Legal Terrain for Stakeholders in an Integrated Tourist Resort Development
On December 27, 2020, the Maldives’ government introduced a legislative framework for integrated tourist resort (ITR) development as a separate tourism product in the Maldives. An ITR development is a project that combines a variety of tourism products including resorts, hotels, guesthouses, yacht marinas in a single project. This article explores the legal terrain for different stakeholders in an integrated tourist resort (ITR) development.
Developers and Investors
In ITR Development, there are developers and investors. The developer is the main sponsor of the project and the primary lessee of the project land. The developer designates different parts of the land for different products and creates categories of land for different ventures/industry subsets to be housed in that project.
The developer invites investors to be part of the project by allowing them to invest in individual subsets like a resort, tourist hotel, or tourist guesthouse, dive center, eatery/restaurant, retail shop, or any other service provided for tourists.
An ITR Development is awarded to the developer under an agreement with the MOT. The project agreement must identify the project land; lease period; construction period; lease rent; rent payment obligations; services to be made available at the project; proposed date of commencement of operation; treatment of breaches; events and consequences of termination; safety and security obligations; and functions relating to establishment and management of public utilities.
Specific statements must also be included: construction period will not invite any lease rent; developer will continue to bear lease rent payment obligations; and developer is also responsible for the establishment and management of public utilities and arrangement of insurance in respect of them.
The developer onboards the investor via an investment agreement. The following must be addressed in any investment agreement between a developer and an investor for an individual subset; lease period, lease rent and treatment of breach of agreement.
In addition, the investment agreement ought to contain certain statements, such as, the payment of lease rent for the project land will continue to reside with the developer; and that the project agreement with the MOT will take precedence over the investment agreement.
In addition to the investment agreement, the developer is to sign a management agreement with the investor. This agreement outlines details of services provided, how they are provided, rates charged by the developer from the investor, and rates charged from the tourists by the investor. The management agreement must be registered with the MOT.
Sublease of Rights
The developer can create a sublease of its rights to a third party subject to MOT approval in accordance with the rules relating to the grant of rights administered by the MOT. However, a sublessee may not be able to further sublease its sub-leasehold rights to another.
The sublessee will enjoy the same powers as those of the developer to engage investors for individual subsets and grant them rights in respect of their products–but subject always to MOT rules on the grant of rights.
Every investor will also be able to grant management rights to third parties in respect of the management and operation of their subsets.
The initial period for an operating license for an ITR Development is 20 years. If the lease period at the time of application for the operating license is shorter than 20 years, the license will be issued for the period remaining of the project agreement.
The operating license for the ITR Development will have to be obtained before the operating license for any individual subset can be processed.
Where a certain business (conducted by a subset of an ITR Development) requires an additional approval from a government agency (other than MOT), the MOT license for that business will be issued for the period consistent with the practice of those agencies.
The operating license may be terminated if the developer fails to cure a breach of agreement after being given at least 3 months to rectify it.
Read more about Designating and Awarding an ITR Development
Maldives Tourism (Tenth Amendment) Act [Law Number: 35/2020]
Integrated Tourism (Development and Operation) Regulations [Regulations Number:2021/R-64]
Tourist Resorts (Grant of Rights) Regulations [Regulations Number:2010/R-14] as amended
Own Terms: Project Agreement, Investment Agreement, Project Land, and Subsets are our own terms used in this article for ease of understanding only. Terms used in the law and regulations may differ.
Disclaimer: The article contains a general understanding of the relevant rules as they relate to ITR Developments on uninhabited islands and is meant for providing a general understanding of the subject for information purposes only. Certain details may have been omitted in the interest of brevity. It is requested that proper advice be sought in case of a serious examination of the applicable law and regulatory framework.
Version of the article originally published on Nasheeds Commercial Lawyers
Featured Image: CROSSROADS Maldives