.

2. Subject to Reg.1 where a plot of land is reserved for any purpose specified in Sect. 22 of Maharashtra Regional and Town Planning Act, 1966 the owner would be eligible for DR’s to the extent stipulated in Rules 5 & 6 in this Appendix after the said land is surrendered free of cost or after completion of development.

3. TDR’s will be available only for prospective development of reservations.

4. DRC’s will be issued by the Commissioner himself giving details of FSI credit.

5. The built up area for the purpose of FSI shall be equal to the gross area of the reserved plot to be surrendered.

6. When the owner or lessee also develops or constructs the amenity on the surrendered plot at his cost, he may be granted a further DR in the form of FSI equal to the area of the construction/ development done by him.

In short, the Transfer of Development Rights (TDR) means making available certain amount of additional built up area in lieu of the area relinquished or surrendered by the owner of the land, so that he can use extra built up area either himself or transfer it to another in need of the extra built up area for an agreed sum of money. It is designed to steer growth not to limit or stop development.

What is the difference between Built-Up Area, Super Built-Up Area and Carpet Area?

Carpet Area: This is the area of the apartment/building that does not include the area of the walls.

Built-Up Area: This is the area of the apartment/building including the area of the walls.

Super Built-Up Area: This includes the Built-Up Area along with the area under common spaces such as the lobby, lifts, stairs etc. This term is therefore only applicable for multi-dwelling units.

The Developer has to complete the redevelopment project in two years, or a maximum of three years. The development agreement must be signed on carpet-area basis. Most importantly, if, for some reason, the successful Developer is unable to complete the project, he cannot sell his agreement to another Developer.

The fact that most societies do not appoint professionals like architects, structural engineers and competent advocates, is the reason that proper negotiations do not take place. The appointment of a competent advocate is equally crucial as he has to act as an ombudsman and prevent unnecessary litigations. It is also a fact that ignorance of members is taken advantage of by committee members with vested interests, who take hasty decisions ignoring genuine objections of a small section.

It has been often noticed that during the process of redevelopment, the terms of Development Agreements as agreed upon, are later twisted and grossly violated by the Developers and the ground rules of MRTP and DCR by unlawful planning are flouted by constructing additional/unauthorized areas that are beyond the entitlement (i.e. beyond the plot FSI and the TDR/FSI loaded) for their hidden financial gains. The buyers of such unlawful flats/properties land themselves in deals that lead to litigation at a later date.

At times, upon the completion of the Project, there are major inconsistencies and discriminatory features noticed in the approved plans v/s actual layouts, measurements and other aspects in respect of the constructions of residential area and the commercial area which may not be in conformity with the Development Agreement originally executed between the Society and the Developer.

Under Right to Information Act, the Housing Society can procure all the Plans and the related documentary evidences from MCGM duly attested by two Senior Engineers of the Building Proposals Dept. to study the anomalies which exist in execution of the entire redevelopment project even after the occupancy certificate is issued.

It has also been observed that the deviation of vital Rules and Guidelines of MRTP/MCGM/DCR are conveniently overlooked by few corrupt and dishonest but “Sympathetic Officials” of MCGM and the final plans with numerous anomalies so submitted by the said Developer are approved by them without verifying the justifiability or its conformity with the Development Agreement executed with the Society.

It is also learnt that in many Societies, the Managing Committees, who execute the documents with the Developers, do not possess any legal holding as they have never filed/nor aware of filing the Indemnity Bond in Form M-20 on a Stamp required under Section 73(1AB) and Rule 58A of the Maharashtra Cooperative Societies Act 1960. The members who fail to execute such Bonds within the specific period are deemed to have vacated his office as a member of the committee and no legal effects can be given to the documents executed by them with the Developers.

Section 73(1AB) of the Maharashtra Co-operative Societies Act 1960 is reproduced below:

"The Members of the Committee shall be jointly and severally responsible for all the decisions taken by the committee during its term relating to the business of the society. The members of the committee shall be jointly and severally responsible for all the acts and omissions detrimental to the interest of the society. Every such member shall execute a bond to that effect within fifteen days of his assuming the office, in the form as specified by the State Government by general or special order.

The member, who fails to execute such bond within the specified period i.e. within fifteen days from joining the Managing Committee member, shall be deemed to have vacated his office as a member of the committee."

