A tripartite agreement is the principal legal document involving the buyer, seller, and bank. It’s the document required when a buyer goes for a house loan to purchase a home in an under-construction project. Tripartite agreements have been established to support buyers with acquiring loans for properties against the planned purchase of the estate. Since the apartment is still not in the name of the customer till possession, the builder is involved in the agreement with the bank.  In the leasing industry, tripartite contracts can be drafted between the lender, the borrower, and the occupant. These agreements typically state that if the owner is in breach of the non-payment clause of the loan agreement, the lender becomes the new owner of the property. Furthermore, the tenants will have to accept the mortgage/lender as the new owner then. The agreement also restricts the original owner from changing any clauses or provisions of the tenants.

How does it work?

According to experts, tripartite agreements have been established in assisting buyers with acquiring finance from lenders against the planned purchase of a house 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 buy a flat in the project. This agreement defines the status of all the parties involved in real estate transactions and keeps a watchful eye on all documents.

Tripartite agreements should include the particulars of the subject property and introduce an annex of all the original property documents. Also, trilateral contracts need to be relevantly authorized subject to the state where the property is established.

Details Needed

The following is required to be mentioned:

• 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
• Accepted common area amenities
• Penalty details if the booking is canceled

See Also: The benefits of land banking, for buyers and sellers