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Tenants and Redevelopment: Key Factors

Saturday, March 24, 2018

The Maharashtra government recently reiterated its desire to reduce required consent for redevelopment to 51% of tenants from the current 75%. This is likely to boost redevelopment of tenanted premises. In view of the same, Advocate Tanmay Ketkar explains some important concepts related to redevelopment

Shelter being fundamental need is utmost important for survival and progress of human beings. On basis of ownership, the shelter or house can be divided in two categories i.e. owned and rented. Both these categories have their own pros and cons.

Most of the metros and cities have tenants and tenanted properties and most of these are undergoing or soon to undergo the redevelopment. These tenanted properties are governed by the Rent Control Act. A tenant, a sub-tenant permitted by owner, deemed tenant, and legal heirs of deceased tenant are all covered in definition of tenant. Leave and license and tenancy are altogether different concepts. Tenancy is governed by rent control act, whereas the leave and license is not governed rent control act. A licensee cannot be termed as and cannot get the benefits and rights of tenant.

Why third party redevelops
A redevelopment of tenanted property can be undertaken either by the owner or by third party developer. Redevelopment by third party is comparatively bit more complicated. Why will a third-party developerbe interested in redeveloping a tenanted property? There are two important reasons, firstly most of the tenanted properties are situated at prime location and secondly the developer gets additional F.S.I. for redeveloping the tenanted and dilapidated structure. Prime location and possibility of additional F.S.I. attracts the developers for redevelopment.

All the tenants must clearly understand that the owner and developer are interested in redeveloping for the possible profit. Therefore, under demanding and over demanding should be avoided. The tenants shall insist for optimum benefits, which will leave room for profit to owner and developer as well. if there is no profit, there will be no redevelopment.

Redevelopment by a third-party developer will be a tri-party affair, involving the owner, tenants and developer. In such redevelopment, tenants must be vigilant. In most cases, initially the tenants are proposed to surrender tenancy in lieu of money. However, as far as possible, tenants, even if they do not want the newly-constructed unit, shall not surrender, because selling the newly-constructed premises with appreciated value would be much more profitable.

To maximise the profits, divide and rule is another policy adopted by the owner and developer.The owner and developer may try and endeavour to settle claim of every tenants separately. Such negotiations will give undue leverage to owner and developer and may result in exploitation of tenant.  To avoid this, alltenants must stand united against such attempts, the unity among tenants will ensure maximum benefits to all.

Negotiate well with developer
Negotiations of redevelopment scheme are crucial for tenants. Before negotiating with owner and developer, the tenants must study the prevailing rules and regulations, to assess the status and value of their holdings and rights. If it is not possible for tenants to study, appointing professionals like architect, lawyer, etc., will always be advisable and profitable.Temporary alternate accommodation and permanent alternate accommodation are the key points around which entire redevelopment will revolve. All other important points like rent, location, tenure or term of temporary alternate accommodation and area, rate, date of delivery of possession of permanent alternate accommodation, interest or penalty for delay in delivery of possession etc., shall be dealt with utmost caution and care. The tenants shall also insist for tri-party redevelopment agreement or entering details of their tenancy and claims in agreement between owner and developer. The tenants shall insist and continuously follow up for execution and registration of agreement for permanent alternate accommodation i.e. agreement of newly constructed unit.

Even after all due care is taken, the possibility of dispute cannot be completely ruled out. Earlier, the tenants had to approach the conventional judiciary. Now with RERA in place, if the redevelopment project is within purview of RERA, the tenants may get a quick and better redressal to their grievance and disputes.

A well thought, well negotiated, well planned and well executed redevelopment will be beneficial for all the parties involved.

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