Real Estate and Developer laws in Bangladesh : Rights and Liabilities:
The construction industry contributes significantly to the growth of our GDP. Co-developing land with a development business has proven extremely lucrative for urban landowners. This not only produces a substantial amount of revenue up front for landowners, but also allows them to develop the area without expending any money.
Due to the appeal of the actual contractual agreement, landowners sometimes neglect to conduct due diligence on the developer businesses, while new developer companies, in an effort to generate a rapid profit, also neglect to conduct due diligence on landowners.
Normally, the developer company reach an arrangement with the landowner who was willing to transfer building rights to the Real Estate Developer Company. In this area of Real Estate and Developer laws in Bangladesh, a number of contracts are established between landowners and real estate developers, regardless of whether they adhere to the Contract Act of 1872 or other pertinent legislation enacted by the government of Bangladesh for this subject. Without sufficient legal knowledge, landowners unknowingly encountered numerous challenges. Also, the number of disputes between the parties increases.
The government enacted the Real Estate Development and Management Act in 2010 to protect the interests of landowners against developers. In addition, the government has lately issued circulars mandating that developer companies receive REHAB registration, so insuring a particular level of quality and standard as per Developer laws in Bangladesh.
There are numerous Real Estate Developer Companies in Bangladesh that have constructed structures on landowners’ property with their approval. As a result, parties are entering into contracts to complete the necessary legal requirements. Disputes can emerge between the real estate developer and the landowner on their respective rights and liabilities.
Before entering into any kind of formal agreements, all parties must be informed of the applicable law pertaining to their respective responsibilities. This paper will examine the rights and responsibilities of the landowner and real estate developer vis-à-vis one another in light of the applicable laws, rules, and regulations in Bangladesh.
Real Estate and Developer laws in Bangladesh in 2023:
- The Constitution of Bangladesh; the Contract Act of 1872;
- the Real Estate Development and Management Act of 2010;
- the Real Estate Development and Management Regulation of 2011;
- the Specific Relief Act of 1877; the Arbitration Act of 2001;
- the Transfer of Property Act of 1882; the Registration Act of 1908;
- the Land Development for Private Residential Projects Rules of 2004;
- the Building Construction Act of 1952; the Building Construction Rules of 1996;
- the Town Improvement Act of 1953; the Private Residential Project Land Development Act of 1953; and
- the Private Residential Project Land Development Partnership-based Infrastructure Development (Flat Construction) on Public Land Rules, 2008; Bangladesh National Building Code, 2006; Trade Organizations Ordinance, 1961; etc.
Real Estate and Developer laws in Bangladesh and the structure:
Real estate matters are generally governed by the Real Estate Development and Management Act, together with all other applicable relevant laws.
According to this Act, “Real Estate” refers to land-based property established or developed for sale and purchase in the following real forms: residential, organizational, commercial plot, apartment flat, organizational, or mixed floor space. This Act applies only to private or mixed ventures, i.e. undertakings done by the landowner or developer on their own land, excluding government activities. In the case of joint venture assignments between the government and private development businesses, however, the following rule applies.
Essentials to know for Developer firms :
In order to publish advertisements in public media for the sale of any real estate, developer companies are required to include the following information: registration number, sanction number of the authorized plan with memo numbers, dates of such grants, etc. in their published prospectus or advertisements. It should be noted that landowners and developers do not have the power to commence or conduct construction work prior to securing design, allocation, and other required licenses from the relevant government entity.
Legal responsibilities of the landowner and real estate developer:
According to the laws of this country, the parties to the agreement must first understand their rights and responsibilities in order to conduct and finish all legal procedures amicably and without argument or difficulty. However, if a dispute arises, the parties to the contract, such as the landowner, developer company, etc., have the option of resolving the disputed issues amicably; if this is not possible, they have the option of resolving the dispute through arbitration; in this case, the decision of the arbitration tribunal is binding on the parties.
Alternatively, if none of the parties are prepared to present and resolve their disagreement before the arbitration panel, they have the alternative of proceeding to the competent court to resolve their dispute.
Rights and responsibilities of the Property Owner:
Transfer of the required documents:
The landowner has the right to get all required property documents from the developer company, and is obligated to submit all required documents to the developer company in accordance with the agreement and the laws of the nation. Additionally, the landowner must sign the power of attorney in favor of the developer business.
