Investing in an under-construction apartment or flat is advantageous to the buyer in many ways. Under-construction apartments cost less than ready-to-move flats; they also allow the buyer to make payment in stages with the completion of the project and also bring the prospect of an increase in the asset value by the time the construction is completed. However, investing in a project that is underway brings many challenges and concerns. Will the builder deliver the project on time? Will the construction quality be as promised? What if the builder demands more or changes the unit dimensions at a later date? The best way to address these challenges and concerns is to have a clear Builder Buyer Agreement, which is legally binding. Let us take a closer look at this agreement, commonly referred to as BBA or an Agreement To Sale.
Builder Buyer Agreement and RERA
The Real Estate (Regulation and Development) Act of 2016 was enacted to streamline the construction and sale process in the real estate sector and protect the interests of the homebuyer. The RERA clearly outlines guidelines for drafting the BBA, which must be followed. This ensures that the contract or agreement becomes legally binding once signed and does not remain skewed in favour of the promoter or builder. During registration of the project with the RERA authorities, the builder must provide a proforma of the allotment letter, the Builder-Buyer Agreement, and the conveyance deed, apart from other title documents and permits.
What is the Builder Buyer Agreement?
The BBA is a legally binding contract that clearly outlines the builder’s intention to sell a property or unit. It mentions the project and unit dimensions, utilities, amenities, and all the aspects of the offerings in great detail. It also chalks out the payment structure that the buyer undertakes, along with the downpayment and the subsequent slabs and timeline of payment. It also clarifies the construction timeframe and the delivery date. This legal document is governed by the Indian Contract Act of 1872. Let us now take a look at some of the essential elements of the agreement.
Essential Elements of the Builder Buyer Agreement
Section 13(2) of the RERA clarifies that the builder-buyer agreement must include a very detailed and nuanced outlook of the project and the terms of sale. Here are some essential elements of the BBA -
- Location and scope of the development of the project
- RERA registration details
- The number of towers, units, buildings etc.
- Area and details of the internal and external development work undertaken
- Timeline of construction - stages and date of completion
- Date of delivery of the apartment to the buyer
- Payment schedule - Downpayment, mode and date of payment of subsequent payment instalments
- Default clause - interest charged in case of delay in payment
- Grace period for the builder and for the buyer
- Terms of cancellation of the agreement or contract by either party
- Refund policy
- All the facilities and amenities included such as parking, community hall, common spaces etc.
- Maintenance contract - initial and subsequent
- Force majeure clause offering indemnity in case of unforeseeable circumstances or unavoidable catastrophes
- Clarity and commitment with regard to clear title and support in buyer’s right to due diligence
- Transfer charges or payments are to be made to the builder if the buyer resells or transfers ownership before taking possession.
Registering the BBA
As with all contracts, once agreed upon and signed by the builder and the buyer, the BBA must be registered to make it legal. In many places across the country, the BBA is not registered, depriving the homebuyer of the legal protection this agreement offers. According to RERA, the BBA must be registered, and the buyer will bear the registration fee and stamp duty of the agreement.
Legal recourse
As a legally enforceable contract, the BBA has the protection of the law. Both the builder and buyer may seek legal recourse on the grounds of breach of contract if any clause is violated. If the builder fails to provide the amenities as committed in the BBA, they can be held responsible for rectification for up to 5 years since the delivery of the apartment. The penalties applicable in case of delay in project delivery or inability to rectify any lack of amenities are also clearly outlined by the RERA. As a homebuyer, you must seek legal counsel and understand the terms and details enlisted in the BBA before you sign the agreement.
Buying a property is a major financial decision, but it is also emotional. Homebuyers must remain aware of the legal protection offered by the RERA. Getting complete clarity on the clauses and terms of the BBA will help them avail of this protection.
