1.Delays
in Redevelopment Projects; `Extension of Time’ Clause
We own a house in Mumbai after
investing a lifetime of our savings and at the time of its redevelopment, place
it in the hands of a builder without essential scrutiny & care, just
believing on the big dreams he has projected. Many times, this results in
decade of wait languishing in some rented apartment, at the most fighting a
court case with the builder.
In many cases, builders have got
the buildings vacated and demolished. The residents were paid rents for shifting
to alternate rented accommodations for first 2-3 years & afterwards the
builders have stopped paying any rent, mostly taking advantage of glitches in
redevelopment agreement. Under such circumstances, the residents who have
migrated to other areas or at different places, staying in the rented
accommodations, become totally unorganised & unable to fight the might of
the builders & suffer endlessly, at the most, fighting prolonged civil
court cases.
We need to stay alert, take care
and apply our mind during essential scrutiny of redevelopment project
particularly during tendering process. In this series of articles, I aim at
providing some important inputs useful in scrutiny of redevelopment project.
Hi friends, I am Shrikant Chavan, practicing Architect, Civil Engineer, Project Management Consultant (PMC),
working in construction industry since last 37 years. Since last about 8 years
I have been involved in many redevelopment projects as Project Management
Consultant. During this period, I had also an opportunity to study the
redevelopment projects in which I was not involved, since on many occasions the
people individually approached me for consultations regarding their concerns
about such projects. In these cases, the most unfortunate people were
the one who were shifted to temporary residence, their building was demolished
& after couple of years they have to pay their own rent since builder has
stopped paying rent & their project has not even commenced. Some other
concerns have been :- 1. Builder had stopped the construction & rent
payment due to non-availability of funds, 2. After dragging project for 4-5
years, the builder has expressed that the additional carpet area has to be
drastically curtailed considering present recession, 3. Builder has used FSI more
than allowed in agreement for saleable component & rehabilitation area has
to be reduced. These are all unfortunate cases where these people have to
either fight out the prolonged court cases or be at the mercy of the builder
& allow him to complete the project at his own conditions, will & wish.
There are many others, who have not yet completed the process of finalising the
tender for redevelopment of their buildings. These people can use the inputs
mentioned in this series of articles.
INPUTS ON VARIOUS ASPECTS OF
REDEVELOPMENT PROJECTS
In this series of articles, I
will try to offer some inputs, which I have evolved from my last 8 years of
involvement in redevelopment projects. I
have many of the time been approached by individual residents of buildings undergoing
the redevelopment proposals. These individuals were highly worried &
stressed-up considering that the property that they have gained with lifetime
of their earnings at stake. Generally,
they were ignorant of the various processes & details involved in these
projects. So my inputs are aimed at these people. In this series, I aim at providing
inputs on general redevelopment procedure, role of PMC, feasibility report,
tender, important clauses like extension of time, termination, bank guarantee
etc.
TENDER CLAUSE ON EXTENSION OF
TIME
The endless delay in project
completion is the main issue in most of the redevelopment projects. So I will first
discuss the `extension of time’ clause in this series of articles on
redevelopment issues, considering its importance in progress & completion
of redevelopment projects. If compared with the normal construction projects
where the contractor has no income source from the project work except through
routine bills (called RARs i.e. Running Account Receipts) which is controlled
by PMC/ Architect, the redevelopment project developer has income source from
bookings on saleable component which is not under control of PMC. In
redevelopment project, delayed project adversely affect the society members, particularly
in timely recovery of their rents from the developer & on other
rehabilitation compensations. Considering these differences & taking
lessons from the fact that in most of the delayed redevelopment projects the
unscrupulous developers have stopped paying compensatory rents to the society
members, I am of the opinion that the extension of time clause should be linked
to the schedule of construction (bar chart) in such a manner that for delay in
each activity, when the construction schedule (bar chart) is rescheduled, if
the project completion date shall be required to be extended, the developer
should be asked to deposit post-dated cheques for rent & other
compensations for the extended period, prior to acceptance of extension with
revised construction schedule. To simplify it, suppose the PMC observes during
his visit to the site that the activity of completion of work up to plinth
level is expected to be delayed by 2 months. He asks the developer to submit
his revised schedule with reference to the delays in activities observed during
his site visits. When the developer submits the revised construction schedule
it reflects that the delay in activity affects the overall completion of the
project & the project shall be delayed by 2 months. The project which is to
be completed in 24 months shall now take 26 months to complete. The developer
has already handed over to the members of the society the post-dated cheques
for initial 24 months. So now, prior to getting sanction for the revised
construction schedule & extension of time, the developer shall have to hand
over the two month’s post-dated cheques for 25th & 26th
month. The developer has to deposit these cheques & get the revised
schedule & extension of time sanctioned reasonably in advance of the concerned
ongoing activities so that the revised schedule is not disturbed in anyway. The
failure on the part of the developer to comply with this requirement shall be
treated refusal of performance by the developer & hence such breach may
result in revocation or suspension of power of attorney and/ or termination of
agreement. Here, it is needed to remember that the agreement to be valid in law
should be fair to all parties involved in agreement & many times the normal
termination clauses tend to be unfair to the developer in the redevelopment
agreement particularly if we consider the heavy investment of the builder.
