I have an on-going housing loan on my flat. Our society is going in for redevelopment. The developer is asking NOC from the bank to proceed further. I have made an application to the bank but there has been no response for the last two weeks. How should I go ahead in this regard? Sumedha Damle, Goregaon
The bank has certain right over your flat until the housing loan is fully repaid. Redevelopment of the CHS will have an impact on the property mortgaged with the bank and it will need to be assured that their security/interest will not be compromised. Contact your bank, provide the society’s resolution, builder’s appointment letter, relevant documents, and any planning authority permissions. The bank will issue an NOC stating no objection to redevelopment and that its rights/interest will remain during the loan tenure.
The bank cannot deny the NOC, as the builder must record mortgaged flats and note their interest and charge on the flats that will be allotted in the redeveloped property. Failure to submit NOC to the builder will unnecessarily delay the redevelopment. Your bank should grant the NOC without issue, as they often finance under-construction properties. If you don’t receive a response within a month of submitting your application, you can file an online complaint with the RBI Integrated Ombudsman via RBI website www.rbi.gov.in.
Our society finalised a developer for the redevelopment and we issued a Letter of Intent (LOI) to him. He was required to sign the development agreement (DA) within six months from the date of LOI as per the terms in the tender document. One year has elapsed and now we wish to terminate him. Please guide us on the legal implications. Ankur Raje, Dahisar
The tender document outlines terms and conditions the developer agrees to when submitting a bid. The terms in the LOI are binding on both the developer and the society/members. If the tender document or LOI requires signing the DA within six months of the LOI, the developer must comply. Failure to do so constitutes a breach of terms. The society can cancel the LOI, as it is only an initial step indicating the intent to appoint the developer for redevelopment.
The DA, once signed, supersedes all prior communications. Since the DA has not been signed and there is violation of LOI conditions, the society may terminate the LOI without significant consequences.
To proceed, a general body meeting must be called to discuss the issue and pass a resolution with a 2/3 majority. A unanimous decision by the general body is preferred to prevent complications from dissenting members. Non-compliance with the LOI terms erodes trust in the developer. Inform the developer of the decision in writing but allow them to explain the delay. To avoid legal disputes, obtain an NOC from the developer.
If the developer has incurred costs (eg, expenditure for planning authority applications), consider reimbursing them as per the LOI terms. The interest-free security deposit given to members may be forfeited or returned as agreed. It is better to record the discussion and the decision in writing.
The questions are answered by Sharmila Ranade, a legal expert associated with Mumbai Grahak Panchayat. The questions, in brief, may be sent to [email protected]