Further the power to decide whether the losses incurred by the society are due to act or omissions of members of the committee is given to the Registrar

"Provided that, before fixing any responsibility mentioned above, the Registrar shall inspect the records of the society and decide as to whether the losses incurred by the society are on account of acts or omissions on the part of the members of the committee or on account of any natural calamities, accident or any circumstances beyond the control of such members."

Rule 58-A of the Maharashtra Co-operative Societies Rules 1961 is reproduced below:

"Every elected member of the Managing Committee shall execute a bond in Form M-20 within fifteen days of his assuming the office. Such bond shall be executed on the stamp paper as provided under the Bombay Stamp Act 1958. The expenditure on stamp paper shall be borne by the society. The Chief Executive Officer / secretary of the society shall receive such bonds and keep them on record of the society and accordingly inform the Registrar within Fifteen days from the formation of the Committee."

It is clear from above that the bond should be executed within fifteen days of assuming of office by each member of the Managing Committee in Form M-20 on a stamp paper. Failure will invite penal consequences.

On or before the execution of the agreement, the Society should hand over to the Developer, the copy of the conveyance deed in respect of the Society’s property along with certified copies of the property register card, index II, latest electricity bill, water bill, municipal tax bill, N.A. tax bill in respect of the Society’s property and also, the copy of the registration certificate of Society under the Maharashtra Cooperative Societies Act, 1960.

There are complications which the Society at times in case of redevelopment if the following things are not considered. They fail to assemble all members of the Society at a single point of time during the meetings. Sometimes the title documents are not clear.

There is always an anxiety in the minds of the members about possible delay in completion of the project after they have vacated their old flats. The old documents of the members are not traceable. Some members don’t wish to come back to the new building and ask for very high prices for sale of old flats or are more interested in purchasing a new flats at a discounted rate in new building.

When drafting a Development Agreement, some of the important points and clauses of a Development Agreement are to be taken care of. The cooperative Society, the Developer and preferably all the members should be parties to this agreement. There should be a brief history of how the conveyance deed was given to the Society. The registration number of the cooperative Society under the Maharashtra Co-Operative Societies Act, 1960, should be mentioned in the 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 utilizing TDR on the plot should be mentioned.

Lack of 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 standards adopted in construction etc.

The agreement should clearly mention the carpet area, including the additional area which will be made available to the members in the new building. The schedule of payment of the total consideration should be specified in the Development Agreement. There should be a mention of the tentative date for vacating the flats in the old building by the members which shall be linked with the plans being approved by the concerned authority.

The number of open car parking space, stilt car parking and closed parking which will be given to the members in the new building should be mentioned in the Development Agreement. Usually the Developer obtains 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. Further, the Developer 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.

It should be clarified in the Development Agreement that neither the Society nor the Members shall be expected to pay such types of expenses. It must be clarified in the Development Agreement that each purchaser of a flat in the new building who intends to be a member of the Society will be required to pay to the Society the entrance fee and share allotment money as well as a sum as approved by the Society towards the 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 Developer fails to complete the entire work within the stipulated period, a penalty clause can be mentioned in the 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 in respect of the new building and till such time that the Developer intimates the members to take possession of their respective flats, the Developer shall bear and pay all municipal rates, taxes and other payments required to be paid to the concerned authorities.

The Development Agreement should also clarify that the Society shall pay only the municipal rates, and other outgoing taxes till the vacant possession of the entire property is done (the plot and the existing structure) to the Developer after receipt of full occupation certificate in respect of the new building.

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. The Development Agreement 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.

The confederation of REAL ESTATE DEVELOPERS’ ASSOCIATIONS of India introduced Code of Conduct for Developers, Promoters and Builders with an aim to maintain the honor and dignity by them in promotion of highest standard of development and building activities, to establish transparency and fair dealing with their customers and ensure that they discharge their responsibilities to the community in general.

Completion of any Redevelopment project as per the given schedule is by and large governed by the market fluctuations of supply and demand of all the material which are used in construction and the changing policy decisions of concerned Authorities and hence, this factor is beyond the control of the Society.

It has also been noticed that certain Builders, due to sudden liquidity crunch or improper planning, drop the project half way or the project is badly staggered and the paucity is worst affected to the members of the Society for long, may be years. Such Builders stop the further payment of rent for the alternate accommodation hired by the members or offer any monitory compensation for the delayed period.

