Understanding Tripartite Agreements in Home Buying
In many instances, after taking the plunge and making the decision to purchase a house now, the best option is to buy an under-construction property. There can be many valid reasons for this. You could be one of the first buyers and would want to benefit from the rising prices or you could be getting an attractive deal from the builder by pre-booking. Anyhow, if you’re planning to buy an under-construction property, you will need to sign a tripartite agreement.
What is a Tripartite Agreement?
As soon as you enter into an agreement with the builder of the under-construction property, you and the builder sign a tripartite agreement. This is a critical aspect that needs to be adhered to whenever you pre-book a home.
For starters, a tripartite agreement gets its name from the three people involved: the client who buys a home, the company that constructs the property, and the bank where the client gets a loan for that home. This agreement should be a mandatory step for buying a property which is still being constructed, and especially if the buyer is planning to borrow a loan from a lending institution.
The Importance of a Tripartite Agreement
A primary reason why home buyers need to sign a tripartite agreement is that they are not in legal possession of the property until such time as it is ready for occupation. It is only after the property has been completed and approved for occupation that the home buyer qualifies for the title deed.
This document ensures the dependence of the loan deed for a home buyer on a builder. It stipulates that in case the home buyer defaults in paying for the property purchased with a loan, the financial institution or the mortgagor acquiring the ownership of the property. A tripartite agreement serves the purpose of ensuring that all parties engaged in the home purchasing process and their specific roles are clear in the transaction.
Key Components of a Tripartite Agreement
Here is a list of all the information that a tripartite agreement should contain:
- The names of the involved parties such as those engaged in constructing the house, purchasing the house, and offering the financial loan.
- The purpose of borrowing the money and the respective property securing the home purchase loan.
- Rights and responsibilities of the parties concerned.
- Consequences that may arise if the terms of the agreement are breached.
- Views and rationale with regard to the home loan.
- The viewpoint of the actual developers, containing their anticipated date for selling the property.
- The viewpoint of the target house purchasers, containing the above-selling price.
- The rate of interest as in whether it is a floating rate or a fixed rate.
- The specifics of the EMI contract, that is the sum payment that is to be made.
- The schedule of standard facilities provided by the builder to the house purchasers.
- The detail of additional charges that the clients have to repose due to late cancellation of the booking of the house loan.
Benefits of a Tripartite Agreement
The most common and preferred practice on acquiring a property is a tripartite agreement. It makes it possible for the bank to do a proper due diligence review of the title before the property is sold by the builder for the interests of the client. It also heads off instances where the developer is free to disregard his or her legal responsibilities which is for the betterment of the would be client.
A tripartite agreement is a formal, legal and enforceable contract which as described covers the transaction linked with the purchase and sale of the house. It ensures that no one engages in fraudulent activities in relation to the process of buying a house.
Enact Your Rights When Signing a Tripartite Agreement
The first thing a buyer must keep in mind while signing the tripartite agreement is that it is a legal document. It will likely include clauses filled with a lot of legalese. So, it would be advisable for buyers to get in touch with a legal professional before signing such an agreement. Such legal counsel puts both the parties, the builder and the homebuyer who enters into a contract with the financial institution, in a clearer picture.
While entering into such agreements, one should always highlight any designations, restrictions, or conditions mentioned. This would help avoid losing track of these terms in case of construction delays and other issues related to the property.
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