Tri-Party Agreement in home loan process

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.

Sample Tri-Party Agreement agreements: HDFC Tripartite Agreement  Axis Bank Tripartite Agreement

Conclusion

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.

9 thoughts on “Tri-Party Agreement in home loan process

  • October 13, 2015 at 2:32 am
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    Thanks Team. Appreciate your awareness articles being shared from time to time.
    Wish you great success ahead.
    Regards,

  • February 8, 2016 at 2:07 pm
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    i have one question, the original copy of the developer & purchaser is lost. but the bank is having its original copy with them. In this case what is to be done. Builder is refusing to issue NOC for registration of flat without his copy of TPT agreement. What to do in this case. Can you please suggest the solution.

  • February 8, 2016 at 8:07 pm
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    Ajay,

    Your question is not clear to us, could you please add more. Is the copy of Builder Buyer Agreement lost or the TPT?

    In either case, you can ask the bank to provide you true certified copy of the originals.

    You can contact us at connect@thelogicalbuyer.com

  • April 4, 2016 at 8:34 pm
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    my account is NPA from April 2015 and pending amount was 3.21 lac but paid around 2lacs but failed to pay all pending balance now bank is forcing builder to cancel flat by tripartite agreement plz suggest what to do?

  • April 5, 2016 at 12:26 pm
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    Try to negotiate with bank and find an amicable solution. Bank can probably also use SARFAESI Act and take over the property.

  • May 4, 2016 at 8:52 pm
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    Hi Sir,

    I have transferred my loan from LIC to HDFC and somehow lost the Tri Party Agreement (TPT) which was given to me by the LIC. Now HDFC is asking for old TPT, what option I have on this case.

    Thanks,
    Ritesj

  • May 5, 2016 at 11:41 am
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    You should speak to the officials and try giving declaration on affidavit that it is lost. Try to procure a copy of the same from LIC.

  • May 24, 2016 at 6:55 pm
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    Who signs first the TPT – builder or bank ?

  • May 24, 2016 at 8:50 pm
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    Buyer than builder and than bank.

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