By CA. Rajkumar S. Adukia
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 Builder 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. 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.
It is said that Co-operative Movement is a Socio-Economic and Moral Movement. It is to fulfil the Constitutional Goal of the community that it is encouraged by the Government.
It is neither a profit making activity nor is it a device for building power politics. Its candid role cannot be forgotten or else it will lose its sanctity and reliability.
The recent guidelines i.e. the “Directive for Redevelopment of Buidlings of Cooperative Housing Society” have been 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, should be 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.
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.
Building redevelopment is a market-driven frenzy fuelled by greed and ignorance a lot like Ponzi schemes. Redevelopment projects taken up by cooperative societies for economic advancement of a brute majority of its members have a flawed mandate and a crumbly legal foundation. To bring the transparency in Societies seeking to undertake
redevelopment projects, the Government of Maharashtra had issued a Circular bearing
No. CHS 2007/CR554/14-C, Co-operation, Marketing and Textiles Department Date: 3rd January 2009 this 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. These guidelines are applicable wherever the buildings of Co-operative Housing Societies in the State of Maharashtra are being redeveloped on a large scale.
The Directive & Guidelines to be followed in brief.
1. Requisition for convening Specials General Body Meeting for Redevelopment of Society’s Building.
2. Convening Special General Body Meetings.
3. To accept written suggestions from members relating to redevelopment of the buildings.
4. Decisions to be taken in Special General Body Meetings.
5. Providing Minutes of the meetings to all members.
6. Issuing Appointment Letter to the Architect/Project Management Consultant.
7. Work to be done in the initial stage by Architect/Project Management Consultant.
8. Action to be taken on receipt of redevelopment Project Report.
9. Preparing List of Bids Received.
10. Selection of Developer.
11. Agreement to be entered into with Developer.
It should be ensured that any activity of redevelopment of Housing Society should not compromise the rights of members and must safeguard the existence of the Society.
In case the dissenting members fail to abide by the resolutions passed at the meetings then it is not the Developer to use his power but the Managing Committee of the Society who has to initiate appropriate action against those dissenting members under the recourse of law.
Some un-resolved issues
• lack of definition of redevelopment:
Redevelopment is not merely a cognate form of the term Development.
Redevelopment is not simply demolition and rebuilding; it is so much more.
The term ‘redevelopment’ first appeared in the Maharashtra Slum Areas
(Improvement, Clearance & Redevelopment) Act 1971 and the concept of redevelopment of middle-class buildings is a logical progression from slum redevelopment. However, this term is not defined in the Maharashtra Slum Areas Act.
It is also not defined in:
Maharashtra Co-operative Societies Act, 1960
Maharashtra Regional Town Planning Act, 1966
Mumbai Metropolitan Region Development Act, 1974 & Development Control Regulations, 1999
Development Control Regulations of Greater Mumbai 1991
• Even the Maharashtra Govt, directive on redevelopment issued in January-2009 lacks definition of Redevelopment. It only stipulates procedures by which a cooperative housing society must pursue redevelopment.
• Need of legal definition: Without a legal definition, nobody knows where the legal responsibilities lie. For example, at the end of redevelopment, a flat-owner gets an unsatisfactory flat which
is not as per agreement. However, his society, which entered into the redevelopment agreement with the builder, is not interested in seeking legal remedies. The question is: Can the flat-owner proceed against the society, against the builder, or both? Should he go to cooperative court or to high court? What is the individual flat-owner’s locus standi in enforcing an agreement between society and builder? Without a definition of Redevelopment, this is unclear.
REDEVELOPMENT GUIDELINES CIRCULAR DATED 3rd JANUARY, 2009 is
meant to facilitate redevelopment. It recognizes that redevelopment is widespread, and lays down guidelines for procedures. This circular is a directive under Section 79A of Maharashtra Cooperative Societies Act i.e. Government’s power to give directions. But this can not be deemed to confer powers of redevelopment powers on managing committee and this cannot be deemed to define redevelopment. It regulates the managing committee’s powers to undertake redevelopment without answering the basic question:
From where did the managing committee get these powers? Therefore, this circular is ultra vires of the Constitution as it goes beyond the intent of Maharashtra Cooperative Societies Act. This circular is bad in law, because it strives to regulate an activity that cooperative societies have no power to undertake!
• The Government directives do not deal with the aspect of TDR/FSI and other rights attached to the land and how they have to be dealt with. Therefore, in case the Society desires to assign the development rights in the property to the Developer by way of executing the Development Agreement then the nature of such rights should be adequately documented by the Government with a view not
to allow the Developers to encroach or establish their future claims in the property of any Society.
The Government guidelines should also emphasis strongly on the discussions that are to be held at the General Body Meeting of the Society on all the agreed terms of Development Agreement between the Developer and Managing Committee as the present guidelines of the Government do not provide for approval of draft Development Agreement at General Body Meeting and hence in case Managing
Committee innocently or without understanding its implications, creates such rights in Society’s property in favour of the Developer and then the entire Development Agreement becomes vulnerable to such clauses and is exposed to risks of ownership of Society’s property.
The issue of conflict between collective interest and individual interest should be clearly addressed in the Government guidelines as otherwise; the minority will always feel subjugated and dispirited in such redevelopment work and in all probability the pace of redevelopment will suffer. The Societies Registration Act, 1860. Older housing societies or associations are registered under this Act, and are governed by the Charity Commissioner’s office under Bombay Public Trusts Act 1950. Such a society derives its mandate from its Objects, which is a part of its Memorandum of Association. The Objects
typically refer to securing better amenities for its tenants, beautification of the colony, maintaining hygiene etc. Without amending the Memorandum of Association, these societies have no legal mandate for entering into the adventure
Neither a society’s bye-laws nor Redevelopment Circulars can go beyond the ambit of existing laws and Acts. Rules and directions drafted by the government cannot go beyond the laws passed by the legislature, and cannot amend the basic intent of these laws; they can only flesh out existing laws. The intent of the Maharashtra co-operative societies act or Indian societies registration act is
not to enable adventurism and profit seeking behavior by housing societies. The redevelopment Circular cannot give legitimacy to such behavior.