What is a Tripartite Deed?
Deeds and contracts are two different forms of written agreement. A tripartite deed is an agreement involving three parties. Find out more here.
A tripartite deed is an agreement involving three parties. They are common in various areas of the law. It is important to note that a deed is a different form of a written agreement than a contract. A deed only requires the exchange of promises while contracts require the exchange of valuable consideration.
Tripartite Deeds and Financing
Usually, tripartite deeds include a financing or lending party. For the loan providers, the tripartite agreement is a means of securing their loan. For example, a tripartite deed may take place between a developer, a builder and a lender. The deed clarifies the status of all the parties involved. It also sets out the rights and obligations of each party in relation to the building and the loan. A tripartite deed may also exist between a new purchaser, a developer, and the mortgage provider for a planned property. The mortgage provider may become the new owner under the tripartite deed if the new purchaser is unable to make mortgage repayments.
Government agencies also employ a tripartite deeds when it is necessary. For example, the NSW Land and Housing Corporation must be a signatory to a tripartite deed when developing land for housing. A sample of the tripartite deed is available here.
However, not all tripartite deeds require a financing or lending party. For example, a tripartite deed may exist between a former solicitor, a client, and a new solicitor. The deed would govern how the former solicitor is able to claim the unpaid amount for his work from the client who has a new solicitor.
Other parties commonly included in a tripartite agreement include a guarantor or an indemnifier. The existence of a guarantor or indemnifier provides security for the financier. The parties are common in tripartite deeds that involve corporations. Lenders may require shareholders or directors to personally guarantee the land or become an indemnifier.
Contents of a Tripartite Deed
Usually, the deed will include various details. Firstly, the deed may set out the basis details such as the names of the parties, their details, and the objectives of the agreement in the form of recitals. The deed will contain the details of the loan such as the loan amount, the interest rate, and the repayment schedule. The loan will also contain details about the security of the loan. Importantly, the loan will set out the rights and remedies of each party, the forms of default or breach of the duties, and the consequences of the default or breach.
Negotiating Tripartite Deeds
A tripartite deed can be a cause of prolonged negotiation. For the financing or lending party, it is necessary that they are able to protect their loan. Firstly, the lender or financier will require the consent of the borrower to grant the security. Provisions enforcing their security would therefore be essential. Secondly, the financier or lender may impose notice requirements. The borrower must notify the lender or financier of any defaults under the contracts. Thirdly, the financier or lender may also choose to ‘cure’ any defaults by stepping in and acting on behalf of the borrower. This will ensure that the agreement continues despite a default. For assistance with financing, you can connect with Lawpath’s best Business Finance Lawyers here.
Annexure of documents
Further details will depend on the circumstances. For example, tripartite deeds relating to construction will include the details of the property and annex any original property documents. There may exist a seperate agreement between the parties which further defines their rights and obligations. The parties may choose to annex that agreement to the tripartite deed. If you are a builder or developer, it is essential that you can get the best legal advice to assist you in negotiating a tripartite agreement.
Meru is a legal tech intern at Lawpath and a Bachelor of Laws student at The University of Technology Sydney. He is interested in how technology can help bring the legal industry into the 21st century.