Have a good look at the
construction agreement
| A construction agreement is concerned with execution of the work and
transfer or sale of goods involved. |
FOR A CLEAR UNDERSTANDING: Read through the construction agreement carefully.
You are in the process of acquiring an apartment. You will
notice that there are usually three documents which are executed in your favour.
One is a sale agreement. This covers the intended sale of the undivided share of
land. The land is later conveyed under a sale deed. If the sale is a first sale
of undivided share of land, then the title will be confined only to the
undivided share of land conveyed. In order to acquire the title to your portion
of the building, you will need a construction agreement. The agreement for sale
and the sale deed are executed by the owner of the land or by the builder on
behalf of the owner. The construction agreement is directly executed by the
builder. This is a standard procedure.
In certain instances, the builder executes a promoter's
agreement which is a combination of the agreement for sale as well as the
construction agreement. In such cases, the builder agrees to obtain conveyance
of the relevant undivided share of land.
The construction agreement is essentially a works contract.
In other words, it is an agreement in writing for the execution of the work
relating to the construction of the apartment and it also involves the transfer
or sale of the goods involved in the execution of the contract. The nature of
this contract is such that a person undertakes to execute work by incorporating
various items, things and goods in such work. When completed, these items along
with the executed work are owned by the person for whom the work has been
executed.
To have a more clear understanding of the position, it
involves sale of goods which are incorporated in the work and providing of
service for the purpose of execution of the work.
You have to understand that as this is indicative of the
title to the building or portion of the building, it has to cover certain vital
aspects. For example, in the case of an apartment which is being constructed
pursuant to the execution of a construction agreement, it should contain with
clarity the entire extent of land on which the building is being constructed;
the particulars of the undivided share of land being conveyed to the purchaser;
the location of the apartment within the building; particulars of built-up area
or super built-up area; particulars of any common or exclusive amenity or
facility being provided.
The construction agreement also indicates the price at which
the building is being acquired by the purchaser, who is usually referred to as
the allottee. You have to check whether this price includes payment towards
allotment of car park, provision of common or exclusive amenities or facilities,
deposits payable to various authorities, taxes such as VAT and service tax.
You also have to understand the terminology employed in the
construction agreement with reference to the apartment such as the built-up
area, super built-up area, private garden, private terrace, common car park,
exclusive car park, covered car park, open car park, common area, etc. You also
have to understand the cost implications of these matters.
The standard features and items that will be incorporated in
your apartment are usually furnished under the title of `specifications'. The
specifications normally cover broad details such as flooring, doors, windows,
wall finish, particulars of fittings in toilets and other rooms, description of
kitchen, service connections and particulars relating to electrical fittings
throughout the apartment. The specifications have to be completely checked on
all aspects and one can say that this will be one of the most important aspects
in the ownership of your apartment.
The construction agreement will also contain particulars of
the time required for completion of the apartment. Different builders have
different concepts of completion. Further, completion is different from delivery
of the apartment. Usually, there is a provision and even in the absence of a
clear provision, it is understood between both parties that providing the
apartment for the house warming ceremony will not amount to delivery of
possession. The delivery of possession is normally evidenced through a letter
issued by the builder confirming the same as well as the fact that your payments
have been completed. All the keys relating to your apartment have to be
delivered to you.
Any error in the description of your flat or providing of the
amenity may involve considerable damage at your end at a later point of time. As
such, please make sure that all the relevant factors are clearly stated in the
construction agreement.
The common practice is that the construction agreement is an
unregistered document stamped for a nominal value, which is the same as that of
an agreement. However, if it relates to the construction of a house or a
building on the land sold by the owner and if it contains a stipulation that the
land and the building so constructed shall be held individually or jointly by
the purchaser, then it has to be stamped as a conveyance on the value of the
proposed construction.
Other
factors
The construction agreement also governs your relationship
with the other persons acquiring an interest in the property or the project
concerned. It may also touch on the aspects of forming of an association and on
the maintenance of the building once the construction is completed and the
project is handed over. There is also a practice of collecting a lump sum
maintenance fee from the allottees or purchasers. At times, the construction
agreement is split into two or more documents, such as construction or builder's
agreement, agreement for provision of amenities, agreement for allotment of car
park, agreement for providing services, agreement for supervision, etc. In such
cases, the implications of the documents have to be read together.
The construction agreement is not any less important than the
sale deed. Many times sufficient importance is not given to the construction
agreement as a result of which one can land in considerable trouble or hardship
at a later stage.
Therefore, it is advisable for you to understand the nature
and the importance of this vital document. In order that you have sufficient
clarity in understanding the terms and conditions contained in the document, it
is best to obtain professional advice in this regard.
This will ensure that your interests are taken care of at an
early stage.
SRINATH SRIDEVAN
Courtesy: Property Plus, The Hindu
http://www.hindu.com/pp/2007/03/10/stories/2007031000960400.htm
