Things to be aware in Builder – Buyer Agreement

A builder-buyer agreement is a document which specifies the modalities, conditions and clauses between a builder and a homebuyer. The builder-buyer agreement contains clauses referring to the property in question, delivery information, and terms relating to default and late project delivery, among other things.

At one point, delayed real estate projects affected the Indian real estate market, causing buyers’ money to become stuck in such incomplete projects. There was no effective recourse or process in place for unhappy homebuyers prior to the implementation of RERA. However, one document that safeguards the rights of homebuyers and guarantees that the delivery is in accordance with the agreed terms and conditions is the Builder Buyer Agreement.

The importance of the Builder Buyer Agreement has increased in light of the Supreme Court’s instruction to draft an agreement that complies with the Real Estate (Regulation and Development) Act, 2016.

What is a Builder Buyer Agreement?

The “Agreement for Sale” is actually a “Builder Buyer Agreement.” According to the Builder Buyer Agreement, the property in question is officially transferred into the name of the new owner, subject to a set of conditions that both parties can agree to. The entire property sale is governed by the Builder Buyer Agreement. It contains provisions, annexures, terms, and unique details regarding the sale or transfer of property.

The Builder Buyer Agreement (BBA) typically includes the following information:

  • The buyer’s name
  • The developer’s name
  • Address for the building
  • Purchase-related terms
  • Area of the apartment
  • Super built up area
  • Built up area
  • Information about the services offered
  • Parking specifics
  • installment plan
  • Fees for cancellation, etc.

It is a comprehensive document that may span several pages.

Things to check in the Builder-Buyer Agreement

 Here are the top things you should keep an eye on when checking your Builder-Buyer agreement:

  • Certificate of Completion

The developer is required to provide you with a completion certificate for your home whenever you take possession of it. This certification that the housing unit complies with the approved plan is made by the municipality or other appropriate authority. In order to register your property and obtain additional facilities, you must have this certificate. Your agreement should include a provision for the completion certificate. If it isn’t there, make sure to get it added; specifically, the contract should contain a condition requiring the builder to provide you with the completion certificate once your housing unit has been delivered.

  • Possession

Read the terms regarding delivery and possession of your rental property. Be extremely cautious if the agreement has language stating that the delivery must be made within a specific timeframe, such as 100 days from the start of construction without a set date. Make sure the contract specifies a specified possession date by which the builder will have to compensate you. Another provision that ought to be included in the contract is this one.

  • Building Plan

Without the customers’ express written consent, builders are not permitted to alter the plans for any project. Verify the contract for any such provision and ensure that the builder requests your permission before making any changes to the building plan.

  • Indemnity Clause

This is a crucial element because it provides security and protection for the builder against any financial losses or burdens in the event of a legal issue or dispute involving the property. Make sure the contract contains a clause specifying that the seller would compensate the buyer for any losses they may suffer as a result of any such legal concerns. The going rate in the market should be used to determine compensation.

  • Opting Out

The homebuyer should always have the option to back out of the purchase agreement in specific circumstances without incurring any penalties or fees. Let’s say that before the sale deed is signed, the builder fails to produce the appropriate paperwork you require or there are any legal or title problems. Buyers should have the option to back out of such transactions. The Builder-Buyer agreement needs to make this point very clear.

Builder Buyer Agreement before RERA

The Builder Buyer Agreement was severely biased in favour of real estate developers and builders previous to the RERA Act, which did nothing to protect the interests of consumers.

In accordance with the pre-RERA Builder Buyer Agreement, if a homebuyer misses a payment, the interest of up to 20% will be assessed against them. However, the penalty rate was only 2 per cent if the builder or developers were in default.

  • Construction Time Limit

According to the pre-RERA Builder Buyer Agreement, possession of the property would begin 36 to 42 months after construction began. Nowhere in the paperwork was it stated that the time period began on the day the apartment was reserved. Additionally, the builder’s discretion determined the duration of construction and the day it began.

  • Price Rise Provision

The Builder Buyer Agreement had a provision for price increases in the pre-RERA era. The cost of the residential units could be raised at any time by the builders. The builders used to boost the prices regardless of project delays, blaming an increase in the cost of building supplies.

  • Area Change

The pre-RERA agreements taxed the homebuyers and permitted changes to the property’s location. The homebuyers had to pay up to 15% more than the initial price, even though the super area increased. Even though they received no advantage from the larger region, the homebuyers were responsible for covering this charge.

