6 minutes read
Why construction agreement review is important?
First of all, I would like to express that I was optimistic when I was signing the agreement and things changed after delivery schedule was not kept up by the builder. Hence, would like to give you some tips with pessimistic approach & extra caution to safe guard your money, time, interest & dream
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If you have not decided which one to buy, my video with FREE excel analysis based on my experience may throw some lights to help you "How to decide my home of my interest" .
If you already decided and would like to focus on key points in construction agreement, continue reading
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Most of us will not spend our time to focus on Builder Buyer Construction agreement in the beginning as every one of us, "buyer" will go with good intention of buying a dream home with high morale/ethic and we will strongly believe that the same will be reciprocated by the builder too. However, the reality is bitter in most cases as I come across.
Few buyers will succeed based on the selection of builders with good track record ( remember, it is not based on Media ads..etc but the core value like completion in time, customer satisfaction, quality in long run). But few of us will fail in any one or many factors which were presented through lucrative marketing tactics and foul promises while buying your home.
Most of the builders may not have the intention to dishonor your agreement as they have to be in business for long time, however, builders with less professionalism, ethic will fail at a point of time after which they may be least bothered about the buyers position.
I also analyzed various facts as I said in my youtube channel and finalized the project of my wish, however my mission failed due to the faith I had with the builder/promoter that "Builder will not dishonor the agreement" which should not be the case for you.
The agreement comes in place while 2 entities/individual parties agree together for set of rules, conditions, procedures, timelines & cost to achieve/render a desired target of service/business.
Alright. If there is a Builder Buyer construction agreement, will the builder deliver. Ofcourse Yes & No
Though RERA comes handy to help you to get justice as per the agreed facts & fair trade practices, getting legal remedy is a long way as builder who has money and muscle. Builder will spend their money more than required and will go up to all level courts to make you tired. Going in group or through association will help for some extent, however, builder will use all his sources to divide, confuse, make restless
Hence, we must be proactive to avoid complications & bitter life at later stage with respect to all contractual conditions like payments / defaults, amenities, quality of construction, delivery date & hidden agreements which are key. After analyzing, if you are satisfactory, you select the project or else step back from that project
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If you are buying flat for mere investment, you may check this article to analyze whether real estate really works now as a bright investment option "Why to buy a home?" with the help of FREE excel sheet.
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How a construction agreement must be as per RERA?
RERA has defined how the builder buyer construction agreement should be as per RERA act 2016. There were lot of unfair trade practices in construction agreement which were highlighted by Supreme court of India and finally driven to make a model construction agreement to reduce such unfair trade practices in construction agreement filed in various courts (Download Consumer protection act 2019 and search "unfair" in PDF to see what are all unfair trade practices)
RERA has made model construction agreement for easy & ready reference of buyers to cross verify without help of an attorney
How to check builder buyer construction agreement by yourself?
Getting an Attorney help for legal opinion on the construction agreement may be tiresome if you don't stop at right lawyer who is professional in property cases. In my case, I relied on my known source civil lawyer and I could not get value addition, I recommend you to find out a property lawyer who already dealt such apartment or construction agreement cases and offer them nominal fees & reasonable time to review it. Based on my experience, I collected key information from model agreement and respective RERA act and compiled here with my past experience for easy reference as key check points of a construction agreement or builder buyer agreement.
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First & foremost, ensure that whether your project is registered with RERA and builder have all legal rights & necessary approvals from authorities to build an apartment
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Apart from EC and Registration of project with RERA, the followings are nut shell of builder buyer construction agreement which can be checked by yourself before buying
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1. Cost of the apartment - Cost of the apartment to be legible in agreement with break up and milestone payment may be in annexure as per RERA agreement model, Point no 2
2. Mode of Payment - Should by thru RTGS/DD/Cheque, NRI Foreign payment should be as per act FEM 1999. More than 10%, no advance payment must be made without any agreement as per RERA agreement model, Point no 3
3. Payment delay, Late penalty from builder & compensation by builder - Normally there will be hefty interest charges for the delayed payment from your side but at the same time, compensation for builder project delay will be meager which is unfair trade practice. There should be a reasonable interest & compensation at both sides as per Consumer Protection act 2019, sl no 46, point ii, page 8. Also read sl no 24 of NCDRC judgment
4. Sale deed of UDS - Conveyance deed must be registered along with UDS within 3 months of the issuance of occupancy certificate as per RERA act, chapter II,17
5. Period of completion - Completion period as the essence of the agreement, must be legible in agreement with grace period which is maximum upto six months as per RERA agreement model, Point no 4. Normally completion period may vary from 18 to 48 months which is subjective
6. Force Majeure - Force Majeure if any must be informed by the builder in written to the allottee along with extension of time. If allottee doesn’t agree extension of time, the refund must be done within stipulated time and that time must be indicated in agreement as per RERA agreement model, Point no 4, RERA act, chapter II,6
7. Amenities & prospects - Must be as per commitment in brochure, notices, marketing material, model apartment and advertisements and it shall be added in annexure for transparency as per RERA act chapter III, 12
8. Apartment Association - Builder must enable formation of association within a period of three months of the majority of allottees having booked their plot or apartment or building & Every buyer of the apartment, plot or building as the case may be, shall participate towards the formation of an association or society or cooperative society of the buyers, or a federation of the same as per RERA agreement model, Point no 6 & RERA act chapter III, 11.4.e
9. Monthly Maintenance cost - Buyer & Builder agrees for maintenance of amenities for specific period till handing over to association and statement of accounts to be submitted to association while handing over as per RERA agreement model, Point no 6 & RERA act chapter III, 11.4.d
10. Defects Liability - Builder should rectify the problem arising from manufacturing, design failures, workmanship till 5 years on the complaint of buyer and the complaint must be addressed by the builder within 30 days of receipt without any charges as per RERA agreement model, Point no 6 & RERA act chapter III, 14.3
11. Construction quality specifications - The builder, at the time of the booking and issue of allotment letter has to provide sanctioned approval drawing, plans & specifications as per RERA act chapter III, 11.3 and this is mandatory for future reference. This includes specifications on door, window fittings, wood work, tiles, bathroom fittings, electrical cables & fittings, whether 3 phase or single phase, if it is 3 phase, whether it is with change over switch, concrete quality, mason work, loft (if not mentioned in your drawing)
12. Progress status - The builder should submit the progress status to RERA by every quarter. If you, as a purchaser didn’t get any status, you can visit respective RERA site and refer status at par with his commitments and you have all rights to with held the payment for non-compliance of respective stage/progress. Check whether builder restricts to see the progress in site and that should not be.
13. What is Buyer consent in agreement- Builder will indicate all his liability as a builder consent here & there, however there will be thin line of hidden points in Buyer consent of the construction agreement wherein he will include unfair trade practices and you have to take legal opinion for damn sure as I am facing few of these points which will make your family life miserable. Check whether your builder has indicated any point like "builder will use unsold flats as service apartment", "they will retain some flats and let out for lease", "they will use the apartment road to access their property"
The above conditional points may be taken granted and "residential apartment can be used for commercial purpose" in future which will ruin our social & family life within the campus. Better to avoid that project.
When you or your attorney come across major doubts and clarification, send a mail to your builder and insist them to clarify it in agreement transparently. If they don't agree to mention in agreement, that is your first caution to step back from the project/builder. Few small clarification through mail may be kept for future reference.
If you would like to know more from my experience, comment below so that I will share my experience and clarify to my best
