This article explains all that you need to know about the tripartite agreement. This includes the meaning, why you need it, how it works, and the typical formats that you can use to develop a tripartite agreement. When writing a tripartite agreement, you will need to include many legal terms.
You can also find a third-party agreement template that you can use as a guide in drafting your agreement. It is advised that you seek professional legal counsel to know if a tripartite contract is the right choice for what you need it for.
What is a Tripartite Agreement?
A tripartite agreement is a legal document that explicitly states the responsibilities and obligations of all parties that are involved in a deal. The agreement elaborates the different terms and conditions that all parties must follow in the course of carrying out the specified deal.
This agreement is often drawn up among three parties and it mostly relates to the subject matter of property. For instance, when a buyer decides to choose a home loan to buy a house that is under construction, a tripartite agreement is required to help the buyer to acquire the loan to purchase the property.
At the time of the agreement, the home is not yet in the name of the buyer until possession. Therefore, the builder will be included in the agreement that is to be signed with the bank or loan company. The document must contain all relevant details about the property as well as the annexure for the original documents.
To validate the tri-party agreement, the agreement must be stamped in the state where the specified property is located. To understand the specific contents of the agreement, you should check a three-party agreement template.
Why Do You Need a Tripartite Agreement?
A tri-party agreement is a legally binding contract that specifies the responsibilities and obligations of parties involved in a deal. It also highlights all the terms and conditions that all parties must follow in the course of executing the deals. If you are involved in a deal that involves the sale or purchase of a property, you would need the tripartite agreement.
The document ensures that all parties in the deal are committed to their parts of the deal. For instance, when a third-party agreement is in place, it becomes impossible for a third-party that is related to the agreement to claim that they are unaware of such a transaction.
Additionally, it becomes impossible for the successors or legal heirs of the third-party specified in the agreement to challenge the transaction at a future time. Also, if you want the bank or financial institution that you approach for a loan preferment to take you seriously, you need to consider drafting a three-party contract with the parties involved.
This shows that the transaction is indeed genuine. You also need this agreement to specify that no arrears are payable to the third party by the seller.
How Do Tripartite Agreements Work?
A tripartite agreement is an effective contract that helps buyers to obtain finance from financial institutions against the plan to buy a property from a specified developer. The triparty agreement explains the status of the parties involved in the transactions and gives the guidelines for monitoring all documents.
The contract outlines the rights and obligations of the borrower, builder, and lender. It highlights the different phases or stages of the construction, the agreement on common amenities areas, the final sale price, and possession date. It should also include the interest rate, the payment schedule for the acquired loan, the penalty for canceled booking, and equal monthly installment details.
A tripartite agreement also outlines the legal process, referred to as subordination. This defines the ‘whom’, ‘when’, and ‘how’ the different agreements within the property will be transferred among the parties. It indicates to the seller or developer that the property possesses a clear title.
Additionally, the agreement emphasizes that the developer has not and will not enter into any new contract for the property’s sale with another party. The tri-party agreement also states the liabilities of the developer to construct the structure according to approved specifications and plans from the local authority.
The Typical Format of a Tripartite Agreement Include
The third-party agreement format may vary from one agreement to the other. However, there are specific details that must be included in the document to make it enforceable. The typical format of a tripartite agreement would include the following information:
- The names of all parties involved in the agreement
- The specific objectives of the tri-party agreement
- The rights and obligations of the parties involved
- The legal implications of the tripartite agreement
- The perspectives of the borrower, developer, and the lender/bank.
- The agreed selling price
- The specific agreed date of possession
- The interest rate payable as applicable
- The details of the equal monthly installment
- Progress details and stages of the construction
- Agreement basic amenities areas
You can find a tri-party agreement sample that you can use to create your contract. You can also engage the service of an attorney to help you in drafting the document. However, if you want to cut costs, you should use a template to write your tripartite agreement. However, you should consider sharing the document with your lawyer for professional input.
Conclusion
A tripartite agreement is an important document used when you want to request financing in the purchase of a home. Usually, the terms and conditions in the agreement are often technical and may be difficult for you to understand, especially if you do not have a legal background.
Therefore, it is recommended that you seek the professional assistance of a legal practitioner in reviewing the tri-party agreement.