Damages in the event of a delay:
In accordance with the REHAB code of conduct, the landowner and the developer business must form a mutual agreement that entitles the landowner to rental compensation that will be paid on a monthly basis by the developer company in the event of a developer delay.
Transfer of ownership:
According to the provisions of the contract, the landowner must transfer possession of the land to the developer business for the purpose of its development. In addition, upon completion of the real estate development, the corporation is obligated to transfer ownership of the designated share of the property to the landowner.
Punishment for tardiness:
According to Bangladesh’s Real Estate Development and Management Act, if a landowner delays the handover of possession of a property or cancels a power of attorney executed in the name of a developer company without giving 30 days’ prior notice, he or she will be subject to a maximum fine of BDT 10 lacs and/or two years in prison. Alternatively, if the developer firm is responsible for the delay in handing over possession, the landowner is legally entitled to compensation under the terms of the agreement and the laws of this country.
Legal right to sue the developer and Real Estate and Developer laws in Bangladesh:
Depending on the circumstances, if a real estate dispute arises between the landowner and the developer company, the aggrieved landowner may file a suit for specific performance of the contract against the developer company for various matters done in breach of contract, such as continuous delay in development of the land, possession of the allotted property, etc. (Real Estate and Developer laws in Bangladesh)
In addition, the landowner may submit a writ under the Constitution in order to get the desired remedy if no other equally effective remedy is available under the law of this country.
Rights and responsibilities of the Developer:
Formation, enrollment, and membership for Developer laws in Bangladesh:
First and foremost, all developer companies are required to be formed and registered with the relevant government authorities, i.e. RJSC etc., in order to conduct business in Bangladesh; failure to do so would result in imprisonment of two years or a fine of ten lacs BDT, or both. If a developer begins work on a real estate project without authorisation from the proper authorities, the punishment is the same as previously stated. In order to be recognized as legally valid in Bangladesh, developer businesses must also obtain membership from the proper authorities, such as REHAB.
Transfer of the required documents for Developer laws in Bangladesh:
In accordance with the terms of the agreement, the developer must give the necessary documentation to the landowner and purchasers at the time of turning over the portion of the property ensuring other services and advantages, such as parking, telephone, water, and gas. Similarly, the landowner is required to supply the developer with the essential paperwork for the development of the land. In addition, the development business is required to deliver the property’s deeds, including the sale deed, registration, etc., to the buyer within three months after the buyer’s payment.
Carrying out deeds and Developer laws in Bangladesh:
If no power of attorney was executed by the landowner in favor of the developer company for the purpose of executing sale deed and completing registration in favor of the purchaser of the developer’s portion of the property, then the landowner is required to execute the deed in favour of the purchaser within 15 days of receiving written notice from the developer company. Nonetheless, if the landowner fails to comply with the aforementioned notice, the developer firm will be allowed to finish the sale deed as if it were the landowner and will also be able to complete the registration.
Repair and upkeep obligations and Developer laws in Bangladesh:
It should be noted that if repairs are necessary due to construction problems after handover, the developer will pay for the repairs for at least two years from the date of handover. In addition, according to the conditions of the agreement between the parties, each developer must maintain the property for at least one year following the transfer.
Transfer of ownership:
The landowner must surrender possession of the property (land, etc.) to the developer business in order for the estate to be developed. Similarly, the developer company is obligated to transfer possession of the allotted portion of the real estate, i.e. apartment, plot of land, etc., to the landowner(s) within the time agreed upon in the deed of agreement between the developer company and the landowner(s) in accordance with the Real estate development and management Act of this country.
In the event of a delay in handing over possession to the landowner, the developer company is obligated to pay rental compensation in accordance with the agreement between the developer company and the landowner, with the following exceptions: natural disaster, political unrest, unusual rise in prices of building materials, delay in obtaining utility connection from the appropriate authority, or other force majeure.
Consequences for the developer business for specific actions:
If the developer business mortgages real estate without the buyer’s approval, it will risk imprisonment for one year or a fine of up to five lakhs Bangladeshi taka, or both.
In addition, if the real estate company uses substandard materials or if the proper quality and quantity of materials are not used for construction, or if the real estate construction was made outside of the approved design, or if the real estate was not sold to the owner without his knowledge as promised, then the developer company is subject to imprisonment for a term not to exceed three years or a fine not to exceed twenty lakhs, or both.
