Real estate investment has always been lucrative and considered to be a long-term investment but this sector has created a magnetic field after the masses faced the drastic corona Period. With salary cuts and job losses, paying the rent had become the worst part of life during that period. So, many wished to own a home so that it would serve as a shelter as well as security during tough times. With an incredibly low rate of interest on home loans, these people have climbed the bandwagon of purchasing a new home and becoming the first-time homebuyers. To take a home loan, to buy an under-construction property, one should know a few terms and the most important one is ‘Tripartite Agreement’. Here is everything that you should know about a Tripartite Agreement.
1. What is Tripartite Agreement
Usually a buyer and a seller are involved when there is a deal of a property, i.e. only two parties, but in some cases, a seller wants to sell an under construction property and a buyer wants to buy it but he needs a bank loan for the same. In such conditions, three parties get involved, a buyer, a seller and a bank. A principal legal document that involves all these three parties is called a Tripartite Agreement. The seller can also be the builder of the project. This agreement is very important when you are buying an under-construction property. It protects the interests of home buyers and also affirms that if the borrower defaults on the loan, the property will be transferred to the lender and the builder must accept the new owner.
A Tripartite Agreement includes the roles and responsibilities of all the three parties concerned, in addition to the basic information about them. It has all the particulars of the property and an annex of all the original property documents. This type of agreement is usually created to purchase units in under-construction project. You should know everything about a Tripartite Agreement before you invest in an under-construction property.
2. How Does It Work
Tripartite Agreements helps homebuyers in obtaining finance or loan from banks for a planned purchase of a home from a developer. Any developer who constructs a housing or residential project has to enter into a written Tripartite Agreement with those homebuyers who opt out for a loan in this purchase. A Tripartite Agreement will hold all the particulars of the said property and an annex of all the original property documents. This legal document has to be stamped depending on its location in a particular state.
3. Advantages of Tripartite Agreement
This agreement helps in applying for home loans. The third party or the bank that is facilitating the loan, can go for the legal checks before going for the agreement. There are a number of advantages of making a third party as a party to the Tripartite Agreement. Though the third party is not directly related to the agreement, it remains aware of the transaction. The agreement also implies that there is no due payable by the seller to the third party. The legal heirs and successors of the third party have no say in the agreement and cannot challenge the said transaction.
A Tripartite Agreement helps in applying for home loans and also gets the legal checks done for the property. When the bank gets the documents from the seller and the buyer, it performs investigation on the illegality of the property. Hence, the Tripartite Agreement adds a safety net to the project in which the homebuyer is investing and helps in eliminating fraudulent practices. The Tripartite Agreement for home loan includes all the information related, to the said property which includes the sale price, the EMIs to be paid, the interest rate at which the home loan is taken etc.
4. When is a Tripartite Agreement Useful
A Tripartite Agreement is essential when a flat or an apartment from a registered society is being sold. It is also useful in a situation where a flat is bought from a builder and till the time of resale, a society is not formed. A Tripartite Agreement also comes handy when there is any encroachment, charge, etc. on any property, such as house, land, farm, etc. If the society plays the role of the third party, to a Tripartite Agreement in the transaction of a flat or an apartment or a villa, then the society confirms the transaction. This confirmation also announces that the society has no objection to transfer the flat in the name of the buyer. A builder can also be made a third party in the Tripartite Agreement.
5. Conclusion
A Tripartite Agreement is a legal document or an agreement among three parties or individuals – the homebuyer, the developer or the seller and the bank or the lender who lends the loan. It effectively states the relevant details of a housing loan or leasing transaction in an under-construction project. This agreement will be signed while entering into a contract in an under-construction property. As three parties are involved in this process, it got the name as Tripartite.
This agreement explains about the status of all three parties who are involved in that particular transaction and scrutinizes all the documents. It also has the record of the stages or phases of construction, the final sale price, common area amenities, date of possession, details of EMI, etc. The legal process, known as subordination is also mentioned in this agreement. It says to whom, how, and when, the various agreements in the property are transferred among the three parties. The property in transaction should have a clear title and the developer should not enter into a new agreement with another party for the sale of the same property. The agreement should also include the developer’s liabilities to construct the building according to plans and specifications approved by the local authorities.
A Tripartite Agreement is that legal document which involves three parties, the homebuyer, the bank, and the seller and mostly this agreement is created to purchase an asset in an under-construction project. Now you are ready to purchase a property as you know everything about this type of Agreement.
Written by Nikhil Gattu
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Written by Nikhil Gattu
