Every business, especially the real estate market, requires strong legal documentation to execute the deal and make it better and more effective. You should be aware of many things when you are buying a house. With the rapid growth of the real estate sector, legal documents play a very important role in the same sector.
The agreement between the builder and buyer, known as the builder-buyer agreement, is the most important document for home buyers. This buyer agreement safeguards your rights and contains all the necessary terms and conditions that both the builders and buyers have to meet from their ends. It also allows you to stand before a court of law if your rights get violated.
What is a Builder Buyer Agreement?
A builder-buyer agreement act as an agreement for sale between the builder and buyer which certifies that the concerned property is transferred in the name of the new owner and that the transfer is subject to mutually acceptable terms and conditions. The document holds clauses, peculiarities, annexures, and terms and conditions that the buyer agreed upon in the flat purchase agreement with the builder.
Before signing the document, the buyer should carefully read it as it protects the legal rights of the buyer. This agreement governs the entire sale of property and is drafted and executed at the time of the sale of an under-construction property.
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Builder-buyer agreement before RERA
RERA has brought a major change in the Indian real estate sector. Before the RERA Act, the interest of the homebuyers was not well protected. The agreement was inclined towards the real estate builders and developers. According to the pre-RERA builder-buyer agreement, an interest of up to 20 percent was levied on the homebuyer if they defaulted on the payment and the penal rate was as low as 2 percent if the builder or developers defaulted.
- Provision of price rise
The pre-RERA builder buyer agreement included a provision for a price rise. The builder used to raise the prices of the residential properties as and when they desired. When the project was being delayed, they raised the prices, mentioning a rise in the cost of construction materials.
- Construction time limit
In the pre-RERA regime, the agreement mentioned that the property possession would start from 36-42 months right from the date of start of construction. It wasn’t mentioned that the period started from the date of the flat booking. However, the starting date of construction and construction time depended on the builder’s discretion.
- Change in the area
The pre-RERA agreement draft also allowed for the change in the property area and charged the homebuyers. The homebuyers had to pay up to 15 percent more than the original price even if the super area increased. Despite having minimal benefits out of the increased area, this cost was borne by the homebuyers.
- No mention of the transfer charges
The transfer charges weren’t mentioned in the pre-RERA builder buyer agreement. Transfer charges were relevant when the owner sold the property to someone without taking its possession. As no charges were mentioned, the builders used to charge excessive transfer fees.
- Additional services on an actual cost basis
In the previous agreement, the builders habitually charged excessive prices for additional services. The homebuyers were asked to pay extra for services such as maintenance, security, clubhouse, gym, swimming pool and many more services. Moreover, there was no mention of the Preferential Location Charges in the agreement, but they were charged at the last moment.
Builder buyer agreement after RERA
The grievances of the homebuyers were addressed with the introduction and formation of the Real Estate Regulatory Authority (RERA) Act. The builder-buyer agreement was drafted and executed by real estate law because the previous agreement favored builders and was a key pain point for the buyers. In accordance with the RERA Act, the builder-buyer agreement, referred to as an agreement for sale in the Real Estate Regulation and Development Act, 2016, is an agreement agreed upon between the promoter and the allottee.
Here are some key provisions after RERA.
- The builder has to submit the proforma.
The Real Estate Regulation Act states that the builder must submit the proforma of the builder-buyer agreement sample along with the allotment letter and conveyance deed proposed to be signed with the buyers before the authority at the time of project registration.
- A guiding document
The estate regulation and development act also state that the builder will have to carry out the acts and responsibilities as guided by the clauses of the agreement. The agreement will act as a guiding document for the builder-buyer relationship.
- Earnest money clause
The builder cannot ask for more than 10 percent of the property’s value as the earnest money deposit at the time of signing the builder-buyer agreement. Both parties are liable to register this agreement legally so that it is binding.
What is the Supreme court judgment on the Builder Buyer Agreement?
On October 4, 2021, the Supreme court of India stated that the country must move towards a model Builder Buyer Agreement. The observation of the apex court termed the Builder Buyer Agreement as an important tool for protecting the interests of home buyers. All the stakeholders were encouraged by the Supreme Court to form a comprehensive sample proforma of the Builder Buyer Agreement under the Real Estate Regulation and Development Act, 2016.
Format of Builder Buyer agreement
The builder-buyer agreement contains every detail of the amenities and deliverables of the projects. It also contains the terms and conditions which will govern the cases of default by the parties involved. The builders are instructed to draft and execute the builder-buyer agreement with the provisions laid under the development agreement format under RERA. The document contains every aspect of the buyer-builder relationship with no scope for speculation or confusion.
The Builder Buyer Agreement contains details such as:
- Buyer name
- Developer name
- Property address
- Clauses related to buying
- Built up area
- Area of the flat
- Consideration for the property and services excluded, such as parking, maintenance, electricity charges, etc.
- Super built-up area
- Details of the amenities offered
- Cancellation charges
- Installment schedule
- RERA registration
- Refund policy
- Date of completion and possession
- Date of payment
- Mode of payment
- Buyers right to assign or cancel the property
- Any grace period, if taken by the builder
- Particulars of the property, such as clear title, fixtures, arbitration/jurisdiction clause
The builder-buyer agreement is not registered in many states. Hence, RERA sanctioned that at the time of booking, the home buyer should register the agreement for sale with 10 percent money.
The home buyer needs to pay the stamp duty once the movement happens. The fee paid at the booking time will be adjusted in the stamp duty charges. Since the clauses of the Builder Buyer Agreement are binding on the developer, this provision is home-buyer-friendly.
The builder-buyer agreement is a crucial legal document for any deal made between the buyer and the builder, along with the terms, conditions, liabilities and regulations. This document also defines your rights in case of any default to move to the court of law. It is the constitution for any deal which you should thoroughly read and understand before signing. You can also get the help of a property lawyer or an experienced professional to check the agreement. As a buyer, you should always be careful about the said document.
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Frequently Asked Questions
- Is the builder-buyer agreement mandatory?
The builder-buyer agreement should be registered and executed after the payment of the booking amount to safeguard the interest of the homebuyer,
2. What happens if BBA is lost?
If BBA is lost then the seller has to lodge a police complaint mentioning that the sale deed has been lost, make an affidavit to the same and also make a paper publication under the lost documents. With these provisions, you can still buy the property.
3. Is it possible to cancel the BBA agreement?
Yes, you can cancel the BBA agreement before registration. However, the registered builder buyer agreement will regulate the refund rules.