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Advantages of signing a Tripatriate agreement

 Any agreement will normally include only two parties, but in some special cases, the agreement has to be made between three parties, and this agreement made between three parties is called as a Tripatriate Agreement.  The term ‘tripartite’ means three parties. In the real estate industry, a tripartite agreement refers to an agreement between the buyer, the seller, and the lender/financial institution.  A tripartite agreement sets out the terms and conditions of a property deal when a third party, namely a lender/financial institution is also involved. 

A Tripatriate agreement will usually be drafted in case of the buyer may wish to buy a property that is under construction and to fund the purchase, the buyer, chooses to take out a home loan. Then an agreement will be drafted between the buyer, the seller (property developer/owner) and the Bank (Financial Institution) this agreement is known as a Tripatriate agreement Agreement, as it involves three parties.
A tripartite agreement is one of the most important legal document. There are several circumstances under which a Tripatriate agreement finds its use.
· When a property is being sold and the society is registered, it becomes necessary to create a tripartite agreement between the seller, buyer, and the society.
· In case a property has been bought from a builder and during the resale, a society has not been established, you would find much use in a Tripatriate agreement between builder buyer and seller format.
· In case of an encroachment on a property including a land, home, farm etc., a tripartite agreement finds much use for establishing legal obligations.
· You will find use of a Tripatriate agreement for sale of property format when a registered society has agreed to sell and buy and has no objection against the transfer of the flat and the subsequent change of ownership.
· You will also find use of a Tripatriate agreement for third party payment format if a builder has been made a third party, and the builder itself becomes responsible for making a new society, new buyer, or an apartment.
“A tripartite agreement in India is important while purchasing an under developed property because, during the development phase, the buyer doesn’t get any legal rights on property being developed and as a matter of fact, the developers are included in an agreement along-with the bank”, while the developers would have invested a huge amount of money in developing the said property, along-with the owner.  The main objectives for which a Tripatriate agreement is signed is for the following reasons:
· Tripartite agreements assist the buyers with obtaining loans for properties against a planned purchase of a property. 
· As the house is not in the name of the buyer until the possession, the developer is also made a party to the agreement. This protects the interests of the home buyers.
· The tripartite agreement clarifies the status of all the parties involved in the real estate transaction.
· The tripartite agreement also includes the legal process which defines how, when and to whom various agreements in the property are transferred between the parties. This is called subordination. For example, in case of death of buyer/borrower, the builder may have the first right to lien for what is rightfully owed to him, and then the bank would retain a lien on remaining assets. 
· The agreement affirms that in case the borrower fails to pay back the loan, then the property will be transferred to the lender and the builder must accept the lender as the new owner.
· The tripartite agreement seeks to avoid any future conflicts. 
In the context of leased property, the tripartite agreement involves the following parties:
1. The owner of the property,
2. The lender, who has lent the property, and 
3. The tenant, who occupies the property. 
The agreement says that in case the owner fails to pay the loan, then the lender shall become the new owner of the property and the tenant has no choice but to accept the lender as the new owner. However, it is pertinent to note that the new owner cannot change the terms of the lease.
TERMS & CONDITIONS: As any other documentation, a Tripatriate agreement has various terms and conditions that must be adhered to before finalizing the sale. One of the reasons why the format of the tripartite agreement is important is because the agreement clearly states the responsibilities regarding the construction and payments of all the parties. Before signing the agreement, the buyer must ensure that every key detail and all relevant information of the property is mentioned in the agreement such as the sale deed, dimensions, and area details about the property and the custodian of original documents, the hold of the developer on the property along with his share.
As per the law, whether a buyer has bought a property or goes to buy a property within the project, being developed; any developer who builds housing societies must have to make a tripartite agreement in India with all buyers. While, the buyers also need to make sure that the tripartite contract is stamped appropriately and that the proper stamp duty is paid to the State where the property is located.
CONTENTS OF A TRIPATRIATE AGREEMENT:  The contents of a Tripatriate agreement generally would consist of the following:
· Details of all the parties involved in the agreement.
· Purpose or objective of the agreement.
· Particulars of the property being purchased
· Tracing of titles of the property involved
· Representation as to clear titles
· The obligation of the developer
· Shares of the Buyer and the developer
· The rights of the parties.
· Details of the approved sanction plan by the local authorities
· Representation of the Developer to restrict construction to the approved sanction plan.
· Non-Disclosure clause or confidential clause
· Legal implications of the parties involved.
· The perspective of the buyer/Loan taker.
· The perspective of the Bank/Loan giver.
· The perspective of the developer.
· Consideration Amount (selling price).
· Amount of consideration paid, or details of the amount that would be paid by the parties on a future date
· Date of possession.
· Phases and process of construction.
· Applicable interest rates.
· Equal monthly instalment (EMI) details.
· Information on penalties for booking cancellation.
· Consent on common features. (common areas and amenities)
· Remedies of the parties in case of default
· Dispute Resolution Mechanism
· Terms and conditions of the agreement
· Neither the third party that is indirectly related to the agreement or the Legal heirs of the parties involved in the transaction of a Tripatriate agreement may not take a stand that they are unaware of the transaction or challenge the transaction in future or on the death of the parties involved in the transaction, who had signed a Tripatriate agreement.
· As all the parties involved in a transaction, the financial institution or Banks, feel secured and are convinced on the genuineness of the transaction, as there are less chances of challenging the said agreement.
· It also indicates that there are no arrears to be paid by the seller to a third party.
· Financial institutions and banks will easily provide housing loans and other types of loans after submitting a tripartite agreement with them.
· It is likely that the borrower/buyer would not be willing to pay the builder/developer/seller unless the whole construction work is completed in accordance with the agreed quality standards. However, the builder has to pay all his vendors involved in the construction. There is thus, a risk that the buyer might not pay or refuse to pay due to any reason. In such circumstances, the builder must have a safety net in order to claim the costs and money due to be paid to the vendors. This safety net is provided by the tripartite agreement. In the event of non-payment, the builder can claim a construction lien on the property. 
· A tripartite agreement may also include the architect, contractor, and designer within its scope. This is called a ‘no-fault arrangement’ wherein all the parties undertake to remedy their mistakes or omissions and agree not to hold any other party liable for any omissions or errors made in good faith. 
· In case, If a situation where-in the third party does not wish to be a part of the “third party” in the agreement, it is necessary to obtain NOC (No Objection Certificate) showing its stand towards the ongoing transaction. In this way, the name of the third party can be deducted and NOC can be submitted in the legal office fee bodies while transferring the title of the piece of land from the name of the seller to the name of the buyer. The No Objection Certificate must include details such as the name of the third party, their position in the transaction, and the reason behind signing the NOC.
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