Sample of Development Agreement between Owner of Land and Developer

Sample of Development Agreement between Owner of Land and Developer

ARTICLES OF AGREEMENT made at………. {City} this……day of…………., 20…. between (1) Mr. ……………. of…….{city}Indian Resident hereinafter called “Owner” (which expression shall unless it be repugnant to the context or meaning thereof, be deemed to include their respective heirs, executors and administrators) of the One Part and ……………..of………{city}, Indian Resident carrying on business at…………………..hereinafter called “Developer” (which expression shall, unless it be repugnant to the context or meaning thereon be deemed to include his heirs, executors, administrators and assigns) of the Other Part:

Whereas the Owner is absolutely seized and possessed of or otherwise well and sufficiently entitled
to all those pieces or parcels of land or ground situate lying and being at………. {City} in the
registration………. {District} and sub-District of…………… City of area ………..square meters or thereabouts and more particularly described in the Schedule hereunder written (hereinafter referred to as “property”);

And whereas the said property is vacant save and of which fact the Developer is aware, he having inspected the said property prior to the execution of these presents;

And whereas the Owner has agreed to grant to the Developer and the Developer has agreed to accept from the Owner exclusive rights of development of the said property upon the terms and subject to the conditions herein recorded;

And whereas all of the said property has been declared to the surplus vacant land by the Competent Authority under the provisions of the Urban Land (Ceiling and Regulation) Act, 1976.

NOW IT IS HEREBY AGREED BY AND BETWEEN THE PARTIES HERETO as follows:
1. The Owner hereby grants exclusive right to the Developer of development of the said property on what is known as “as is where is basis” and the Developer accepts the same for the consideration and subject to the terms and conditions herein provided.

2. It is specifically agreed that the Owner shall through the Developer’s Architects submit plans for sanctioning of lay out for construction of buildings and/or other structures on the said property or any part or portion thereof.

3. The said plans shall be prepared by the Architects of the Developer and at the costs of the Developer and the Owner shall submit only such plans as are prepared by the Developer through their Architects and copy of the finally approved plan shall be given to the Owner.

4. Soon after the execution of this agreement, if so required, the Owner shall execute a Power of Attorney in favor of the Developer or any other person nominated by the Developer to approach all public authorities and to submit and obtain sanction of plans of lay-out and the buildings and structure/s to be constructed on the said property or any portion thereof from the Municipal Corporation and all other concerned authorities.

5. In consideration of the Owner granting exclusive rights of development to the Developer under this Agreement, the Developer shall pay to the Owner a minimum consideration of Rs. ____________/- (Rupees ________________ ______________________ only) (hereinafter called “the minimum consideration”) or an amount calculated at the rate of Rs.____/- per square foot of the F.S.I. which may be sanctioned by the Municipal Corporation of ________, whichever is higher and the said total consideration amount shall be paid in the manner following:
o Rs. ____________/- (Rupees ______________________ ____________ only) on the execution hereof being the earnest money or deposit (receipt of which sum the Owner do hereby admits and acknowledges).
o Rs. ____________/- (Rupees _____________________ _____________ only) being the balance consideration which shall be paid by the Developer to the Owner on the compliance of the following:
1. The Owner making out the marketable title to the said property free from all encumbrances and reasonable doubts.
2. The Appropriate Authority issuing its NOC under Section 269 UL(3) of the Income-tax Act, 1961.
3. The Owner handing over complete vacant possession of the said property to the Developer under an irrevocable license.
4. The owner giving irrevocable right to construct buildings on his own account and with right to sell the units in the said building/s to the prospective purchasers, on ownership basis or otherwise and to appropriate the Sale Proceeds to themselves although formal possession of the property shall be handed over to the Developer on execution of the Conveyance.

6. Notwithstanding anything contained in the preceding clause it is specifically agreed by and between the parties hereto that after execution hereof the Developer shall be entitled to put up fencing around the said property or any portion or portions thereof, for the purposes of preventing further encroachments but subject to the existing encroachments, and shall also be entitled to put up fencing around the portions of the property in occupation of the unauthorized occupation as hereinabove provided. The Developer shall also make arrangements for guarding the said property and preventing any further encumbrance or encroachment by trespassers or unauthorized persons upon the said property or any part or portions thereof. All costs, charges and expenses in respect of the above shall be borne and paid by the Developer alone. The Owner shall not be liable to remove and/or vacate the encroachments or unauthorized occupants who are already occupying portions of the said property nor shall they be liable in respect of any further encroachment or unauthorized occupation on the said property.
7. As from the date hereof, the Developer shall be solely entitled at his own risk to deal and/or negotiate with the unauthorized occupants and/or trespassers on the said property and to take any proceedings against them and/or to arrive at any arrangement or agreement with them at the costs, charges and expenses of the Developer alone. However, the Owner shall empower and authorize the Developer and/or his nominees under the Power of Attorney to be executed as aforesaid to effectively deal and/or negotiate with the trespassers or unauthorized occupants and to receive the possession of the respective area occupied by such trespassers or unauthorized occupants subject to the consideration having been paid to the Owner for the said property as mentioned hereinabove. The Developer shall also be entitled to hand over, on behalf of the Owner, any area of the said property, which falls under reservation and/or set-back and/or requisition or acquisition to the relevant authorities in the event the same becomes necessary on receiving proper notice from the authorities and for that purpose, the Owner shall grant suitable powers and authorities in the said Power of Attorney to be granted to the Developer and/or his nominee.

