When you buy an under construction property from a property developer and avail a loan from the lenders (banks), you may be required to sign an agreement. This is often referred as Tri-Party Agreement also known as Tripartite Agreement. This is one important piece of documents which most of us have overlooked and never read the fine print.
What is Tri-Party Agreement or Tripartite Agreement
A Tri-Party Agreement is an agreement between three separate parties. In the mortgage industry, a contract involving the buyer, the primary lender plus a developer. This type of contract is commonly used to secure bridge loans for the construction of a home or any other real estate.
Things to know about Tri-Party Agreement
While you have no control on the content of Tri-Party Agreement, it make sense to read the important clauses carefully and not to make any mistake.
1) You can not stop EMI in any case, even if construction has stopped
Irrespective of the stage of construction of the Project and irrespective of the date of handing over the possession of the residential apartment to the Borrower by the Builder the Borrower shall be liable to pay to Bank regularly each month the EMIs as laid down in the Loan Agreement to be signed by and between Bank and the Borrower.
2) Delayed disbursement by bank
In case there is any delay in payment of installment by the Bank or the Borrower/s, in either case it shall be treated as a default on the part of the Borrower/s, and the Borrower/s shall be liable to pay penalty to Builder on the delayed installment as per the terms of the Allotment Letter issued by the Builder.
3) No possession without registration of apartment
Builder shall not hand over the actual and physical possession of the said flat/residential apartment to the Borrower before execution and registration of the said deed and the original registered sale deed shall be submitted to Bank directly by the Builder to be kept by Bank towards security for the said loan.
In such cases, by taking fit-out possession, you are breaching the contract with your bank.
4) Default in EMI payments
In the event of default of repayment, shall on intimation by Bank cancel the allotment of the residential apartment in favour of the borrower and refund all monies to Bank directly under intimation to the borrower for appropriation and adjustment by Bank against all monies due to it from the Borrower as mentioned above.
These are some of the most common clauses from few Tri-Party Agreement analysed by us. Every bank has a separate format and may contain many more conditions.
We suggest that home buyers must go through their Tri-Party Agreement and read all the clauses carefully. It is best to stay informed and avoid unknowingly breaching the contract.