BUSTING OF REDEVELOPMENT PROJECTS OF HOUSING SOCIETIES

by DILIP SHAH
(MUMBAI, INDIA)

BUSTING OF REDEVELOPMENT PROJECTS OF HOUSING SOCIETIES

The Redevelopment scheme within last few years that has hit Mumbai with great potential and has, by and large, seen disagreement from members of the Society time and again.

Redevelopment projects have often collapsed due to the growing demands of the members in majority. There is a high level of diffidence among the members when the idea of Redevelopment is proposed. There is persistent fear of insecurity whether the Builder will deliver the redeveloped property or leave it intermediately.

As we all know that the Builder is earning generous amount out of a Redevelopment project and hence, the members start becoming more desirous at times.

There are rounds of negotiations before a time to finalize the conclusive agreement is reached. The major reason for failure of many Redevelopment projects is that the members themselves don’t trust the Office Bearers and Members of their Managing Committee.

As the Managing Committee handles the entire process, often there is a suspicion of their being hand in gloves with the Builder and at times, it is assumed to have been true as the Managing Committee members also look forward for their personal gains rather than ensuring a fair deal for members and the corporate interest of the Society.

First and foremost, the Housing Society members must ensure that their Office-Bearers and the members of the Managing Committee are elected as per the provisions of Maharashtra Co-operative Societies Act, Rules and Bye-Laws. In short, please ensure that the entire Managing Committee is lawfully formed.

Secondly, members of the Co-operative Housing Societies to please note that the entire exercise of redevelopment efforts will come to a zero if the mandatory filing of Indemnity Bonds in Form M-20 is not complied within 45 days from the date of election. Even a delay of one day and the entire Managing Committee including Office Bearers shall have no legal footing to run the Society!

There are several instances of disgruntled members filing cases against the Managing Committees for not having executed the mandatory bonds, to derail the process of redevelopment. The Managing Committee may even get caught or be slapped with fraud and forgery charges for entering into any Redevelopment Agreement with the builders as has happened with a Co-operative Housing Society on the Hill Road in Bandra., Mumbai.

The Society here entered into an agreement with a builder for redevelopment of their property without executing the mandatory bond in Form - 20 under Rule 58-A and Sub Section 73(1AB). When it realized the deal will fall through for not having executed the bond within fifteen days of their election, the elected Office Bearers resorted to trickery by purchasing stamp papers and back-dating the Indemnity Bonds. However an alert member found their trickery and registered cases against them under Sections 420, 465, 467 and 471 of the Indian Penal Code.

The Indemnity Bond in Form M-20 is to be filled in and submitted by each of the Managing Committee Members state that the he shall be jointly and severally responsible for all the decisions taken by the Managing Committee during its term relating to the business of the Society and shall be jointly and severally responsible for all acts and omissions detrimental to the interest of the Society as provided in Sub Section 73 (1 AB) of the Act.
The member, who fails to execute such a bond within the specified period, shall be deemed to have vacated his office as a member of the committee. Bombay High Court too has upheld this MCS Act provision.

On one hand, it has also been experienced that though the members of the Society are no fools or illiterates but on the other hand, due to their peaceful nature and out of fear, are agreeing and resolving every un-constitutional and unlawful proposal of Redevelopment backed by ulterior motives moved by the present Office Bearers in various Meetings. Whoever tries to protest against their barbarism, the stooges of these Office Bearers and the Managing Committee members, are in a readiness to either snatch away the mike from hands of ordinary members who raise the voice or physically attack on the protesters in meetings.

It is learnt that many a times, even if the majority of members have agreed, a few members become trouble-makers and refuse to accept the terms of settlement and succumb to pressure tactics later and all these consume a lot of time. Redevelopment thus often suffers due to lack of harmony and understanding among the members themselves.

The another reason for the stagnation stage or a halt in Redevelopment project is that during the process of Redevelopment, the terms of Development Agreements as agreed upon, the unhealthy attempts with ulterior motives are made by the Builders/Developers to twist and grossly violate the rules of MRTP and DCR by unlawful planning and constructing additional/unauthorized areas that are beyond their 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.

In most cases, the Developer negotiates the deal of restoring an old building with the Managing Committee of the society. In which case, the onus is on the Managing Committee to ensure that the interests of the members are protected and they need to take all the precautions. Lack of due diligence on the part of members of the Managing Committee can prove damaging in the long run and thus members need to be doubly sure before they agree for the Redevelopment and need to make sure that they too get maximum returns.

Another focal area is payment of rent by the Builder for transit accommodation. No buildings is completed within 18 months and hence, make sure that an advance rent of 24 months is received in advance and a suitable penalty clause in the Development Agreement is inserted on default in handing over the possession within the stipulated time.

A Redevelopment agreement (Known as Development Agreement), as the name suggests, is an agreement for the restoration of an old building, between the members and the Developer. But it's not as simple as it sounds; the Housing Society needs to exercise necessary caution to ensure that the members' interest is safeguarded. In other words, the Redevelopment agreement should be a members-friendly and not the in favor of the Builder.

It's always advisable to circulate the draft of the Development Agreement well in advance and then discuss the in detail at the General Body Meeting so as to arrive at a consensus about the terms and conditions in order to avoid the later hassles. Most important is to ensure that the Builder has a sound reputation with adequate financial footing to sustain through the entire process of Redevelopment. If possible, the members of the Society must visit the site of some of his previous projects so that they get first-hand information about the Builder.

Since the property of many members is at stake, it is advisable to engage professionals such as Lawyers, Technical Supervisor, Architects and Structural Engineers in getting a valuable counseling on taxation, legal or architectural issues connected to dealing that the Society is entering into.

The process of Redevelopment needs to be made more see-through right from the time the societies initiate to identifying, negotiating and selecting/finalizing the Builder. However, this rarely happens.

The guidelines as contained in the Circular bearing No. CHS 2007/CR554/14-C, issued by the Government of Maharashtra, 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 has invariably to be followed strictly.

There some common issues that cause problems and they are greed of Managing Committee members, non-cooperation from members, disputes regarding the clauses in the agreements, income tax liabilities and unrealistic expectations from Builders etc.

There are several instances of incomplete or misleading information prevailing among the Housing Societies and flat owners as well that are planning for redevelopment. Controversial court judgments add to the confusion and such Housing Societies get stuck at some point due to lack of information, knowledge, contact with right kind of counselors, analysts, advisors etc. Many societies do not have conveyance and hence, the entire process can break down in an instant.

The discussion over Redevelopment is endless; the perception on the whole is certainly beneficial, especially for a city like Mumbai. But one needs to take care that the common good is not sacrificed over individual interest.

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