8. The Owner declares that:
a. The Owner is the absolute owner of the said property described in the Schedule hereunder written which is also shown on the plan hereto annexed and marked “A” and thereon shown surrounded by a red colored boundary line and that the said property is vacant save and except the portions thereof, which are at present occupied and/or encroached upon by the unauthorized occupants and portions whereof are under reservations as aforesaid.
b. Subject to the Competent Authority granting permission and/or sanction under the provisions of the said ULC Act, the Owner has good right, full power and absolute authority to grant exclusive rights to develop the said property described in the Schedule hereunder written to the Developer and the Developer shall be entitled to develop the said property subject to the terms and conditions herein contained.
c. They have not created prior to the date hereof nor shall they create hereafter during the pendency of the Agreement any right or encumbrance of any nature whatsoever in respect of the said property or any part thereof.

9. Simultaneously with the execution hereof, the Owner shall deposit all the title deeds relating to the said property described in the Schedule hereunder written with their Advocate(s) until the completion of the transaction herein. The said Advocate(s) shall after examining the title as mentioned in the previous clause, send, against an accountable receipt all the title deeds to
the said Advocates of the Developer for perusal, as and when required by the said
Advocates. On the completion of the transaction herein the Owner through his said
Advocates hand over to the Developer all the said title deeds against an ordinary receipt.
10. Upon the Competent Authority under ULC Act granting the requisite permission and/or sanction for the development of the said property and on sanction of the plans by the Municipal Corporation of Greater Bombay and all other concerned authorities as aforesaid the Developer shall after full payment of the consideration amount to the Owner be entitled to commence construction on the said property, for which license to enter upon would be given by the Owner to the Developer pursuant to this Agreement. The development to be carried out by the Developer shall be in accordance with the permissions granted by the Competent Authority under said ULC Act and shall also be in accordance with the sanctioned plans. The Developer shall also be entitled in his own right to enter into agreements on what is popularly called Ownership basis or otherwise and/or arrangements with any person or persons of their choice for the purpose of selling, allotting, and/or transferring any of the flats/shops/ premises/garages/units, etc. to be constructed by the Developer on the said property or any portions thereof in accordance with the terms and conditions laid down by the Competent Authority and in the sanctioned plans and to receive and appropriate the consideration payable in respect thereof and/or any part thereof for their own benefit and use. Such agreements and/or arrangements shall be entered into by the Developer in his own name and at his own costs and risk and no risk or liability of any kind shall be incurred by the Owner in any manner.

11. After the receipt of the full consideration by the Owner from the Developer, the Owner shall execute one or more Deeds of Conveyance as may be desired by the Developer but at the costs and expenses in all respects being borne and paid by the Developer including stamp duty and registration charges, in respect of the said property or portions thereof, as the case may be, in favor of a Co-operative Society or Societies or Association of persons or other body Corporate who have agreed to acquire flats/shops/garages/premises/units etc. from the Developer.

12. On receipt of the full consideration amount by the Owner, if for any reason the Developer does not desire to obtain the Conveyance of the said property, then the Owner shall, at the request of the Developer, simultaneously with the payment of the said balance amount, execute an irrevocable Power of Attorney in favor of the Developer and/or his nominees or nominee or representatives empowering and authorizing the said Attorneys, inter alia, to execute one or more Deeds of Conveyance in respect of the said property or any portions thereof in favor of the Developer or in favor of Co-operative Society or Societies or association/s of persons to be formed and/or incorporated and/or nominated by the Developer herein. No further consideration shall be required to be paid by the Developer to the Owner for execution of such Deed or Deeds of Conveyance.

13. Prior to the execution of one or more Deeds of Conveyance in respect of the said property or any portions thereof in the manner mentioned herein, the Owner shall produce the requisite Certificate under the provisions of Section 230A of the Income-tax 1961 for effectively vesting the said property in favor of the Developer or in favor of the person or persons nominated by the Developer. It is further agreed that in the event the said Deed or Deeds of Conveyance or any of them are not executed at the time of payment of the balance consideration amount an amount representing 10% of the total consideration amount shall be retained by the Owner’s Advocates until the production of the said Certificate/s under the provisions of Section 230A of the Income-tax Act.