Hence on the subject of termination clause, I plan to write a separate article
in this series.
The construction schedule is the
time-bound schedule of different activities of redevelopment project in bar
chart format (specimen listing minimum activities required to be mentioned
should be annexed to the redevelopment agreement), mentioning dates of commencement
and completion of each major activity, in such a way that the agreed completion
of the redevelopment project exactly tallies with the completion shown in the
bar chart. This bar chart shall be inclusive of activities such as, preparation
of draft plans by the Developer’s Architect, approval by the Society of draft
plans, submission of proposal to municipal authority, applications for
permissions/ NOCs to different statutory/ government bodies as applicable,
obtaining of IOD/ commencement certificates/ all other necessary permissions/
NOCs, vacating the existing accommodations of society members & shifting
them to their temporary accommodations, demolition of existing buildings, major
construction activities including foundation, work up to plinth, each slab-wise
structural/ RCC work, masonry work, windows, doors, internal & external
plaster, waterproofing of toilet/ bath room floor, roof terrace floor, basement,
internal finishing work (including door & window fixing, kitchen platform
work, flooring, skirting, dado, fixing of fittings & fixtures & all
internal amenities each as separate activity),
internal & external painting, underground & overhead water
tanks, , internal & external plumbing, sewage disposal system, internal
& external electrification, water supply system, lift installation,
firefighting system, area drains, open
space development, compound wall and other miscellaneous works up to obtaining
occupation certificate & rehabilitation of society members. The bar chart
shall be in the format as approved by the PMC, wherein the PMC shall have
authority to insist on indicating any activity as a separate activity in the
bar chart & to insist on indicating the work force & tools & plants
to be employed on the work for each activity each day. This bar chart shall
also indicate the scheduling of samples for approval & procuring the
required materials.
I have observed, generally in the
redevelopment agreement that, apart from initial about 24 months of period of
completion the extension of 6 months to 1 year is allowed & for any further
delay it is the developer is held liable to pay certain amount per day as
liquidated damages. In the absence of very specific terms in redevelopment
agreement particularly the details of actions to be taken in such situation,
nobody can question the developer till these periods are over for the further
rent amount & in the end after 2 or 3 years the developer stops to pay
abruptly & these unorganised society members can even not meet the builder.
The society is at mercy of the builder or at the most enters into a long drawn
civil court case. In the court the team of builder’s lawyers easily find out
the escape routes / loop holes in such loosely worded ambiguous redevelopment
agreement.
Here, somebody may bring out that,
now the RERA provisions can discourage the builder from delaying the project.
It is true that the RERA provisions have made the builders more alert
particularly regarding timely completion of the project. But since the RERA do
not provide for the rent & other compensations of the redevelopment
rehabilitation component, the society members won’t get the required protection
in this aspect under RERA.
Linking construction schedule to
the extension of time on basis of each activity has many benefits :- 1.The main
benefit is that the members will be assured of getting rent for their temporary
accommodation well in advance,
2.The project shall be planned more
realistically & responsibly,
3.It will bring clarity about the entire
project,
4.The actual work progress shall be closely monitored,
5.It shall provide
more control in hands of the society to handle the work progress
systematically,
6.It shall instill fear in
builder’s mind from the beginning of the project that, if he delays at any
stage or activity, he will have to face consequences immediately,
7.Delay in
any activity shall also be publicised & may affect, on getting booking on
saleable component.
In next article I will offer
inputs about the different reasons to be permitted for the delay i.e. for extension
of time limit.
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