For every individual, who wants to mortgage his/her property to meet the urgent financial needs, tripartite agreement is important. It makes the deal more credible and reliable because one gives a loan to the other while a third party proves the authenticity of the deal.
The aspiring owner gets support from this legal document that the property will not be transferred to the buyer's name until it will be possessed and therefore, the developer/seller has to be part of a tripartite agreement.
So, if you are thinking of getting into any of such agreements, then here is what you should know.
What Is a Tripartite Agreement?
With three parties involved i.e. seller, bank and buyer, a tripartite agreement is needed when the buying party wants to book a home in a developing project against a home loan.
This agreement is intended to facilitate buyers to receive loans for acquiring properties wherever they plan to. Since the property’s ownership will be transferred to the buyer at the time of possession, the builder is involved in the making of this agreement.
For the leasing purpose, tripartite agreement is drafted between the owner/borrower, mortgage/lender and the tenant. The purpose is to clearly mention that in case of no payment from the borrower/owner, the lender/mortgage will be in possession of the property.
Moreover, the tenants will then have to accept their new owner. Also, there should be no change in provisions or clauses for the tenants by the new owner.
The primary purpose of the tripartite agreement is to ensure financial support from the lender/borrower i.e. the bank to own a property in an under construction site.
It is also important for the builder/developer to get into this agreement but there is no need of taking interest in any matter. This legal document is clear about the rights and obligations of all parties.
As for the bank/lender, it will be quite easy to keep a record of all papers. They can easily get to know about all transactions between the seller and buyer. Also, the agreement must have the state’s stamp so that it can be reliable and authenticated.
What Kinds of Property Deal Requires Tripartite Agreements?
The third party agreement template is quite clear about which properties need to sign it. It’s just about realizing the right time to create it with all the required information.
- When an owner is going to sell a flat in a registered society and seeks their permission in order to proceed with the process.
- If the builder sells a flat without letting the society know about it. When resold, the society finally gets to know about it. This is when a tri-party agreement is important.
- In case of an encumbrance like a charge, mortgage etc., on the property like farm, land, home etc.
While these situations are a bit complicated to deal with, parties are not mandated to always find an appropriate three part agreement template. They can opt to not get into it after agreeing to all the requirements and expectations from the other party.
The purpose is to facilitate the thirty party, who is acting like a confirming party. When the registered society is included as the third party of the agreement to sell a flat, it implies that society has no issue with this transaction and they are aware of all the matters involved.
What Are the Key Details Mentioned in the Tripartite Agreement?
By looking at the tri-party agreement sample, you will get to know about the following elements that are necessary to be included:
- Parties involved in the agreement
- Purpose/objective of the agreement
- Rights, duties and remedies of the parties
- Legal as well as technical mechanics
- Borrower’s perspective
- Lender/bank’s perspective
- Owner’s/ developer’s perspective
- Price to be paid by the buyer
- Date of sale along with date of possession
- Progress details of the project
- Interest rate charged on the loan
- Monthly installment details like payment cycle to be followed
- Amenities included in the property by the owner/ developer
- In case of cancellation, penalty paid by the buyer
Now that you are aware of the basics of a three party agreement, it would be quite easy to come up with the right choice.
All you need to do is to analyze your tripartite agreement’s requirements and get a free template on CocoSign for your convenience.
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