14. The Owner shall pay and discharge all assessments, outgoings, taxes, etc. payable in respect of the said property up to the date the possession of the said property is handed over by them to the Developer. Thereafter, the same shall be paid and borne by the Developer alone. The Developer shall pay and discharge all outgoings, assessments, taxes, etc. for the entire property after possession of the same whether whole or in part is handed over to the Developer. If necessary, the same shall be apportioned between the parties hereto.

15. The Owner declares that no notice of acquisition or requisition issued by the Municipal Corporation of Greater Bombay or under the Epidemic Diseases Act or any other statute has been served upon them or anyone on their behalf. If however, any notice or requisition of the Municipal Corporation or other public body is issued in respect of the said property after the date of execution of these presents but before the completion of the transaction the Owner shall comply with the same at their costs and expenses. The Owner hereby declares that at present no notice or requisition has been served by the Government of Maharashtra or Municipal Corporation of Greater Bombay for requisition or acquisition or set-back in respect of the said property or any part thereof and that so far as they are aware no such requisition or acquisition or set-back is contemplated. Provided always that if the Owner has concealed any such notice issued, inter alia, under any of the Acts as aforesaid, the Developer will be entitled to cancel this Agreement and on such cancellation to receive forthwith the earnest money and all other payments made, if any.

16. All disputes and differences that may arise between the parties hereto relating to or in connection with the matter of this agreement or between the parties or their representatives shall be referred to the sole and final arbitration of Mr. _______________ or failing him Mr. ____________ as the sole Arbitrator whose decision shall be final and binding on both the parties. The Arbitrator shall have summary powers.

17. All out-of-pocket expenses of and incidental to this agreement including the expenses for Deed/s of Conveyance and other documents and writings including stamp duty and registration charges shall be borne and paid by the Developer alone. The parties shall bear and pay their respective Advocates’ professional costs.

18. The Developer shall be entitled to develop the said property either by himself and/or through his nominees including a firm, wherein he is a partner or a company wherein he is a Director, provided however, all the obligations and liabilities undertaken by the Developer under this Agreement shall remain in full force and be personally binding upon the Developer, and in particular his liability for payment of all amounts under this Agreement to the Owner.

19. The Owner hereby declares that he has not entered into with any person or persons Agreement to Sale or Lease or created any third party rights in favor of any person or persons in respect of the said property.

In Witness whereof the parties hereto have hereunto set and subscribed their respective hands the day and the year first hereinabove written.

SIGNED AND DELIVERED by) the within named “OWNER”) Mr. ___________________ )
in the presence of…………. )

SIGNED AND DELIVERED by) the within named “DEVELOPER” )
(1) Mr. ____________________ )
in the presence of ………… )
Receipt

Received this day and year first } hereinabove written from the } within named Developer a sum of
Rs. _______/- (Rupees._______________ only) being the deposit to be paid by him to us by Cheque (
Number _______, dated _________, drawn on __________)

Signature

Owner
Witnesses:
1)____________________}
2)____________________}

Registration of Agreements

Development Agreements or ‘Agreements to Sell’ can be registered with the appropriate authorities of the State Government under the Registration Act, 1908. (Read: Documents to be registered under Registration Act). Benefit of entry into Book-1 maintained at the Registrar’s office can be availed. Such entry will ensure that there is a public notice of these documents and their contents. Encumbrance certificates, if any, can be obtained on the immovable property as there will be entries recording the execution of these documents.

General Power of Attorney (GPA) given by the owner to the developer can also be registered and there will be a public notice on the GPAs. The total cost of stamp duty and registration fee payable on these documents will depend on the kind of powers given to the PA holder to deal with the property concerned. It should also be noted that the stamp duty payable on a Development Agreement is very high in case it is observed that sweeping powers are given to the developer to deal with the property under the guise of Development Agreement.

Any disputes arising between the developer and individual/company/Government are covered by the Indian Contract Act which is a Central Act and is applicable throughout India.

It has to be borne in mind that Banks and Housing Finance companies normally decline to finance houses bought by individuals in buildings developed under developmental rights and on land held by PA holders till the time the owners have been fully paid off. Similarly, developers will find it hard to obtain bank finance for their projects to be executed on land covered by such Development Agreements.

Arch. Francis Gichuhi Kamau. (331 Posts)

Architect Francis Gichuhi . B.Arch. University of Nairobi. Registered Architect, Kenya. Member, Architectural Association of Kenya. Contacts. email info@a4architect.com. Telephone +254721410684


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