Tripartite Agreement: Know Its Basics and Why It is Important

Like the Occupancy and Encumbrance Certificate, the Tripartite Agreement is also an essential part of home buying and this document is important to avail financial support from the bank. So, here are the things you must know about the Tripartite Agreement as almost every second home buyer look up to the financial institutions to get a home loan sanctioned within the minimum time possible:

Tripartite Agreement

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1. Concept of Tripartite Agreement:

This is a legal document that directly involves the buyer, seller and the financial lender i.e. the bank and this document is required particularly when a home buyer look to a avail home loan in order to purchase a property which is currently under construction. The aspiring homeowners are offered support with this legal document as the property is not transferred in the name of a home buyer until possession and hence the seller/developer is required to be included in the Tripartite agreement with the bank.

2. Importance of Tripartite Agreement:

The case is a bit different when the Tripartite Agreement is drafted under the Industry leasing. Here also three parties are involved and these are the owner, lender and the tenant. According to this agreement, in case the property owner tries to breach the non-payable clause of the home loan agreement then, the bank alias the lender comes into an active role automatically become the new property owner. With the change in ownership, the tenant has to accept the new owner and the new owner has no rights to reform the predefined clauses in the Tripartite agreement.

3. Purpose of Tripartite Agreement:

The basic purpose of this agreement is to offer support to the home buyer who looks for financial support from the bank to purchase a property from a developer. But, the builder should also take interest and must get into the Tripartite agreement as this legal paper clearly states the position of all parties including the seller, the buyer and the bank alias the lender.

Also, this agreement helps the bank to keep a track of all papers related to the property and can also have a record of transactions carried out between the buyer and seller. The Tripartite agreement should have the stamp of the state in which the property is located and should also have the details of property and original documents related to the same.

4. Essential Documents for Tripartite Agreement:

Here we are listing the documents important for making this agreement.

  • The parties to the agreement

  • The objective of the agreement

  • Rights and remedies of the parties

  • Legal mechanics

  • 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

This document must have the seller as a party with a clear title. Also, he/she should mention that the same unit or the property is not sold to any other party. It is also important to add the developer’s liabilities for the construction of the building as per the sanctioned plans of the local authority.

Read More :- Home Buyers: Know the Significance of Occupancy Certificate