A Builder-buyer agreement is an important document for both the parties. While the builder may alter it in his favour, it is upon to buyer to clearly deny to such toxic clauses and withdraw from such a deal.
Any legal document should be read thoroughly before putting your signature on it. When it is about any property dealing, your alertness must increase manifold. Because of the heavy amount of money involved in buying, you must read the document twice or must get it read by your lawyer and understand every point. It is not only important because you won’t want to get cheated, but also, you can produce it as a proof of the Builder’s consent to abide by certain claims he had done while selling the property.
Here are a 7 such important points that you must check in a builder-buyer agreement.
The most important point is construction timeline. As a regular practice, the builder must handover the property to the buyer within 36-42 months from the start of construction. However, it does not guarantee that the possession of the same will be offered by the same time. At least the builder cannot keep you waited in the name of delayed construction.
There has to be a clear description of the extra charges to be applicable in case the builder needs to change the square footage of the apartment. Make sure that the area change is usually the super area, not the carpet area. This may add about 10-15% extra cost, while the benefit out of it may be very marginal or even nil.
Building Plan Changes
According to prevailing laws in certain states, the developer must take written consent of the buyer prior to going for changes in the building plan. This is why some developers have started taking such papers beforehand so that they do not have to approach the buyer in the future. Remember that such a clause may again attract an area change charges on the buyer’s part.
Price Escalation Clause
Some builders may include a clause in the agreement that will allow them to raise the price of the apartment in the future. Most of the time, the projects get delayed due to the builders’ fault; however, in lieu of such decisive clauses, they squeeze out more money from the buyers.
Payment based on Actual Cost
This agreement compels the buyer to pay an unexpected amount at the time of possession for certain unexpected amenities such as electricity connection charge, club membership, preferential location charges (PLC) etc. this will surge the price at the time of possession.
This clause can raise the cost of payment of interest by 18% to 24% quarterly for failing to pay an installment. Check if the developer has also included a clause that will enable him to cancel your allotment apply a penalty as high as 20-25% of the total cost.
Most of the time, this clause is not disclosed or rather hidden. The builder may sell your proposed property to another buyer prior to selling you and you have to pay the property transfer charges at the time of possession.
To conclude, though things in a Builder-Buyer agreement can go in favour of the builder, it is solely in the buyer’s discretion to refrain from such catastrophic property deals.