Almost all builders have the terms and conditions written in their application form or agreement in the way that favors the most to builders. The terms and conditions vary somewhat with different states and the kind of property that is being purchased. However, there are some clauses that should be present in all such applications.
- Agreement should explicitly state whether the land is free-hold or on lease. If land is on lease then duration of lease and lease amount should be mentioned in the agreement.
- Agreement should explicitly state that this agreement will be binding to both the parties. If there is bank loan involved then bank is also a party in the agreement.
- Agreement should specify the ownership clause of the property. It should explicitly state first right to bank if there is a loan and then to the buyer of the property or his/her legal heir, successor, descendants or any other party the buyer sells to.
- Agreement should also state the current ownership of the land on which Apartment complex is being built or plot is being developed.
- Agreement should specify whether the buyer may sell the property to any other person/entity. If there is any restriction such as right of first buy, time restriction or minimum payment restriction then that restriction should be clearly stated.
- Agreement should clearly state restriction of using the property such as pet restriction, age restriction, disability restriction or disabled only, military personnel only, no tenants, maximum number of occupants or families per dwelling unit etc.
Identification of Property
- Application and agreement should specify the identification of property being purchased. It can be block and apartment number for apartment, plot number for plot or khasra number for any other piece of land.
- Identification of property should mention the area included in the property and any other right such as parking space type (open or covered), roof rights, private elevator, club membership or any other facility. Parking space should specify clearly parking space number and number of parking spaces.
- Agreement should clear state the specifications of apartment (if apartment). Specifications include but not limited to
- Dimensions of each room
- Type of paint or wall paper or any other mechanism used on each room including bathroom, kitchen, servant room and balcony.
- Type of fittings and fixtures provided in each room. Fixtures are especially important for bathrooms and kitchen.
- Application should specify at least the tentative price of the property that is being purchased. Nonetheless, final Agreement must specify the lump sum purchase price of the property.
- Agreement should specify terms of payment (down payment, construction linked or time linked etc.).
- Agreement should specify whether there may be change in the location or size of the unit allotted as per the agreement.
- If such is a possibility then how much change will be implemented without taking buyer’s consent and when buyer’s consent must be required.
- It should clearly specify the rate that will be applicable for such price escalation or reduction. The rate may be the one that buyer booked or purchased or it may be market rate at the time of such change or the rate at the possession time.
- Plot of land should specify construction clause or dwelling clause (maximum time permitted before a house must be constructed and lived in). Such clause should also specify the consequences of non-fulfillment of this clause.
Delays and Disputes
- Agreement should specify payment delay clause on part of the buyer.
- Agreement should specify construction delay clause on the part of builder.
- Agreement should specify the consequence if buyer delays in taking possession after builder offers to give possession of the property. If cancellation of property allocation is an option with builder then agreement should clearly state so.
- Agreement also talks about dispute resolution mechanism – arbitration/mediation or jurisdiction of a particular state.
- Agreement should specify the terms of general and specific maintenance of unit – price per sq unit (sq feet or sq yard), services included (security, power backup, water supply, lawn maintenance, garbage collection/disposal etc.), frequency of collection of maintenance fees, maintenance agency name or builder representative, consequences of late payment or non-payment of maintenance fees etc.
- It should also state whether any advance maintenance fees will be taken.
- If an advance maintenance fees is taken then agreement should specify whether that advance will be used or put in a bank account.
- If advance be put in bank account then how the interest earned on the account be used and how the amount will be returned (if at all) or whether such amount be transferred to next owner of the unit.
An informed buyer should look for these clauses in an agreement before signing it. An omission of a negative clause does not imply that agreement favors buyer. However, explicitly stating omission of such clause does favor buyer. Watch out before you sign an agreement.