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What is a tripartite agreement and how does it work?

Terms and conditions of property deals, where a financial institution is also involved apart from the buyer and the seller typical, are laid under a different legal document, legally known as a Tripartite Agreement.

A tripartite agreement has to be signed by these three parties — thus earning the document its name —when a buyer opts for a home loan to purchase a house in an under-construction project.

“Tripartite agreements have been established to assist buyers with acquiring loans for properties against the planned purchase of the property. Since the home/apartment is still not in the name of the customer until possession, the builder is included within the agreement with the bank,” states Rohan Bulchandani, co-founder and president, Real Estate Management Institute™ (REMI) and The Annet Group.

“In the leasing industry, tripartite agreements can be drafted among the lender, the owner/borrower and 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 have to then accept the mortgager/lender as 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 have been established with a view to assist 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 about to purchase a flat in the project,” explains Vijay Gupta, CMD, Orris Infrastructures. “This agreement clarifies the status of all the parties involved in real estate transactions, and keeps a watchful eye on all documents,” he says.

See also: Can RERA overturn ‘forced consent’ agreements procured by builders for changing project plans?

Tripartite agreements should contain the particulars of the subject property and include an annex of all the original property documents. Also, tripartite agreements need to be relevantly stamped subject to the state where the property is located.

Details mentioned in tripartite agreements

According to Bulchandani, tripartite agreements have to carry all the information mentioned below:

  • Names of the parties to the agreement
  • The objective of the agreement
  • Rights and remedies of the parties
  • Legal implications
  • The borrower’s perspective
  • The developer’s  perspective
  • Bank/lender’s perspective
  • Agreed selling price
  • Date of possession
  • Stages and 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 seller stating that the property has a clear title. Furthermore, it should also mention that the developer has not entered into any new agreement for the sale property with any other party. For instance, the Maharashtra Ownership of Flats Act, 1963, requires full disclosure from the seller/developer to the buyer 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 local authority.

FAQs

What are the key details mentioned in tripartite agreement?

A tripartite agreement means the role and responsibilities of all parties concerned apart from the basic information about them.

Why is tripartite agreement important?

This document states the obligations and responsibilities of all parties involved in the property purchase deal.

What do tripartite agreements contain?

Tripartite agreements should contain the particulars of the property and include an annex of all the original property documents.

What kind of property deal requires tripartite agreements?

Tripartite agreements are generally signed to purchase units in under-construction projects.



This post first appeared on Get All Real Estate Market Trends With In-depth Market Research, please read the originial post: here

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What is a tripartite agreement and how does it work?

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