Community Benefits Agreement

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Community Benefits Agreement

A Community Benefits Agreement or a CBA is nothing but a deal between real estate developers and the residents of the community. This agreement is used to address community needs. These community needs include amenities, maintenance, provision of utilities, essential services, etc. Such agreements are essential as they help community bodies have a say in how their community is run and built. Such agreements also help in preventing the developer from retracting on his promises.

A CBA is not produced in a day. Both parties sit together and negotiate. It is the product of a long negotiation. Parties to this negotiation are the developer and the residents. Examples of community projects which use a community benefit arrangement are many.

Parties Involved in the Community Benefits Agreement

Following parties are involved in a Community Benefits Agreement:

  1. Real estate developer: The real estate developer is a party to the agreement. He is the person who has built and developed a community project.
  2. Communities bodies: Community bodies are also a party to the agreement. These are resident welfare bodies. Sometimes resident representatives are also made parties.
  3. Facilities management companies: Facilities management companies provide maintenance services. They are hired by the developer. Sometimes, they too become parties to CBA.

Purpose of the Community Benefits Agreement

Following is the purpose of the Community Benefits Agreement:

  1. To encourage the greater role of the community members.
  2. To create a planned body within the community.
  3. It helps community members put forward their demands.
  4. To have a written document assuring both the parties, their rights, and obligations.
  5. Have an agreement in writing.
  6. To prevent the developer from going back on his promises.

Contents of the Community Benefits Agreement

Following are to be included in a well-drafted Community Benefits Agreement:

  1. Parties to the Agreement: The parties to the Agreement should be clearly included in the CBA. Certain people may represent the community. These chosen elects can also be parties. RWAs or other such bodies can also become parties.
  2. CBA definition: CBA definition may be included in the Agreement.
  3. Date of entering into Agreement: The date on which agreement began needs to be included.
  4. Commitments: A CBA should clearly reflect the builders’ promises. Promises such as protection against environmental pollution, access to clean drinking water, etc. should be aptly captured.
  5. Purpose: The purpose of the CBA should also be included.
  6. Details of community bodies should be included. The division of duties among the developer and the resident bodies needs to be mentioned in the Agreement.
  7. How are the commitments going to be implemented: Builders make certain promises. The coming into effect of these promises is important. The same cannot happen without a plan. Hence, a practical plan which contains both parties’ views should be included.
  8. Governing Laws: The CBA should capture the governing law to the Agreement. This is the law which will bind both the parties to the Agreement.

How to Draft Community Benefits Agreement? -Points to Be Considered

Following important points are to be considered while drafting a Community Benefits Agreement:

  1. Details of Parties: Names and addresses of both parties need to be included. If there are any other parties, their details should also be included. Other parties include: resident body elects, FM bodies, and other such bodies.
  2. Date of starting of Agreement: The start date of the agreement should be included. If there is an end date that too should be mentioned, the beginning date is important. Residents can later allege default based on the start date.
  3. Affordable Housing: Affordable housing is an important clause. The builder should commit to affordable housing. This is to further economic growth. It also acts as a welfare measure. It is important to be included in order to prevent the developer from charging exorbitant prices.
  4. Typically, provision for diverse communities should also be made.
  5. Commitments should always include commitments towards environmental protection. It is vital that residents have in-built protection against environmental hazards.
  6. Noise pollution: Protection mechanisms against noise pollution should also be included.
  7. There may be certain dangers, such as a fire. Every community needs to be protected against such dangers. Adequate protection against the same is required.
  8. A procedure for complaint should be properly outlined.
  9. Applicable Laws: All agreements are subject to laws. It is vital that applicable laws be included.

Negotiation Strategies

Following negotiation strategies to be kept in mind while entering into a Communities Benefit Agreement:

  1. Commitments: Promises made by developers are a good negotiation point. Residents should not give in easily. Residents should increase the scope of promises. Wider the promises, better it is.
  2. Term: The CBA can be fixed or open-ended. A fixed CBA may be more beneficial for the developer. An open-ended CBA is favorable to the residents. The residents should argue for the longer and open-ended term of a CBA.

Benefits and Drawbacks of the Community Benefits Agreement

Following are the benefits of the Community Benefits Agreement:

  1. Inclusiveness: The CBA ensures that communities are heard. It also ensures that their concerns get heard at the right forum. They make the residents a part of the community. They, too, can control the developer. It makes them feel included.
  2. Transparency: The CBA ensures that a clear regime exists between the developer and the resident/community. Everything is included in writing. This avoids the need to go back. It also helps in filing claims.
  3. Unification: CBA brings people closer. People unify for a common cause.
  4. Efficiency: CBAs help people negotiate. They are efficient instruments of negotiations between communities and developers.
  5. Enforceability: CBAs ensure that the promises made by the developer are legally enforceable.

Following are the drawbacks of the Community Benefits Agreement:

  1. Insufficient or poor organization: If the CBAs are not managed properly and lead to a poor community organization, then this may have an adverse outcome. In such a case, residents will not be able to have their grievances addressed.
  2. Legal expenses: Drawing up a community benefits agreement is a complex task. One needs to know which commitments to include. One also needs to understand how to structure liabilities. Clarity should also be there regarding what should be the enforcement mechanism. Hence, it is imperative that an attorney is hired by the community to draft the same. This may lead to legal expenses. This is excluding the several rounds of negotiations that the community members may need to engage in.
  3. Lack of experience: Legal documents filled with technical jargon are not very easy to read(1). Residents may not be very comfortable with the same. Many people may not want to comment on the developers’ role negatively. This is because individuals do not want to interfere in a community issue. This may pose an issue in bringing together people as one party.

What Happens in Case of Violation?

Following remedies are available in case of breach of Community Benefits Agreement:

  1. Damages: In case of breach of contract, the parties may sue each other for damages suffered by the parties.
  2. Recession: The parties may rescind the contract in case the terms of Agreement is found to be breached by the party.
  3. Injunction: The parties may also seek injunctive relief(2).

The Community Benefits Agreement is an effective way of bringing together residents of communities. It is a good way of enhancing their participation in community development. If the residents themselves have been part of a process right from the beginning, then they will feel more a part of it. This is better than a pre-prepared agreement imposed upon them. It also increases cohesiveness and raises awareness among communities regarding their rights. They also learn how they can get the rights enforced.

On the other hand, a community benefits agreement prevents a developer from misusing his authority. The community benefits agreement is the product of a long and tedious negotiation process. This shows that community members are aware and willing. A CBA can be effective if the following is done:

  • Efficient monitoring pertaining to the implementation of commitments contained in the CBA by the community members.
  • I am spreading awareness among residents about community issues.
  • Designating observers and advisors who may help in the efficient functioning of CBAs.

[Also Read: Road Maintenance Agreement]