• A sale deed became a development agreement - a trap?

Dear Sir,
We are six sisters which after our father inherited jointly, his half property, a house in Kolkata.  Owner of the other half is our cousin. We live in Sweden and due to that I have the “Power of Attorney” for all of us.  I have a PIO card.
For 5 years we have tried to sell of our property. There are 5 tenants in the house and two empty flats. No buyers has turned up with a proper deal and now a Developer Company has approached to developed the house. We sisters feel very unsecure about promoting as remaining owners. We want to sell of the property. 
The Developer don´t want to buy the property out of the tax system in WB as the buyer has to pay the tax out of the valuation made of the house. Is this the situation for a buyer? We came to know that the house/property could be valuated out of the year our father died, 2010 and the tax can be compared to the valuation of 2010. Is this a possibility?
How can we handle the matter so the “Developer” becomes the owner?
Can we sign the “Developer agreement”, take our share of payment and at the same time sign “a Mutation” for Municipal Corporation in Kolkata, giving our half of the property to our cousin, making our cousin the sole owner?
In the Development agreement is mention that:
1.	We agree to entrust to the “developer the development to exercise the rights, powers, privileges and benefits of the Owners by executing a “Power of Attorney in its favor.”
-	What does it mean? If the Developer is like the Owner, what is our position in this?
-	Can we be accused if an accident happened during development?
-	If the tenants file a case – who will be responsible in court?
-	Is it so that a “Power of Attorney” for a developer has no end? 
2.	“The construction should be completed within 3 years and that will be the essence of this agreement”. What will happen if the construction is not made within 3 years?
3.	“the Owners (we) themselves or through their agent  shall sign and execute the Deeds of Conveyance in favor of the purchasers of flats/spaces …”  We can say nothing, just sign and even if nothing is mention in the  agreement the Developer will sell of the flats and take the money. Can this be a problem for us?
4.	Nothing is mention about mutation and ending of selling of flats in the property. So we can remain owners for a lifetime? 

Yours Sinceraly
a indian/Swedish Lady
Asked 6 months ago in Property Law from Sweden
Religion: Hindu
Can we sign the “Developer agreement”, take our share of payment and at the same time sign “a Mutation” for Municipal Corporation in Kolkata, giving our half of the property to our cousin, making our cousin the sole owner?
In the Development agreement is mention that:

You can enter into an agreement with the developer on the development and share holding agreement but authorising your cousin to be the sole owner is not an advisable idea.




1.	We agree to entrust to the “developer the development to exercise the rights, powers, privileges and benefits of the Owners by executing a “Power of Attorney in its favor.”
-	What does it mean? If the Developer is like the Owner, what is our position in this?
-	Can we be accused if an accident happened during development?
-	If the tenants file a case – who will be responsible in court?
-	Is it so that a “Power of Attorney” for a developer has no end? 

By an agreement made between the developer and the owner, the developer no doubt will appear as a developer cum seller in the eyes of buyer whereas he will doing them as a power agent and not as a owner.  The ownership rights still remain with the owner whereas owing to the POA deed in effect, the owner cannot effectively take over the property because he has executed an irrevocable POA deed which is irrevocable due to the conditions suitably drafted by the developer in his favor who has invested huge money in this project.

If an accident occurs no doubt the developer can be held but the owner also shall be held liable.
It is similar case in the event of any litigation too.






2.	“The construction should be completed within 3 years and that will be the essence of this agreement”. What will happen if the construction is not made within 3 years?

The developer may come with different reasons if he his not completing the construction within the time stipulated,  You have legal options also for that.







3.	“the Owners (we) themselves or through their agent  shall sign and execute the Deeds of Conveyance in favor of the purchasers of flats/spaces …”  We can say nothing, just sign and even if nothing is mention in the  agreement the Developer will sell of the flats and take the money. Can this be a problem for us?

The developers have procured the prospective purchasers and the buyers have already agreed to the conditions of sale, so as a owner you just have to sign deed of conveyance in favor of the purchasers.  You need not worry about the other conditions which shall be taken care of the actual seller, i.e., the developer.