The members, at later date face the financial vulnerability due to such breach of trust and unfair trade practices by the Builders. Under the circumstances, the criminal case against the Builders is required to be instituted in Criminal Court/Civil Court for breaches of terms of Development Agreement as also in Consumer Court for Deficiency in Services under Section 2(1) (g) which reads as under:

“Deficiency” means any fault, imperfection, shortcoming or inadequacy in the quality, nature and manner of performance which is required to be maintained by or under any law for the time being in force or has been undertaken to be performed by a person in pursuance of a contract or otherwise in relation to any service.

Following are the charges against such felonious Builders under Indian Penal Code:
Initiate action u/s 406 of Indian Penal Code read with Sections 415 and 420 of the Indian
Penal Code, 1860

The above sections are reproduced herewith for ready reference.

Section 406 of the Indian Penal Code, 1860 states;
“406 Punishment for criminal breach of trust – Whoever commits criminal breach of trust shall be punished with imprisonment of either description for a term which may extend to three years, or with fine, or with both.”

Section 415 of the Indian Penal Code, 1860 states;
“415. Cheating – Whoever, by deceiving any person, fraudulently or dishonestly induces the person so deceived to deliver any property to any person, or to consent that any person shall retain any property, or intentionally induces the person so deceived to do or omit to do anything which he would not do or omit if he were not so deceived, and which act or omission causes or is likely to cause damage or harm to that person in body, mind, reputation or property, is said to “cheat”.

Section 420 of the Indian Penal Code, 1860 states;
“420. Cheating and dishonestly inducing delivery of property – Whoever cheats and thereby dishonestly induces the person deceived to deliver any property to any person, or to make, alter or destroy the whole or any part of a valuable security, or anything which is signed or sealed, and which is capable of being converted into a value security, shall be punished with imprisonment of ether description or a term which may extend to seven years, and shall also be liable to fine.”

Abovementioned are some of the important points relating to redevelopment of old buildings by cooperative Societies. Since the laws on the subject of redevelopment are yet to be fully developed, any decision in this matter should be taken with great care or else it could lead to a possible dispute or litigation. It is very important to understand the procedure properly before signing any papers.

The drafts of all the relevant documents pertaining to the redevelopment process must be circulated to all members well in advance and the objections, suggestions and modifications if any, must be discussed in the Special General Body Meetings including recording proper minutes of each meeting to maintain the transparency. It's advisable to discuss the documents in detail at the general body meeting so as to arrive at a consensus about the terms and conditions in order to avoid later hassles.

As with any property dealing, when it comes to a redevelopment contract, it's of utmost importance to ensure that the Developer has a sound reputation. If possible, the members of the managing committee must visit the site of some of his previous projects so that they get first-hand information about the Developer.

I again reiterate here that considering that the property of so many residents is at stake, it makes sense to seek the help of professionals in getting a clear picture about the dealing that the Society is entering into. Sound advice from professionals such as lawyers, architects, engineers, before signing on the dotted line is sure to help the Society make a responsible decision. It is reasonable to hire the services of a technical supervisor who can keep a check on the work done by the Developer.

STAGES OF REDEVELOPMENT
1. Offer letter to the society
2. Terms and conditions with the society
3. Agreement with the society
4. Sanction from MCGM in favour of the society
5. Loading of TDR in the society’s name
6. Obtaining the IOD
7. Shifting of the members
8. Demolition of the building
9. Obtaining the CC
10. Construction of the new building
11. Obtaining the OC
12. Shifting the old members

Offer letter to the society: The Housing Society is required to advertize in 2 leading news papers inviting the sealed tenders from the Developers and a Redevelopment Committee is formed to shortlist at-least 3 Developers on merits and the comparative data is placed before the SPGM for final selection. The selected Developer is informed accordingly and his terms are invited in writing as an Offer letter to the society

Terms and conditions with the society: The first step towards the re-development is agreeing on the basic terms and conditions between the members and the Developer. The broad terms and conditions will include extra area, corpus money, shifting charges, alternate accommodation, time of re-development, amenities in the new building, etc.

