Development Agreement

Dec 15, 2022
3 min read

Written by Sudipta Bandyopadhyay, Advocate

Introduction:

These days old residential buildings are demolished, and new buildings are constructed in almost every city and suburb. Aged people cannot toil enough to maintain their premises. So, they enter into development or joint development agreement with developers to let them use the land and existing building over there. Through the agreement, the developer demolishes the old building and constructs new apartments, shopping malls, etc. A development agreement doesn't mean the sale of the property. It is one kind of license. The actual owner remains the owner until and unless he sells his property through proper registration of a sale deed.

Explanation of Development Agreement:

It is an agreement under which a developer agrees with another party to start the construction of works on behalf of that party.

Need of General Power of Attorney:

Development agreement needs a General Power of Attorney. The Power of Attorney gives authority to the agent or attorney holder to handle every legal issue, banking issue, and official matter attached to the property of the owner or the principal. The principal is the landowner. The principal allows the developer to construct a building on the given land. The agreement also allows the developer to develop the land and sell it subject to some conditions.

The relationship between the landowner and developer is just like licensor and licensee. Otherwise, unauthorized interference in another’s property or land is trespass which is an offence in the eyes of the law.

Important Clauses of the Development Agreement:

Names of parties and addresses of registered offices are to be clearly mentioned in the agreement.
A Recital is the part of an agreement where the purpose of developing land is clearly stated. Both parties henceforth accept the other clauses of this agreement.
The agreement must mention the demarcation of the plot, building, and records of Khatian, Mouza.
Before doing any construction, the developer needs to get approval from the corporation or council. They need to mention the blueprint of the building plan and the nature of tiles and stones to be used during construction. On the basis of all these, the registered office will assess the market value and other costs like stamp duties.
Without consideration, a contract or agreement is not legally enforceable. Consideration is a promise. It can be in cash or in kind. The developer here agrees to share a certain amount of money with the owner after. Additionally, it is also promised the developer to allot a specific portion of the property to the owner. The location of the property is to be mentioned in the agreement.
If the developer is unable to fulfil his promises, then the owner is at liberty to terminate the contract and file a suit against the developer.
The clauses of the agreement are binding upon the parties. If extra time is needed to complete the construction, then both parties agree to extend the period by attaching an addendum. Addendum means an additional document attached to a deed, will, etc.
The owner remains with his title and ownership in the course of the development agreement. The owner can any time visit the site to inspect the construction without any hindrances.
The developer handles all costs of constructing, marketing, selling, and registering plots with other sellers. The owner is not liable for any cost for certain matters.
No party is liable or responsible for any Act of God.
The required stamp duties and registration duties for the parties are to be paid separately.
In the end, both parties will sign the document with free consent and sound mind. This implies that they both will follow the clauses and cause no problems to each other.

Conclusion:

The agreement secures the transaction and usage of money and property. Despite all, cases of fraud developers are found in court records. Some people forcefully take possession and cheat the owner because knowledge of the law is available to them. Before entering into such a deal, one must minutely know all the details to avoid any type of arduousness.

References:

Legal Service India, Joint Development Agreement Between Owner and Developer (Legalserviceindia)
Lexis Nexis, Development Agreement Definition (LexisNexis)