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So, what is a Builder-Buyer Agreement?

These are the ‘Agreements for Sale’. The document basically signifies the said property is transferred to the owner’s name and that the rights and the liabilities are transferred to the new owner’s name, which is subject to the mutually agreed terms and conditions between them. The document contains the different annexures, approvals, flat layouts,  terms and conditions agreed between both the parties. To conclude, it is one document which includes important terms and conditions about the sale of property.

What is the Importance of Builder Buyer Agreement?

The Agreement lays down obligations for both builder and the buyer. As stipulated by RERA, the Builder-Buyer agreement must be disclosed at the time of the registration of the project which remains available during all time to the public for inspection. This agreement must be a registered document as the buyer can then take its help in approaching courts and tribunals for any default of the builder.

For any default of the builder, the builder is responsible for all the obligations made in the agreement. It also secures the buyer against any case where there are structural defects in the building, price changes, and violation in agreements, wherein the court will hold the builder responsible for such violations.

Builder-Buyer Agreements before RERA:

Before RERA, the builder buyer agreements were mostly drafted in favor of the builders. Clauses that were part of these agreements were:

1. Timeline for Construction: The possession under the agreement would be delivered within 36-42 months from the start of construction. However, there would be no mention as to the start of this time from the date of booking.

2. Escalation in Prices: The clause in the agreement helped in raising the price of the property as in when the builders demand. Even if there is a delay in the project, the builders could raise the price stating the non-availability of the raw materials.

3. Delay in Payment: The charge for the delay in payment by the buyer could be as much as 18%-24%, compounded quarterly. Further, some builders also included in their builder buyer agreement, a right to either forfeit or cancel the allotment in cases where there is delay in payment.

4. Change in Area:  Any change in area even if it may benefit they buyer or not was chargeable by the builder eg- a small change in super area may lead to around 20-30% increase in the total amount to the buyer.

5. Change in Building plan: The Builder Buyer agreements were drafted by the developers in such a way that the change in the building plan did not attract penalty to the builder/ developer.

6. Transfer Charges: In the cases where the flat’s possession was transferred to someone else by the buyer even before the possession of the flat given by the builder , the buyer has to pay transfer charges to the developer.

Builder-Buyer Agreements after RERA:

The real estate law has tried to address this issue of favoring the developers and builders in the Builder-Buyer Agreements. The Real Estate (Regulation and Development) Act, 2016 has resolved this by laying down the ground rules in the case of builder-buyer agreement which are referred to as Agreement to Sale. The ground rules include:

1. Submitting the Pro-forma Agreement: At the time of the registration of the project, the  builder has to submit the following documents along with the application such as agreement for sale, proforma letter and the conveyance deed to be signed by the buyer.

2. Detailing Responsibilities: The Builder buyer agreement has to give details of the responsibilities to be shared between the buyer and the builder.

3. Clause on Earnest Money: The buyer cannot claim the earnest money for more than 10% of the property’s value  from the buyer at the time of signing of the builder buyer agreements. 

4. Details in the builder buyer agreement: Each and every detail should be provided in the builder buyer agreement leaving a very little scope of confusion as prescribed in section 13(2) of the The Real Estate (Regulation and Development) Act, 2016. It must specify the particulars of development of the project, other specifications such as internal and external development work etc.

5. Failure in Providing Promised Amenities: If anything is promised by the developer in the agreement, he is legally bound to provide it. In case he fails to provide, he has to rectify that within a reasonable time.

Recent Trend:

The Supreme Court in its recent judgment passed in October 2021 said that there must be a model builder buyer agreement to protect the home-buyers in India. This came in a response to the various uncertainties due to lack of a uniform agreement. The court has observed that the builders and developers try to include clauses that are builder friendly, which try to harm the interest of the consumers. 

References:

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

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

3. https://www.nobroker.in/forum/what-is-builder-buyer-agreement/

4. https://lawrato.com/indian-kanoon/property-law/5-things-to-check-in-the-builder-buyer-agreement-1167