A tripartite agreement effectively states the relevant details of a housing loan or leasing transaction in an under-construction project. Here’s an analysis of what it entails.
Buyers investing in under-construction properties invariably need to sign tripartite agreements while getting into a contract. Since there's a financial organization also involved within the process, there are a complete of three parties in such an agreement, which provides it this name.
What is a tripartite agreement?
Terms and conditions of property deals, where a financial organization is additionally involved aside from the customer and therefore the seller typical, are laid under a special legal instrument, legally referred to as a tripartite agreement.
A tripartite agreement has got to be signed by these three parties, when a buyer opts for a home equity credit to get a house in an under-construction project.
“Tripartite agreements are established to help buyers with acquiring loans for properties against the planned purchase of the property. Since the home/apartment remains not within the name of the customer until possession, the builder is included within the agreement with the bank,” states Rohan Bulchandani, co-founder and president, land Management Institute™ (REMI) and therefore the Annet Group.
“In the leasing industry, tripartite agreements are often drafted among the lender, the owner/borrower and therefore the tenant. These agreements usually state that if the owner/borrower is in breach of the non-payment clause of the loan agreement, the mortgager/lender becomes the new owner of the property. Furthermore, the tenants will need to then accept the mortgager/lender because the new owner. The agreement also restricts the new owner from changing any clauses or provisions of the tenants,” adds Bulchandani.
How do tripartite agreements work?
According to experts, tripartite agreements are established with a view to help buyers with acquiring finance from banks against the planned purchase of a home from a developer.
“As per the law, any developer who builds a housing society must enter into a written tripartite agreement with every buyer who has already purchased or is close to purchase a flat within the project,” explains Vijay Gupta, CMD, Orris Infrastructures. “This agreement clarifies the status of all the parties involved in land transactions, and keeps a watchful eye on all documents,” he says.
Tripartite agreements should contain the particulars of the topic property and include an annex of all the first property documents. Also, tripartite agreements got to be relevantly stamped subject to the state where the property is found.
Details mentioned in tripartite agreements
According to Bulchandani, tripartite agreements need to carry all the knowledge mentioned below:
Names of the parties to the agreement
The objective of the agreement
Rights and remedies of the parties
The borrower’s perspective
The developer’s perspective
Agreed asking price
Date of possession
Stages and therefore the progress details of construction
Interest rate as applicable
Equal monthly installment (EMI) details
Agreed common area amenities
Penalty details if the booking is cancelled
The tripartite agreement should represent the developer or the vendor stating that the property features a clear title. Furthermore, it should also mention that the developer has not entered into any new agreement for the sale property with the other party. As an example, the Maharashtra Ownership of Flats Act, 1963, requires full disclosure from the seller/developer to the customer on all details as relevant to the purchased property. The tripartite agreement should also contain the developer’s liabilities to construct the building as per the approved plans and specifications sanctioned by the agency.
Word of caution
Terms and conditions mentioned in such agreements might be complex and thus, could be difficult to know. It’s advisable that the buyers seek the help of legal experts, to seem into the document. Not doing so might cause complications in future, especially just in case of a dispute, or projects delays.