• Land sell to a builder

Hi, we have been planning to sell a plot of land but so far we have not come across any suitable buyer. Now a builder has approached us who is proposing the following arrangement:

1. The builder wants to get into an agreement with us where we give permission to the builder to start the process of building a flat (i.e. getting necessary permissions, preparing the land, getting into agreement with flat buyers and starting the construction), via an irrevocable power of attorney.

2. The only difference (i.e. why we call it a 'sale' is) here is that the builder has agreed for a timebound, six-monthly payment schedule upto 2 years, and this payment is independent of the progress or status (eg. started, in-progress, on-hold etc) of the construction of the flat.

3. At the end of 2 years, when Full and Final payment is made, we transfer the land ownership to the builder and he continues with his project.

We are trying to find out if there could be a trap where we can fall into. Would we be protected if,

1. The project gets into any legal or byelaw/compliance dispute and work stops.
2. Builder stops payment, but continues with his building activity citing irrevocable PoA?

Kindly advise. Do you see any risk for us?

Thanks,
Anand
Asked 8 months ago in Property Law from Bhopal, Madhya Pradesh
Religion: Hindu
1. That is why make it clear that payment schedule would be stick even if the construction work is held up for any reasons for which you are not responsible.
2. Make a default clause as a result of which default of payment of 2 consecutive installment would make the agreement null and void.
3. Make it further clear that without payment of installment the construction work would not be allowed to proceed with.
Devajyoti Barman
Advocate, Kolkata
5226 Answers
54 Consultations
4.9 on 5.0
1)what is the provisions in case builder fails to make payment on time ? 

2) is the builder giving bank guarantee for the full payment ? 

3)once you execute irrevocable POA and builder starts construction it would be difficult for you to terminate the contract 

4) most builders are facing financial constraints and are unable to complete projects on time 

5) the buildings are not completed as per sanctioned plans . 

6) get agreement vetted by local lawyer 
Ajay Sethi
Advocate, Mumbai
23291 Answers
1220 Consultations
5.0 on 5.0
1. If the agreement is flawlessly structured to protect your rights and the remedies then you cannot fall into the trap, if any laid down by the builder. 

2. If the builder stops payment then you can cancel the agreement to recover the possession of the property. 

3. Get the agreement drafted/vetted by your lawyer before you sign on the dotted line as it is going to be the charter of rights and liabilities. 
Ashish Davessar
Advocate, Jaipur
18158 Answers
449 Consultations
5.0 on 5.0
you should contact a lawyer and prepare an agreement. bargain with the buyer regarding terms of the agreement and must demand some security cheques regarding full payment. 

agreement must contain indemnity clause and clear terms of damages should be mentioned therein. 
Shivendra Pratap Singh
Advocate, Lucknow
2752 Answers
41 Consultations
4.9 on 5.0
1)If an MoU has been drawn for consideration, that is, exchange of money, the document would become binding on the parties,

2) it is advisable  to register MOU 
Ajay Sethi
Advocate, Mumbai
23291 Answers
1220 Consultations
5.0 on 5.0
The MOU will bind both parties once they sign it. MOU does not require notarization or registration. Even an unregistered MOU is a legally enforceable instrument.
Ashish Davessar
Advocate, Jaipur
18158 Answers
449 Consultations
5.0 on 5.0
Yours is a fit case for joint development agreement.
A joint development agreement is an agreement between a land owner or owners and the builder/promoter regarding any real estate joint venture project. A joint venture is one where a land owner with a vacant land or land with building enters an agreement with the builder to construct new projects. This way, the capital, construction and legal work will be carried out by the builder whereas the land will be provided by the builder. Usually the land owner and the builder shares the profit in the ratio of 60:40 which may differ based on location, construction cost, development cost etc.
The joint development agreement should include the names of all the owners of the particular land and the builder’s or the company’s name. The JDA should possess the complete detail of the land such as the size, floor area, materials used, property price, construction and completion schedule, payment plan and the profit ratio shared by the owner and builder. The agreement should include the creation milestone, expenses paid by each party such as the capital invested, man power expense, miscellaneous cost like travel, supplies etc. 
Along with the above details, the agreement should also contain the expenses shared, effect of termination, alternative exit strategies and other legal provisions. This will help the purchasers have security even if there are issues in the construction or if either of the party wants to exit the agreement. By knowing the schedule for project completion, the home buyer will have an idea about the construction and the possession date of the project.
According to the legal process, the owner/owners of the land should grant a general power of attorney to the builder by signing the rights to his name. This way, the builder receives the exclusive right to construct and develop the project in the owners land. It also grants right to get the No objection certificate, occupancy certificate, sanction certificate, electricity and sewage connection on behalf of the land owner.
The General power of attorney (GPA) should be prepared legally by attorneys or with legal assistance and registered by the binding parties to avoid any legal loopholes in the agreement. Once the GPA is approved, the joint development agreement can be processed. A JDA will protect both the land owner and the builder from fraudulent scams.
T Kalaiselvan
Advocate, Vellore
14069 Answers
127 Consultations
5.0 on 5.0
The builder (eventual buyer) wants to have three sets of papers - Registered Agreement, Power of Attorney and an MOU, which will be notarized. The builder wants to include few details regarding penalty clause, payment share/distribution among co-owners etc on the MOU. Assuming we (buyer and sellers) draft the MOU based on mutual understanding and notarize it, how valid is that document in case of a dispute in future? Are Notarized MoU valid legal documents?

The builder does not buy the property from the owner but only develop the property and share the profit. The builder only nominates the buyer and hence a separate agreement will be made between the buyer and the builder. According to this agreement, the builder fixes the cost of the property and amenities offered. The buyer is not involved in the possession of the property before the registration process.
The developer himself does not buy the land/property from the owner.The developer is not the transferee or buyer of the flats as per the Transfer of Property Act, 1882 under the Joint Development Agreement. The sole ownership lies with the owner of the land, but the landowner grantsthe developer along with development rights, a license to enter the land for the purpose of development but not as a transferee/buyer. The license/authority to enter the land is typically given by way of a power of attorney issued in favor of the developer.The general power of attorney should be registered on appropriate value stamp paper with the concerned authorities (registrar) in order to be legally binding on both parties. The stamp duty payable for this kind of GPA given to the builder under a joint development agreement is Rs 1,000. This may vary from state to state.The license gives way to the developer to gain approvals and raise debt by way of mortgage or appoint third parties for advertisement. This power of attorney granted without permission can be revoked by the person granting it unless it’s issued as a part of discharging contractual obligations. In such case revocation would lead to breach of contract.

T Kalaiselvan
Advocate, Vellore
14069 Answers
127 Consultations
5.0 on 5.0
he wants registered agreement and MOU for the purpose of administration right for construction work and POA for the purpose of saving of taxes on the transfer of right. 

you should include indemnity clause in the MOU and POA. keep MOA and registered agreement in single deed. it is possible.  A Notarized MoU is a valid legal document. your rights will be protected by it. 
Shivendra Pratap Singh
Advocate, Lucknow
2752 Answers
41 Consultations
4.9 on 5.0

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