Finalizing the plans with members: After due consultation with all the members, the plan will be made to suit the requirements of the existing members and will be approved by them before applying for sanction from MCGM

Agreement with the society: The execution of the development agreement will be done once the above two points have been cleared by both the parties and after the draft copy of the agreement have been approved by the solicitors of both the parties. It is possible to appoint a common solicitor so as to reduce the time in execution of the document

Sanction from MCGM in favour of the society: After the execution of the development agreement, plans are put up for sanction from MCGM with regards to the entire layout as well as the concession plans in favour of TWO FSI (i.e. plot area + TDR purchased from open market). This step makes the society feel safe and confident towards the Develop

Loading of TDR in favour of the society: On receipt of the plans from MCGM approving the loading of TDR, the Developer will purchase the TDR from the open market in the name of the society and get the same deducted and loaded from MCGM. This step is taken with the intention of making the society feel secure about the entire development process

Obtaining the IOD: After the TDR is loaded, the IOD is obtained from the MCGM, the Developer then starts fulfilling all the conditions as mentioned in the IOD before obtaining the Commence Certificate

Shifting of the members: The members will feel lot more confident after the IOD is been obtained from the MCGM towards the entire development of TWO FSI. The members will now shift into their alternate accommodation as a pre-requisite before demolition of the building which is a must before obtaining the CC from MCGM

Demolition of the building: Once the members have shifted into their alternate accommodation, the demolition of the building will take place either all the wings simultaneously or phase wise depending upon the scheme of re-development. Usually about three months are given to the members from the date of execution of the development agreement before asking them to shift to the alternate accommodation

Obtaining the CC: The IOD approval and demolition of the building will be followed by the issue of the CC (plinth level) by the MCGM which shall enable the Developer to start the construction work and after the plinth lines are verified by the MCGM officers, the further CC is granted for the complete building

Construction of the building: The building construction work will began in full earnest as per the approved plans by the MCGM taking into consideration the various safety factors to be considered during the construction work. The quality and the amenities will be provided as per agreed terms and conditions

Obtaining the OC: The last step before the construction work is termed as complete is obtaining the Occupation Certificate enabling the Developer to allot the occupation to the old as well as the new member

Shifting the old members: On receipt of the Occupancy Certificate the Developer can lawfully allow the possession of the flats to be taken over by their owners
DUTIES AND FUNCTIONS OF THE DEVELOPER IN NUT SHELL
1. The Developer to demolish the building existing in the plot and construct new multi storied buildings taking into account the earthquake resistant factors as directed by The Municipal Corporation of Greater Mumbai. The new building should have stilt for car parking and should consist of _____ stories as per approved plans. The final plans are to be prepared after due consultation with the managing committee and understanding their requirements.
2. The Developer shall be responsible to obtain all the necessary approvals from The Municipal Corporation of Greater Mumbai and all other statutory and Government offices and departments which will include:
1. Development Planning Remark or Town Planning Remark: MCGM (Dev. Dept.)
2. Survey of the entire plot with regards to the area and topography of the plot,
existing plot boundary and existing structures (Developer’s Architect)
3. Intimation of Disapproval (IOD): MCGM
4. Property Tax Assessment NOC: MCGM (Assessment Department)
5. Hydraulic Engineer No Objection Certificate: MCGM (Hydraulic Department)
6. Storm Water Drainage No Objection Certificate: MCGM
7. Sewerage No Objection Certificate: MCGM
8. Traffic Deptt. of Municipal Corporation of Greater Mumbai No Objection Certificate:
MCGM
9. Urban Land Ceiling NOC: Competent Authority in Collector's Office
10. Tree No Objection Certificate: MCGM (Tree Authority)
11. Non-Agricultural Permission: Collector's Office
12. Civil Aviation No Objection Certificate: Airport Authority of India
13. Pest Control No Objection Certificate: MCGM (PCO)
14. MTNL No Objection Certificate: MTNL
15. Chief Fire Officer's No Objection Certificate: Fire Department Office
16. Commencement Certificate: MCGM
17. Lift Inspection No Objection Certificate: Inspector of Lifts, PW
18. Occupation Certificate (OC): MCGM
19. Water Connection Certificate under section 270A: MCGM
20. Drainage Completion Certificate: MCGM (Water Department)
21. Building Completion Certificate (BCC): MCGM
22. TDR Loading: MCGM
23. Building Demolition Work: Contractor appointed for demolition work
24. Soil Testing Report: The Concerned Laboratory
Please ensure to collect all the listed certificates from the Developer/Developer as the same must be with the custody of the Housing Society once the redevelopment of the property is completed and the occupancy certificate is issued by MCGM to re-house the members.
3. The Developer should provide