What Is a Tri-Party Agreement?

A tri-party agreement is a legal business contract between three separate parties. While seen in all kinds of industries or�⛄� ventures, it is commonly used in the mortgage industry.

A tri-party, or tripartite, agrꩲeement often deals with the construction phase of a new home or condominium complex.

It is used when securing bridge loans for the construction itself. In such cases, the loan contract involves the buyer, the lender, and the builder.

Understanding Tri-Party Agreements

With a property that has yet to be built, the homebuyer has to get a loan to co🎃ver the cost of construction in order to s✃ecure an agreement with the builder of the property.

That agreement will then be a tri-party agreement and include the buyer, the builder, and the lender. The buyer won't own the property until after construction, when they take possession of it.

The tri-party agreement serves an important purpose in prot🍸ecting the buyer should disputes arise between the buyer and the builder.

The lender of the home loan, often a financial institution such🌳 as a bank, acts as an arbitrator in such cases.

The agreement resolves potentially conflicting 🃏claims on the property should the borrower default or perhaps even die during construction.

For example, it can inclu༺de include terms about the timely scheduling an𒐪d completion of construction work, as well as specifics concerning quality workmanship.

These terms can ensure that the borrower gets what they have asked for and the builder gets paid for providing it (and can pay thei🥃r subcontractors, such as plumbers and electricians).

The agreement can prevent financial disputes between the builder and the buyer because the details are spelled out. The buyer can avoid a 澳洲幸运5开奖号码历史查询:construction lien on the property due to nonpayment.

The agreement's terms also restate the bank's right to take possession of the property if the borrower defaults on the loan.

Tri-Party Agreement Features

A tri-p⛦arty construction loan agreement typically lists the rights and remedies of all three parties—the borrower,🅺 the lender, and the builder.

It details the phases of constructi♔on, the final sales price, the date on which the buyer takes possession, the loan interest rate, and payment schedule for the loan.

It also specifies the legal process known as subrogation, which determines how, when, and✅ to whom various rights in the property may be transferred between the parties.

For example, in the event of the death of the borrower, the builder may retain the first ri🐓ght to claim what they are owed for time and materials. The bank would then retain the lien on the remaining assets—typically, the land itself.

Other Uses of Tri-Party Agreements

In some cases, ꦏtri-party agreements can cover the property owner, the architect or designer, and the building contractor.

Such agreements are no-fault arrangements in which all parties agree to remedy their own mistakes or n𒁃egligence, and not to hold other parties liable for any good-faith omissions or errors.

To avoid errors and delays, they often include a de꧅tailed quality plan and spell out when and where regular meetings between the parties will take place.

The Bottom Line

A tri-party agreement is any legal contract between three parties. It often comes into play when a homebuyer purchasing a property tha🌜t is to be constructed has to get a loan to secure an agreement with the builder so t♛hey will proceed.

In such cases, the tri-party agreement involves just the construction phase of the home buying process. The parties to it are the buyer, the lender, and the bu😼ilder.