Be­fore you sign on the dot­ted line

Put the sale agree­ment in writ­ing and en­sure that your in­ter­ests are pro­tected

HT Estates - - HTESTATES - Sachin Nigam

The sale agree­ment is t he most i mpor t ant doc­u­ment in a prop­erty trans­ac­tion, and con­tains the fine print of the deal be­tween the buyer and seller. De­spite this, buy­ers rarely go be­yond giv­ing the sale agree­ment a cur­sory look be­fore sign­ing on the dot­ted line. How­ever, en­ter­ing into any com­mit­ment with­out un­der­stand­ing the clauses in the doc­u­ment could be a costly mis­take. Just as a buyer care­fully com­pares and checks other as­pects of a prop­erty such as sales, price, lo­ca­tion or ameni­ties, he/she should scan the sale agree­ment care­fully to avoid has­sles or dis­putes at a later stage.

Let’s first un­der­stand the cur­rent and pro­posed rules gov­ern­ing sale agree­ments. At present, all de­vel­op­ers have to in­clude clauses as per the flat/ apart­ment own­er­ship act gov­ern­ing the state (where ap­pli­ca­ble) in which the project is lo­cated. For ex­am­ple, any project in Ma­ha­rash­tra has to com­ply with the re­quire­ments stated in the Ma­ha­rash­tra Apart­ment Own­er­ship Act, 1971 ( MoFA). In fu­ture, this could change if and when the The Real Es­tate (Reg­u­la­tion and De­vel­op­ment) Bill, 2013, in­tro­duced in the Ra­jya Sabha last year, is passed. This bill seeks to es­tab­lish Real Es­tate Re g u l a t o r y Au t h o r i t i e s (RERA) at the state level for reg­u­la­tion and de­vel­op­ment of the sec­tor. It also seeks to stan­dard­ise prop­erty trans­ac­tions in the sec­tor. How­ever, the bill, in its cur­rent form, does not of­fer a pro-forma of a cus­tomer agree­ment, which would form the ba­sis of all fu­ture sale con­tracts be­tween de­vel­op­ers and prospec­tive buy­ers in the coun­try.

Here are some es­sen­tials to bear in mind while re­view­ing a sale agree­ment:

Put the ag ree­ment in writ­ing: The i ndi­vid­ual must en­sure that there is a writ­ten cus­tomer agree­ment be­fore pay­ing any sub­stan­tial amount (as per the rec­om­men­da­tion of the real es­tate bill, up to 10%). Reg­is­tra­tion of the same would be ad­vis­able.

Es­sen­tial con­tents: The a g r e e m e n t m u s t c l e a rl y de­fine the pos­ses­sion date of the phys­i­cal unit. This has a bear­ing on is­sues like de­lay com­pen­sa­tion and pay­ments. It must also men­tion the load­ing i.e. car­pet area (net us­able area) ver­sus saleable area (the MoFA and reg­u­la­tory bill make it manda­tory to men­tion car­pet area). This helps cus­tomers un­der­stand bet­ter what the ac­tual area is that they are pay­ing for. Fi­nally, the spec­i­fi­ca­tions and ameni­ties must be clearly men­tioned so that buy­ers un­der­stand what is ac­tu­ally go­ing to get de­liv­ered, in com­par­i­son to what is shown in brochures, mock-up units and walk­throughs.

En­sure your in­ter­ests are pro­tected: Link­ing cus­tomer pay­ments to phys­i­cal com­ple­tion is a best prac­tice, as any de­lay in con­struc­tion by the de­vel­oper would limit the pay­ment from the in­di­vid­ual and thus, help the lat­ter save in­ter­est costs. Sim­i­larly, there should be no cost borne by the cus­tomer for project cost es­ca­la­tion. Other clauses that cus­tomers should pay at­ten­tion to in­clude can­cel­la­tion and de­fect li­a­bil­ity. The can­cel­la­tion clause states what hap­pens if the deal is can­celled, while the de­fect li­a­bil­ity clause of­fers pro­tec­tion against con­struc­tion de­fects.

Charges and penal­ties: The hold­ing charge is the charge to be paid by the buyer if he/she doesn’t take pos­ses­sion of the prop­erty within a cer­tain date of com­ple­tion. There should be rea­son­able time given to the in­di­vid­ual by the de­vel­oper for this. Buy­ers should also pay at­ten­tion to clauses re­lated to de­lay com­pen­sa­tion and penalty on late pay­ments. De­lay com­pen­sa­tion should be paid on the ba­sis of rental val­ues in nearby ar­eas, and pe­nal in­ter­est should be on the ba­sis of pre­vail­ing fixed de­posit rates.

Doc­u­ments: T he t i t l e search re­port and en­cum­brance cer­tifi­cate should for m part of the cus­tomer agree­ment in order to en­sure smooth han­dover of the ti­tle. In ad­di­tion, the ti­tle and land de­vel­op­ment rights should be trans­ferred in favour of the in­di­vid­ual or so­ci­ety, along with the un­di­vided pro­por­tion­ate ti­tle in the com­mon ar­eas in­clud­ing hand­ing over of pos­ses­sion.

pres­i­dent, CRISIL real es­tate rat­ings


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