Essentials of a Builder-Buyer Agreement - Things You Should Know!

Posted On : December 22, 2022
Essentials of a Builder-Buyer Agreement - Things You Should Know!
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Have you heard of a builder-buyer agreement? It is the first document which brings the builder and home buyers on a common ground regarding the sale/ possession/ delivery of the project.  The BBA or builder buyer agreement format as per RERA lays the terms regarding the layout of the overall project, unit to be allotted to buyer, additional rights, conditions for cancellation of agreement, and the list goes on. All such terms depict how important a RERA builder-buyer agreement is.

Since the terms in BBA are not written in local language or simple English, buyers often find it complex and hard to understand. There is no uniformity regarding conditions followed in different states and UTs in India. While buying a property in Kolkata while residing in New Delhi, understanding the documentation through property lawyers in Kolkata could save a lot of time and effort, and future interests of the people concerned. If the terms agreed are not understood beforehand, it could result in a lot of trouble for home buyers in the longer run. Hence, the crucial pointers to be taken care of before signing a BBA are enunciated below.

Requisites in a Model Builder-Buyer Agreement

Although builder projects are prevailing in all states and UTs in India. However, there is no uniform format that decides the conditions of agreement between home-buyers and the builders. The validity of builder-buyer agreement depends upon the terms and conditions included in the document. Given below are the general conditions which should be scrutinised by the home buyers before signing any document:

  • Clear title over the construction and undivided share in the property. 
  • Just like the builder, buyers should also have some terms in their favour granting the right to opt out. In other words, buyers should have the right to call off the deal in certain circumstances without facing any penalty.
  • Disclosure of non-balcony carpet area of the builder flat/ apartment.
  • Clear lineation of the super area and the carpet area, in confirmation with that advertised through word or brochure.
  • Any change in the building layout in future should seek buyer’s consent. 
  • Clear dimensions of rooms/ units in the flat without any complex numbers to interfere with the rights of allottees.
  • Payment plan should be the same adopted by the home-buyers. 
  • Undisclosed additional charges like that of membership or electricity connection should also be settled in the builder-buyer agreement sample draft.
  • Delay penalty clause for home buyers should be in consonance with the delay in delivery of the project which leads to compensation from builder as well.
  • Transferability of the flat/ apartment should escape any blocks or unnecessary penalties.
  • Super area variation on delivery should be limited.
  • Memberships in club areas, or other common areas in the project (Whether exclusive to the home buyers for the said project or open for the general public).
  • Even rights to the common areas like reserved parking should be definitely specified so that it does not turn out to be a paid parking later.
  • If the material to be used in the project is specified in the brochure, etc., then it should similarly be specified in the builder-buyer agreement too.
  • Maintenance contracts and upkeep of the project should fall under the Residents Welfare Association (RWA) as per RERA new rules.
  • Changes to Floor Space Index (FSI) or Floor Area Ratio (FAR) and the rights arising should not solely be in the builder's favour.
  • There should be a clause that mentions protection or indemnity to the home-buyers against the loss incurred if some legal dispute regarding the property arises in future

If the terms and conditions contained in the builder-buyer agreement are too tricky and complex to be understood by a lay person, real estate lawyers are the rescue professionals. Before signing the RERA builder buyer agreement, it is recommended to understand the terms thoroughly. The reason being that BBA is drafted by experienced legal professionals hired by the builders. Hence, the document mostly inclines towards the builder’s interests and thus, the home-buyer’s interests are often compromised. 

Supreme Court on Builder Buyer Agreement

In a recent 2021 case, a Public Interest Litigation (PIL) sought a uniform builder-buyer agreement across the nation. Currently, it is upto the states to or not to issue a model builder buyer agreement format which specifies the terms and conditions to be included in such state in the real estate. However, the same is not followed at the state level as well. The PIL seeks a common format from the central government which applies to all the states, upholds the buyer’s rights and strictly requires the builders to follow the requirements under RERA. Proceedings are ongoing in this case, and hence, the uniform RERA builder-buyer agreement is awaited.  

General Queries Related to BBA

Q- What is a builder buyer agreement?

A- The conditions agreed upon by the builder and a buyer regarding delivery of one of the units of a builder’s housing project is usually termed as RERA builder buyer agreement or a BBA agreement. The conditions range from specifications of carpet and super area, date of possession, building layout, delay in delivery, payment plan, etc. 

Q- Is builder buyer agreement a contract?

A- The major difference between agreement and contract is that promise and acceptance to do or abstain from something is agreed upon which forms an agreement. For an agreement to become a contract, there are certain legal obligations. Hence, the validity of builder-buyer agreement or it being a binding contract depends upon the legality of terms included. If such agreement is against the existing real estate laws, it is not valid and hence, not a contract. 

Q- Can a builder cancel the agreement? 

A- If the builder-buyer agreement specifies the terms on which the deal can be terminated, it can indeed be cancelled by the builder rightfully. Delays in payment or no payment after a few instalments are one of the major reasons for cancellation of builder buyer agreement registration. 

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