sreekanth (Consultant) 26 September 2010

MOU for advance payment towards purchase of property

Hello Sir,

I am planning to buy a property which is in Pre-launch stage. This project is pending for approval from the concerned authority. Approvals are likely to come in another 3 months from now. Developer has provided an MOU (attached) for this purpose. This MOU is done an stamp paper and along with this company is providing company receipt for the advance amount. As per the developer, this MOU and company receipt serves as the guarantee for the advance amount.

Developer will formalize the sale agreement as per the terms agreed in MOU once the approvals are completed, which is likely to be in 3 months from now.

My question is does the MOU serve as legal binding between both the parties? If yes, will the terms mentioned in the attached MOU meets the requirement in general? Are there any other terms that are important and missing in this MOU? (Do we need to include jurisdiction?)

Appreciate your inputs on this. Thank you sir.

Regards

Sreekanth

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4 Replies

N.K.Assumi (Advocate) 27 September 2010

But why MOU? Better get Acknowlegement Receipt of advance money with revenue stamp on it, along with a Sale Deed on proper stamp paper.

Joy Dey (Advocate) 29 September 2010

Get an Agreement to Sell (ATS) executed. Get all payments acknowledged by the developer in the ATS.

Register the ATS and pay the requisite stamp duty, with a clause that if sale does not happen, developer will refund the stamp duty to you.

Stamp duty paid on ATS is adjustible at the time of registering proper sale deed.

(Disclaimer: above is not a legal advice. Just an non-binding opinion. Use with discretion.)

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SANJEEV SRIVASTAVA (LAWYER) 16 October 2010

Dear Sreekanth advice Given by Mr. Joy Dey is good, But likely to add some spice on this. In my opinion All the builders are trying to their best efforts for getting approval for their project, but you know the govt. machineries also and some times builders due to several reasons are reluctant to thier projects.

It is advisable to execute AGT and get it registered and add all things given below in AGT, and also get a Undertaking, Indemnity Bond in you favour for loss of damages on account thereof, which may arise in future.

Mention in Agreement:

Time is essence of this agreement and no excuse will be entertained
Thereafter Builder will reimburse all amount and any delay will liable him to pay interest
Undertaking
Indemnity Bond to safe from all damages

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sreekanth (Consultant) 19 October 2010

Thankyou Sanjeev Srivastava, Joy Dey and Assumi for your replies.