4.	Nothing is mention about mutation and ending of selling of flats in the property. So we can remain owners for a lifetime? 

Mutation records do not confer title to the property, hence once you sold the property, you cannot claim ownership of the same.  If the mutation is not done, then why do you worry about it, the new approach the developer who will arrange for mutation and subdivision of the property once the entire construction is completed.
T Kalaiselvan
Advocate, Vellore
13907 Answers
127 Consultations
5.0 on 5.0
1)sale deed is better option 

2) on account of financial constraints builder want to enter into development agreement with owners so that they dont have to pay substantial sums of money to the owners

3) they develop the property and share the sale proceeds 

4) only if sale deed is executed would developer be the owner 

5)you will be executing irrevocable power of attorney in favour of developers wherein developer would be making application to muncipal corporation   for sanction of plans on your behalf , carry out construction as per sanctioned plans, sell flats etc 

6) you must have the POA / developer agreement vetted by lawyer 

7) you would be bound by actions of the developer as you have executed POA in his favour 

8) if tenants file case developer will handle case on your behalf 

9) there are many cases wherein developers does not complete building as per sanctioned plans , sells the flats to multiple parties ., pocket the sale proceeds .  in such a case you would be liable as purchasers would drag both developer and you to court 

10) there must be a clause that if developer fails to carry on construction within period of 3 years  he shall pay penalty for period of delay 

11) insist on bank guarantee from developer to protect your interests 

12) on construction being completed and conveyance  executed in favour of  flat owners they would be absolute owners of the flat . 
Ajay Sethi
Advocate, Mumbai
23089 Answers
1212 Consultations
5.0 on 5.0
1. If you want the developer to be the owner then the sale deed has to be executed in his favour. Mere development agreement will not pass the title to him. The development agreement will merely authorize him to develop the property.

2. A GPA in favour of the developer should not be executed, instead a development agreement is the answer.

3. The development agreement will be the charter of rights and liabilities of both the parties, so get it drafted/vetted by a lawyer.

4. If the agreement lays down a three year time limit to complete the construction the failure of the developer to honour this clause will make him amenable to be sued for breach of contract.

Ashish Davessar
Advocate, Jaipur
18055 Answers
445 Consultations
5.0 on 5.0
Hi, It is better all the sister entered into Joint Development Agreement with Builder and the Builder will sell the property as per Joint Development Agreement and you are in safer side and  it is better you can collect your consideration from the Builder.

2. In your case tenant can't do anything. It is my considered opinion that you can dispose of the property with the Builder entering into Joint Development Agreement.
Pradeep Bharathipura
Advocate, Bangalore
4104 Answers
133 Consultations
4.3 on 5.0

Ask a Lawyer

Get legal answers from top-rated lawyers in 1 hour. It's quick, easy, and anonymous!
Ask a Lawyer

Property Lawyers

T Kalaiselvan
Advocate, Vellore
13907 Answers
127 Consultations
5.0 on 5.0
Ajay Sethi
Advocate, Mumbai
23089 Answers
1212 Consultations
5.0 on 5.0
Ashish Davessar
Advocate, Jaipur
18055 Answers
445 Consultations
5.0 on 5.0
Krishna Kishore Ganguly
Advocate, Kolkata
12027 Answers
226 Consultations
5.0 on 5.0
Devajyoti Barman
Advocate, Kolkata
5137 Answers
54 Consultations
4.9 on 5.0
Rajgopalan Sripathi
Advocate, Hyderabad
868 Answers
43 Consultations
5.0 on 5.0
Atulay Nehra
Advocate, Noida
424 Answers
15 Consultations
4.7 on 5.0
Ajay N S
Advocate, Ernakulam
1905 Answers
19 Consultations
5.0 on 5.0
Shivendra Pratap Singh
Advocate, Lucknow
2706 Answers
41 Consultations
4.9 on 5.0
S J Mathew
Advocate, Mumbai
1949 Answers
65 Consultations
5.0 on 5.0