Purchasing a property is a significant decision that takes several months or years. However, when finalising the purchase, one must read the Builder Buyer Agreement (BBA) properly before signing the dotted line.
BBA specifies the conditions, clauses, and modalities between both parties related to the property’s delivery details, default conditions, delayed project delivery, etc. The agreement protects the homebuyer’s interests while ensuring project delivery according to the agreed terms and conditions.
After signing the BBA, the buyer and the builder bind with each other legally, and both parties cannot object to anything beyond a certain point.
The following sections contain crucial details about the BBA agreement.
What is a Builder Buyer Agreement?
In simple terms, a Builder Buyer Agreement is a contract that ensures the property belongs to the buyer. It indemnifies that the buyer has all the rights regarding the property under the mutually acceptable clauses that the agreement contains. The building contract agreement includes different approvals, annexures, terms and conditions, and flat layouts agreed between both parties. In short, it is a legal document that mentions all the crucial terms and conditions of a property’s sale.
Importance of Builder Buyer Agreement for Home Buyer
When purchasing a property, the buyer is at the receiving end of the transaction, and there is no scope for ambiguity in the contractual terms and conditions. Not getting possession by the pre-determined date puts the buyer in grave distress. Moreover, it is common for realtors to take advantage of loopholes to keep homebuyers oblivious during the process. In such a scenario, a builder agreement proves to be a saviour that makes the builder completely responsible for the mentioned obligations. It safeguards the buyer against any violation, price changes, or defects in the structure by holding the builder accountable. Any inordinate delays also compensate the buyer while protecting their interests.
A builder-buyer agreement is a crucial document for the homebuyer due to the following reasons:
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Homebuyers sign a builder agreement with the builder to ensure the construction process takes place according to their expectations.
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The agreement describes both parties' precise demands, duties, and rights.
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It shields the buyer from any misunderstandings or controversies developing during the construction process.
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The document outlines the terms and conditions both parties must follow during the property development.
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The contract with the builder guarantees that the buyers will obtain quality construction according to their requirements and expectations.
Due to all these reasons, the buyer must read the building contract agreement carefully before signing.
Things to Check Before Signing the Builder Buyer Agreement
The BBA agreement is a key document that governs property sale and possession conditions. Since it is a legal document, the buyer must check these things before signing it:
Assessment of the Builder’s Credibility
The buyer must confirm the builder's reputation and credibility before signing a sale agreement. To ensure the builder's character and reputation, one must assess their prior projects' quality. Reading their online reviews helps assess their client testimonials and their experience with the builder.
Inspection and Warranty
Before signing a building contract agreement, check the clauses about inspection and warranty to see how the builder takes responsibility for any flaws in the construction. They must give a warranty on any defective construction within a few months of property development.
Contract Clauses
Read each contract clause carefully before signing the agreement. Understand its meaning and how it influences the buyer’s rights and expectations. Give particular attention to clauses related to construction permits, delivery timelines, zoning, etc.
Payment Terms
Carefully go through the conditions related to contract payment, including the payment schedule, overall cost, prepayment, delayed payment, registration charges, modes of payment, etc., before signing an agreement. Ensure all payment terms are clearly specified in the contract to make them easily understandable.
Legal Advice
Take the help of a legal expert to evaluate the contract terms and conditions and ensure it does not have any disagreeable clauses. These experts have the eye to identify any loopholes and take the necessary steps to defend the buyer's interests.
Builder Buyer Agreement Before RERA
Before RERA, BBA agreements mostly favoured the builders. For instance, an agreement could mention the delivery timeline of 36-42 months from the beginning of the construction, but it might not mention when this timeline would start from the booking date. The escalation in prices clause helps builders raise the property’s price even after a delay in the project delivery. For instance, it was easy for builders to increase the property's worth due to the non-availability of raw materials. Moreover, if the buyer delayed the payment for any reason, the penalties could be as high as 24% quarterly.
The BBA agreement before RERA gave builders the right to cancel or forfeit the allotment due to delayed payment. Sometimes, builders could make changes in the property’s area and demand 20-30% extra from the buyer. Furthermore, any changes in the building plan did not attract any penalties from the builder. If the buyer decided to transfer their flat’s possession to someone else before possession, the builder had the right to demand transfer charges.
Builder Buyer Agreement After RERA
In order to address the issue of favouring builders in the builder-buyer agreements, the real estate laws have changed the builder agreement format. The Real Estate (Regulation and Development) Act, 2016, has laid down fundamental rules to create builder-buyer agreements for property transactions. According to the new guidelines, builders must provide a buyer-signed contract for sale, conveyance deed, proforma letter, and other necessary documents along with the application. The document should contain details about the duties both parties share. Moreover, it has a Clause on Earnest Money, under which the builder cannot claim more than 10% of the property’s cost as earnest money when signing a BBA agreement.
Section 13 (2) of the RERA, 2016 requires the document to clarify each and every detail of the project without leaving any scope for confusion. These include the particulars of the project development, including external and internal work. If the developer does not provide anything promised in the contract, they are legally bound to deliver it. In case of failure, they must resolve the issue within a given time frame.
Builder Buyer Agreement Format
The builder agreement format contains each and every detail of the project amenities and deliverables. The main purpose is to guide the conditions governing the cases of default. Although there is no set format for a BBA agreement, here is a sample builder contract template for reference:
Conclusion
A builder-buyer agreement is an essential document to which an aspiring homebuyer should always pay attention. It provides clarity and transparency about the project terms and legal protection to the buyers, ensuring a hassle-free and smooth transaction. While planning to purchase a house, carefully reading the BBA agreement is crucial to protect the buyer's interests and ensure an equitable trade. The contract also helps get easy approval when applying for a Home Loan or Mortgage Loan.
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Frequently Asked Questions
1. Why is a builder buyer agreement important?
Builder Buyer Agreement is a legally binding document that ensures the property buyer’s and builder’s interests. It covers all aspects of a property purchase, including payment and possession. So, it is an important document for both parties.
2. Is the builder asking for full payment before registration?
The builder cannot ask for a full payment before registration. The buyer should only pay the full registration payment once the construction work is complete and the builder has obtained the occupancy certificate and the building’s completion certificate.
3. Can a builder cancel a purchase agreement?
The builder cannot cancel a purchase agreement if both parties have signed the document. The builder cannot cancel the deed if the buyer has made full payment and the property is registered. Only the court can do so if it detects a fraud or scam at execution.
4. Is the booking amount for the flat refundable?
If the buyer wants to cancel a flat booking, the booking amount is refundable, as mentioned in the builder agreement. The builder may charge a small fee for doing so, which the BBA agreement should clearly mention. Carefully reading the contract is essential to be aware of the applicable charges.
5. What is the agreement between the builder and owner?
The agreement between the builder and owner is a legally binding contract that contains all the terms and conditions that both parties must comply with to protect each other's interests.
