Monday, September 12, 2011

9 Things to Check In A Buyer's Agreement

By on 7:17 AM

Before signing on the dotted line, check the payment plan the developer is offering, the penalty clauses for delay in payment and the facilities promised before you become the owner of a home in a housing complex, you have to complete certain formalities for the developer, such as submission of application form, execution of buyer's agreement, execution of sale deed etc. Usually, the list of documents to be submitted with the application form is provided in the form itself, some of which are: 
  • Self-attested copy of identity proof (ie voter's identity card, passport, driving license etc.); 
  • Self-attested copy of resident proof (ie telephone bill, electricity bill, driving license etc.); 
  • Copy of income tax PAN card; and Photograph of buyer/ applicant 
After provisional allotment of the property, execution of a buyer's agreement between the developer and buyer is the next step. The buyer's agreement enumerates important terms and conditions with respect to sale and purchase of the property. To prevent unwarranted consequences, buyers must consider certain points before signing the buyer's agreement:

1. Identification of property: Check whether the property has been clearly identified and demarcated in the buyer's agreement. Details of the land on which the housing complex is constructed, details of the property to be purchased such as unit number and floor, super area/built-up area of the property etc should be clearly provided. Moreover, layout plan of the property should also be annexed with the buyer's agreement.

2. Facilities and amenities: Details of facilities and amenities that the developer is undertaking to provide with the property must be taken into account. For instance, maintenance of the complex and/or common areas and facilities, electricity back-up, centralized air conditioning, car parking, membership of club/gym etc should be clearly mentioned. Carefully read the document to understand charges, if any, required to be paid for availing these facilities and amenities.

3. Payment of installments: Check the types of payment plans offered by the developer. These could be down payment plan, timelinked payment plan and construction linked payment plan. Each plan could have its own set of advantages and disadvantages. One often comes across incidents of buyers having paid the full/substantial sale price, at the initial stage of booking of the property where construction is far from complete within the time period stipulated in the buyer's agreement, or worse, where construction doesn't commence till much later. As a safeguard against unprecedented delays in getting possession of the property, a buyer may opt for construction-linked payment plan. Here, the buyer is required to pay a predetermined sum of money to the developer, only upon completion of specific construction phases of the complex in which the property is located.

4. Penalties: Another important point to be considered is the clause on forfeiture of earnest money by the developer, in the event of non-payment of instalments on timely basis by the buyer. Usually, two kinds of penalties are provided for in a buyer's agreement -penalty on delayed payment of instalments levied on the buyer and penalty on delayed delivery of possession of the property levied on the developer. A buyer should carefully note the amount of penalty he would be required to pay in case he fails to pay the installment within the timelines provided in the buyer's agreement. Also note the amount of penalty the developer has to pay if he fails to deliver possession within the timelines in the agreement.

5. Encumbrances and litigation: Visit the developer's office and inquire about any encumbrance, charge and/or litigation with respect to the property and ensure that representations given by the developer with respect to charge, encumbrance and litigation have been clearly incorporated in the buyer's agreement. Also ensure that the property is delivered free from all encumbrances, at the time of possession.

6. Time of delivery: Ensure that the time of possession is clearly mentioned in the agreement. Also make a note of the consequences (eg penalty on seller/developer) of delay in possession.

7. Specifications: Specifications such as type/quality of flooring, paint, wood furnishings, or accessories such as central air conditioning, modular kitchens, etc if any, promised by the developer, should also be clearly incorporated in the agreement.

8. Transfer charges: Some developers impose a transfer charge for transfer of the property by the buyer in favour a third party. However, some developers also permit the first few transfers without the charge. Provisions regarding transferability of the property along with applicable transfer charges should be clearly incorporated in the agreement.

9. Other charges: Last but not the least are provisions with respect to external development charges, internal development charges, preferential location charges, electrification charges, parking charges, interest-free deposit for maintenance services etc., in the agreement. To arrive at the actual total sale price, buyers should carefully consider the quantum of these charges. Also check whether these charges have been included in the sale price or are to be paid as additional charges, over and above the sale price.

About Syed Faizan Ali

Faizan is a 17 year old young guy who is blessed with the art of Blogging,He love to Blog day in and day out,He is a Website Designer and a Certified Graphics Designer.


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