  • Additional Services on Actual Cost Basis

The builders had a history of charging high charges for additional services before the implementation of RERA. For services like the clubhouse, security, maintenance, swimming pool, and other such services, the homebuyer had to pay a premium. Additionally, the Builder Buyer Agreement used to not mention Preferential Location Charges (PLC), but the homebuyer was suddenly charged for these.

  • No Mention of Transfer Charges

In the previous arrangement, the Builder Buyer Agreement (BBA) had no mention of the transfer charges. Transfer charges were applicable when the owner sold it to someone without taking possession. As no mention of the charges was there, the builders used to charge exorbitant transfer fees.

Builder Buyer Agreement after RERA

Homebuyers’ complaints have been effectively handled since since the Real Estate Regulatory Authority was established and the RERA Act was introduced. The builder-friendly Builder Buyer Agreement issue has been resolved by the law, which has simplified the Builder Buyer Agreement. The RERA act aims to be an all-inclusive document that takes into account the needs of all stakeholders. The Builder Buyer Agreement is a contract between a promoter and an allottee that has been approved in compliance with the RERA Act. The major elements of the Builder Buyer Agreement following the implementation of RERA are listed below.

  • Proforma Submission by Builder

When registering a project, the builder is required by the RERA Act to present an example proforma of the Builder Buyer Agreement (BBA) to the authorities. According to the Act, the real estate developer must

  • Earnest Money Clause

In contrast to the past, the builder is no longer permitted to demand an earnest money deposit that is greater than 10% of the residential unit’s overall cost. The legal registration of this agreement is the responsibility of both the builder and the homebuyer to make it enforceable.

  • A Guiding Light

The RERA Act says that the Builder Buyer Agreement (BBA) will act as a guiding light for the builder-buyer relationship. The acts and deliverables will be guided by the clauses of the Agreement.

Supreme Court Ruling on Builder Buyer Agreement

The Supreme Court of India recently stated that the nation needs to move to a common Builder Buyer Agreement (BBA). The Builder Buyer Agreement was considered by the top court to be an important tool for protecting homebuyers’ interests. The Supreme Court urged the parties to create a comprehensive proforma of the Builder Buyer Agreement in accordance with the RERA rules.

In conclusion, the Builder Buyer Agreement (BBA), which is legally obligatory on the real estate developer, is a crucial instrument governing the interests of homebuyers. The authorities must work to create a standard, RERA-approved Builder Buyer Agreement structure.

CASE LAWS

  • M/S. Sitaram Agrawal & Suns & Anr. vs Rakesh Kumar Awasthi & Anr.

Sangita Singh & Anr. Vs. Unitech Limited II (2018) CPJ 504 (NC) I do not find merit in the above-noted plea. As per the builder-buyer agreement the opposite party had promised to construct and deliver possession of the subject apartments to the complainants in consideration of their paying the agreed consideration amount. The opposite party to date has not offered possession of the subject apartments to the complainants and has also not refused to deliver possession. Thus, this is a clear case of continuing cause of action. Therefore, I am of the view that the complaints filed by the complainants are within limitations. Reliance in this regard may be placed upon the decision of the Hon’ble Supreme Court in the matter of Meerut Development Authority v. M. K. Gupta, IV (2012) CPJ 12, Wherein the Hon’ble Supreme Court held that in such a case buyer has a recurrent cause for filing a complaint for non-delivery of possession of the plot.”

  • H. K. Goel vs M/S Bptp Parkland Pride Limited 

Explanation – The question “what is a reasonable time” is, in each particular case, a question of fact”.

 From the above provision it is clear that if there is no time limit for the performance of a particular promise given by one party, it is to be performed within a reasonable time. In most builder-buyer agreements, the period ranges from 24 to 48 months and the most common agreement seems to be for 36 months plus a grace period of six months for completion of construction and delivery of possession. If the possession is delivered beyond 42 months or beyond 48 months, the deficiency in service on the part of the opposite party shall stand proved.”

 Perusing the above-settled law, it is clear that if the possession in a builder-buyer agreement is delivered beyond 42 months or 48 months, then there is a deficiency of service on the part of the builder. In the present case, we find that the possession of the flat in question was offered after the lapse of 7 years (approx.) from the date of booking. Therefore, the deficiency on the part of the opposite party stands proven, hence, the opposite party is guilty of deficiency in providing its services to the complainant.

References

https://housing.com/news/heres-why-you-should-thoroughly-read-your-builder-buyer-agreement/

https://www.squareyards.com/blog/builder-buyer-agreement-what-you-should-know

https://timesproperty.com/news/post/all-you-should-know-about-a-builder-buyer-agreement-bba-blid1267

https://camantra.com/which-points-to-kept-in-mind-while-drafting-builder-buyer-agreement/

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