Contracts, the preeminent part of the real estate sector, are the foundation for transparency, enforceability, and trust in every transaction. The stakeholders in a real estate transaction stay cautious about the accuracy of documentation, legal compliance, and potential risks that may impact the deal's validity. Even the smallest ambiguity in a contract can become a huge liability for the parties to the contract. That’s why real estate firms exercise utmost diligence in the drafting, review, and negotiation of contracts.
The Crucial Role of Contract Review in Real Estate
‘Contract Review’ is one of the most essential stages in Contract Lifecycle Management. After drafting, the agreement is being put forward for review. Generally, the review is done in two stages:
Pre-execution: An agreement attains the status of a contract once it is duly signed by both parties and rendered legally enforceable. Before signing a contract for execution, an agreement is reviewed for any ambiguous, missing, or wrongly inserted clauses. This has been done to protect the interests of both parties and avoid any serious legal complications in future.
Post-execution: When both parties sign the contract, the next step is execution. Even after execution, the contract has been continuously reviewed for compliance. This has been done to check whether both parties have met their end of the conditions or not.
If, at any stage, the contract has been reviewed negligently then it can lead to severe legal complications. In the real estate sector, these complications can be a nightmare for a developer, agent, or even an allotee.
One such inference can be taken from ‘Belaire Owners’ Association v. DLF Limited, HUDA & Ors.’
In this case, DLF Limited launched a project in Gurgaon named 'Belaire Housing Complex'. Initially, it was planned to have 5 buildings with 19 floors each. However, during construction, DLF unilaterally increased the number of floors in each building from 19 to 29. Due to this, buyers who had made timely payments for their apartments and were ready to move in faced a delay in possession. A complaint was filed against the DLF for misusing its dominant position in the contract which was alleged to be arbitrary and unfair.
When examined, it was found that there were multiple problematic clauses in the DLF's agreement. The agreement gave DLF unilateral modification rights, arbitrary cancellation and forfeiture. The Competition Commission of India held that DLF has abused its dominant position in the contract and imposed a penalty of Rs. 630 crores.
This is among the finest examples of how a negligently reviewed contract can adversely affect the parties, highlighting why real estate professionals must exercise greater care when reviewing agreements.
Contract Review Made Simple with LawSimpl
A real estate giant like DLF handles hundreds of contracts every single day whether it’s drafting new agreements or reviewing existing ones. Manually reviewing each contract not only creates a massive backlog of pending work but also leads to significant employee fatigue and reduced efficiency. In the long term, this affects the credibility and position of the company in the market.
One of the smartest solutions for such of problem is to leverage the tools that streamline the process and reduce the risk of errors with the same human resource.
LawSimpl is the tool that can streamline this mess and make it manageable. It provides contract review for legal documents and makes sure to flag risky, ambiguous and potentially missing clauses.
The 'review' feature of LawSimpl can prove to be one of the most useful features for real estate firms and professionals.
The platform can check the legal document for compliance with all the essential aspects. These 'essential aspects' can be different for every legal document and the system has been designed in a way that first it will identify the domain of the document and then it will check it for compliance.
While uploading a document, the user can even add 'instructions' before starting the review to specify on what grounds they want to review the document. This is an optional feature and users can choose to add specific instructions if they wish. Even if they don’t, the platform will still conduct a comprehensive review of the entire document.
Once the document review has been completed, it will provide the user with a 'detailed analysis' of the uploaded document. This detailed analysis will have a brief of the document consisting of the subject matter and domain of the document like
This Master Services Agreement outlines the terms and conditions under which a Service Provider will render marketing and advertising services to ___________, a division of ______________, covering scope of work, intellectual property, confidentiality, and compensation.
The paragraph above represents the summary generated by LawSimpl as part of its document review process. Apart from this, the review will mention the domain such as 'real estate transactions' if it is a document of a real estate transaction.
Thereafter, the review will have a list of risky clauses in the documents, which will be segregated on the basis of the risk they pose for the deal like 'low, 'medium', and 'high'.
The user can 'open' the clauses for more details and they will also be provided with the option of marking the clause as 'resolved' or 'accept risk'. By opening the clause, the user can see the details as to what reason the clause is risky and a suggestion along with it on how it can be resolved.
This comprehensive review will not take hours but minutes for the analysis. It will not only save valuable time but also boost accuracy, reduce manual effort, and ensure consistency.
Conclusion
The real estate sector operates on tight timelines and complex legal frameworks, making precision and speed essential. A platform like LawSimpl can ensure the completion of these tight timelines with utmost accuracy. The integration of LawSimpl into the workflow will allow teams to make faster and more accurate legal decisions, even in times of stress.
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