Most booking agreements for real estate projects start by emphasising the importance of being aware of the terms and conditions mentioned therein. But how many of us take the trouble of going through these agreements, drafted in detail by lawyers hired by developers?
This is important because most clauses in these agreements are aimed atprotecting builders from legal troubles while giving very few rights to buyers.
If you do not have the time or inclination to go through the legalese, we take you through the key points you must consider while booking a property.
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READ IN DETAIL
1. Agreement clause: The company expects that before signing the allotment letter, the buyer will read each clause carefully, analyse the legal implications and understand their own as well as the company’s obligations and liabilities.
Implication: When you sign, it implies that you have gone through all the details. So, it is advisable to ask the developer for a copy of the booking agreement before writing the cheque. If you do not agree with any point, negotiate hard and get it modified.
2. Agreement clause: If the allottee fails to execute and deliver to the company the signed allotment letter in its original form within 30 days of booking the property, his application shall be cancelled and earnest money forfeited without any notice or reminder.
Implication: Even when you get a copy of the agreement after applying, you can refuse to sign the document. In such a case, some developers will return the amount paid in entirety. However, you may forfeit the booking amount paid with the application if you haven’t taken note of this clause in the application form.
Agreement clause: The allottee has seen and accepted the plan, design and specifications of the property. The layout plan is tentative and subject to approval by the authorities. Any changes or conditions imposed by the authorities will be binding on both the allottee and the developer. It will not be necessary for the developer to seek the buyer’s consent for any changes to the design or layout plan made to comply with the government’s directions.
Implication: The layout and design shown to you during the sales pitch is not final. The plans may be altered to any extent without you being informed. If you buy after the project has got all the necessary clearances, the possibility of any change is eliminated.
Agreement clause: The allottee has demanded and has been allowed inspection of various approvals, licences, ownership records and other documents related to the land title and rights of the developer. The allottee has agreed that there shall be no further investigation or objection in this regard.
Implication: While signing the agreement, you confirm receiving all the necessary documents about the project. Developers also include a clause that your queries about the project have been satisfied. Go through the documents and get answers to all your queries before signing the agreement.
Agreement clause: According to the hi-tech township policy of the Uttar Pradesh government, the land acquired by the state government is on lease. The buyers have the option of getting land on a 90-year lease or get it converted into freehold by paying 12% sale price to the government at the time of registering the sale deed.
Implication: Most properties in places such as Uttar Pradesh are offered on a leasehold basis (there is a proposal to enable developers in Uttar Pradesh to sell freehold properties). The property agent may not tell you this in advance. Ask about ownership. If the property you are buying is on lease, consider the cost of getting it converted into freehold.
Agreement clause: The amount paid by the allottee to the extent of 20% of the basic sale price of the property will be considered earnest money for the purpose of the allotment agreement. The earnest money will be forfeited in case of payment default or violation of the agreement.
Implication: When you book a property, a certain portion of the sale price is marked as earnest money. This helps the developer ensure that you have genuine interest in the property. You must know how much you have paid as earnest money. This is because the developer will refund the rest of the money after deducting other charges if the agreement is annulled due to any default by you.
CANCELLATION OF PROJECT
Agreement clause: The buyer authorises the company to treat the allotment letter as cancelled if the plans are not approved by the authorities or it is not in a position to implement the project. The company will refund all payments and pay a simple 4% interest per annum for the period for which it held the money.
Implication: This gives the developer the right to abandon any project at any time. So, the builder can scrap the project for any reason, including absence of approvals, unsustainable property rates and sudden increase in prices in the locality.