Q. Our society is going for re-development, for which a draft development agreement (DA) is being discussed. The society also wants the developer to execute a Permanent Alternative Accommodation Agreement (PAAA) with each member of the society with society as a confirming party. However, the developer is suggesting that the DA should be signed by all members so that there is no need for executing individual PAAA in favour of each member. According to the developer, there will be extra stamp duty burden on each PAAA which is quite considerable. He is therefore discouraging us from going for PAAA and insisting on all members signing the DA itself. In such situation, can we still insist on having a PAAA? How safe it is not to have individual PAAA? How much is the extra stamp duty burden on individual PAAA?
Amar Surve, Mulund
A. It is always advisable to have PAAA when the society is being re-developed by the developer. There was time when developers were insisting on the societies to have the DA to be signed by all members in order to avoid paying stamp duty twice – once on DA and second time on PAAA. This was so because of two circulars of stamp office dated June 23, 2015 and March 30, 2017.
The division bench of Bombay High Court, in its landmark judgment dated February 17, 2023 in “Aditya Builders v/s State of Maharashtra & Ors.” has struck down both these circulars as bad in law. The High Court, in this judgement has observed that “individual members of the society need not sign the DA. That is optional”. The High Court further observed “Once the DA is stamped, the PAAA cannot be separately assessed to stamp beyond Rs100 if it relates to rebuilt or reconstructed premises in lieu of the old premises used/occupied by the member.
The stamp on the DA includes the reconstruction of every unit in the society building”. This judgment also makes it clear that “the PAAA between a developer and a society member is to be additionally stamped only to the extent that it provides for purchase by the member for consideration”. Thus, the legal position as it boils down is as follows: The developer cannot insist on a society that the DA must be signed by all members. Secondly, the PAAA between the developer and the individual member does not attract stamp duty besides normal stamp duty of Rs 100 for any extra free area that the member gets as his entitlement in lieu of his old tenement. Thirdly, the PAAA is to be additionally charged for stamp duty only for additional area that is being purchased by the member. Hence, your society should decline developer’s demand for all members to sign the DA.
Your society should insist on having PAAA for its members. You can inform the developer about the judgement of the Bombay High Court that the PAAA attracts stamp duty of only Rs100 and as such there is no much financial burden on him. It is always safe to have PAAA from the developer and it is also good to have such PAAA executed before the members vacate their flats.
Q. Our society has gone for re-development and the DA has also been executed. The IoD is expected in next couple of months. Considering the dilapidated conditions of the building many members have agreed to vacate the flats and hand them over to the builder. A few members of our society are opposing it although the builder is ready and willing to offer the rent for six months upfront and post-dated cheques for next six months as per the terms of the DA. Many members feel that if they vacate the flats early, the builder will be able to complete the project fast. In such circumstances can the society take action against the members who are refusing to vacate their flats despite assurance of rent from the builder?
Vilas Dandekar, Ghatkopar
A. The members who are refusing to vacate their flats in the absence of the IoD are fully justified in their stand. No member is expected to vacate the flat unless the builder has procured the IoD from the municipal authority. Society cannot take any action against such members. In fact, no builder is legally allowed to seek possession of the vacant flats unless he has obtained the IoD. Actually, there has to be a provision to that effect in your DA with the builder.
(Advocate Shirish V Deshpande is chairman, Mumbai Grahak Panchayat. Queries can be sent to him on email: shirish50@yahoo.com)