In addition, in the event of a breach of contract between the developer company and the landowner for the following, i.e. intentional delay of development work without payment of compensation, refusal to hand over the property, etc., the developer company will be subject to the following penalties, i.e. a fine not exceeding BDT twenty lacs and/or two years in prison, etc.
Moreover, if the services or facilities, i.e. water, gas, electricity, etc., promised in the prospectus by the developer company during the handover of the portion of the property, i.e. flat, etc., were not provided, the developer company would be subject to a fine of less than BDT 5 lakh and imprisonment for less than one year.
Right to file a lawsuit against a property owner:
According to the rules in effect in this country, as a legal person, the developer business has the right to launch a lawsuit against the landowner if it is the aggrieved party in any real estate issue and Developer laws in Bangladesh.
We will attempt to provide useful information for landowners who enter into a building contract with a real estate developer company as per Developer laws in Bangladesh.
1.Joint Venture Agreement:
The Joint Venture Agreement is typically the first document signed between the Landowner and the Developer following protracted negotiations. This Agreement stipulates the Developer’s and Landlord’s share percentages, the timetable, the advance payable, and the penalties for delays. The Landowner is obligated to sign and execute this Agreement under section 10 of The Real Estate Development and Management Act of 2010. It is not required by law to register this Agreement.
- Power of Attorney:
Section 10 of the Real Estate Development and Management Act of 2010 mandates that the Landowner complete a Power of Attorney in favor of the Developer. This will enable the Developer to submit an application to RAJUK/ CDA for approval of the layout plan, execute sale agreements with third-party purchasers, and do other required tasks.
3. Formalities of the Contract Act of 1872:
The contract between the landowner and the real estate developer must comply with section 10 of the Contract Act of 1872, which addresses the essential elements of a valid contract.
- Written contract:
The transfer of land to a real estate developer must be documented in writing with mutual consent from parties that are legally able to contract under the Contract Act of 1872 and have no fraudulent intent. The contract must contain the terms and conditions of the agreement. Add to the contract the consequences for contract violation.
5. Real Estate Development and Management Act of 2010,:
According to section 15 of the Real Estate Development and Management Act of 2010, the transfer has been delayed. In the event of a delay in the handover of the assigned portion of the apartment/plot of land, the landowner is entitled to compensation as stipulated in the deed of agreement between the land developer and land owner. Also, the landowner will be entitled to rental compensation in accordance with a mutually agreed-upon, written contract.
- Delay by Landowner –
Pursuant to Section 28 of the same Act, if the Landowner fails to hand over possession of the land to the developer in accordance with the terms of the contract, the Landowner shall be subject to a fine of up to Tk. 10 lacs and/or imprisonment for up to 2 years. Also in accordance with Section 29 of Chapter 36 of the Real Estate Development and Management Act of 2010, the Landowner will be subject to a fine and/or jail if he revokes the Power of Attorney executed in favor of the Developer without giving 30 days’ notice.
- Dispute Resolution:
According to section 36 of The Real Estate Development and Management Act of 2010, in the event of a problem between a landowner and a developer, the parties will make an initial attempt to resolve the dispute amicably. Nonetheless, if such an endeavor fails, the 2001 Arbitration Act shall control the resolution of the dispute.
Transfer of due portion as per Developer laws in Bangladesh,:
According to section 30 of The Real Estate Development and Management Act, 2010, if a land developer fails to transfer the possession of the due portion of real estate to the land owner in accordance with the terms of the contract between the land developer and the land owner, the land developer shall be punished by imprisonment for a period not to exceed two years or a fine of Tk 2,000,000 or both.
The landowner may initiate a suit for specific performance of contract under the Specific Relief Act 1877 against the developer business in order to obtain ownership of the allotted apartment/plot of land. The landowner may submit a writ against the Ministry of Commerce under Article 102 of the Constitution, with the registering authority of the developer company and the developer firm as additional respondents.
Both landowners and developers should discuss the provisions of the developer agreement with care to prevent future disputes. Special consideration must be paid to the potential delay and handover of such projects, since the developers may incur criminal liability. Also, landowners should be wary of proposals that are excessively profitable compared to market rates.
Are you intending to get into real estate scene in Bangladesh or wants to know more about Developer laws in Bangladesh?
The legal team of Tahmidur Rahman, The Law Firm in Bangladesh: TRW, The Law Firm in Bangladesh are highly experienced in providing all kinds of services related in regards to Developer laws in Bangladesh. For queries or legal assistance, please reach us at:
E-mail: [email protected]
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