Comprehensive Guide to Builder-Buyer Agreements for Property Buyers

If you have ever purchased a flat or are planning to purchase one, you might have heard about the term Builder-Buyer Agreement. This agreement plays a vital role in clarifying the responsibilities of both the buyer and the builder. It also has pre-specified clauses that should be followed by both parties. Today, in this blog, we will talk about the BBA in-depth and its significance.

What is BBA in Real Estate?

A Builder-Buyer Agreement is a legally binding contract between a buyer and a developer. It outlines all the important terms and conditions that should be fulfilled to get the unit transferred to the buyer’s name.

It outlines terms such as defining details like payment schedules, construction timelines, quality standards, and delivery dates, ensuring transparency throughout the property development process and providing legal recourse if either party fails to meet their obligations.

What is the Difference Between Builder Buyer Agreement and Agreement to Sell?

Some people get confused between BBA and Agreement to Sell. Actually, a Builder-Buyer Agreement is made when you directly purchase your property from a builder, such as a new flat, whereas an Agreement to Sell is made when you purchase a flat in resale from an existing owner, referred to as the seller.

The Agreement to Sell specifies the terms and conditions mutually agreed upon by both the seller and buyer, and there is no involvement of the builder in it.

Why Should You Sign a Builder Buyer Agreement?

The agreement should cover all aspects of your building project, including:

       •  Payment
       •  Scope of work/products
       •  The time frame for completion of work/product delivery
       •  Quality standards and specifications, including warranty period
       •  Code compliance certificates

What is the Law for Builder-Buyer Agreement?

A "Builder-Buyer Agreement" in India is mainly governed by the Real Estate (Regulation and Development) Act, 2016 (RERA). This law requires that all agreements between builders and buyers be registered.

It also clearly explains the rights and duties of both the builder and the buyer, such as payment schedules, possession dates, and penalties for delays. In simple terms, it is a legal contract designed to protect the buyer’s interests.

How to Check a Builder-Buyer Agreement?

To properly review a Builder-Buyer Agreement, make sure to go over important details like the property description, construction timeline, payment schedule, possession date, specifications of the unit, penalties for delays, how disputes will be resolved, RERA registration information, and any clauses about changes to the building plan.

       •  Project Details: Location, scope, timeline, units, and buildings.
       •  Payment Schedule: Down payment, installments, late payment interest.
       •  Amenities: Parking, community halls, and included services.
       •  Maintenance: Initial and subsequent maintenance contracts outlined.
       •  Default Clause: Terms for late payments and defaults.
       •  Cancellation: Terms for agreement cancellation by either party.
       •  Refund Policy: Terms and conditions for issuing refunds.
       •  Force Majeure Clause: Indemnity terms for unforeseen circumstances.
       •  Title: Clear title and buyer's due diligence rights.
       •  Earnest Money Clause: Initial deposit payment by buyer to builder.

Apart from these clauses, the BBA can have some modified clauses as per the builder's and buyer's requirements. It is always advised to check it before signing to protect yourself from any disputes in the future.

Things to Check Before Signing a Builder-Buyer Agreement

There are certain things you should always check and also get it checked by a professional before signing a BBA.

Ready to Move: When you are purchasing a ready-to-move-in flat, you should always obtain a completion certificate from the builder before signing the BBA. The completion certificate is given by the local authority, confirming that the housing unit complies with the approved plan.

Your property needs this certificate to be registered and access other services. The agreement should include a clause stating that the builder must provide the completion certificate once the house is finished.

Under Construction Property: If a property is still under construction, then you cannot obtain a completion certificate. However, you have to sign the Builder-Buyer Agreement without the completion certificate if you want to purchase the flat. But in that case, you are required to put a clause regarding the completion date and what will be the fine and penalties if the property doesn’t get completed.

Possession Date: Make sure to check possession clauses carefully. The contract should give a fixed date for possession or construction start. If delayed, you should receive compensation from the builder.

Change in Layout of Building Plans: A builder is not allowed to make any changes in the prescribed layout or building plans without prior notice to the buyer. Always include such clauses that a builder is required to get the approval of the buyer to make any changes in the building plans.

Indemnification Clause: This clause protects the builder from financial loss due to legal disputes. It should ensure that the buyer is compensated for any loss if legal issues arise regarding the property.

Opting Out: Buyers should be able to cancel without penalty if the builder fails to provide necessary documents or if there are legal/title issues before the sale deed is signed.

Payment Details: Always check the payment details mentioned in a BBA and also the payment plan, including when you are required to make payments and when not. Always check all these details before signing.

Builder Buyer Agreement Charges

There are no charges applicable on the Builder-Buyer Agreement.

Conclusion

In conclusion, a Builder-Buyer Agreement (BBA) is crucial for a smooth property transaction, outlining important details like payment, possession, and legal obligations. It's essential to thoroughly check all clauses, including those related to possession dates, completion certificates, payment plans, and any changes to building plans.

Always ensure the agreement is clear and protects your interests. Consulting a professional before signing can help avoid future disputes and ensure that both parties meet their commitments.