A sale agreement, drafted effectively, acts as a safeguard to safeguard rights of purchaser and vendee if prepared correctly and mentions total sum of conveyance before sale deed is conducted. This document is considered to be significant in India for sale of property.
What is Sale Agreement
A sale agreement (which is sometimes called an agreement to sell) is a document that secures the sale of a piece of property for the future. In the case of a sale of property, this document does not in itself transfer title; a sale deed registered with the Sub Registrar transfers final ownership.
Several disputes occur because parties rely upon an informal promise rather than a written contract. An express agreement will generally avoid confusion over payments, delivery, delay and latent defects in title.
When It Is Used
Is often used when the sale price has been agreed upon between the buyer and seller, but they require a period of time to complete legal checks and searches, arrange the funding required, or complete any conditions before registration. It can also be used to secure the deal and prevent the vendor from dealing with the property with any other party.
For immovable property, this agreement usually precedes the sale deed & can even specify the date by when the final deed will be executed. The draft should also specify those who will pay stamp duty, registration costs etc.
Sales Agreement Essential Clauses
A strong sale agreement should include the following clauses:
- Names, addresses, and other identification information of the buyer and the seller.
- Complete description on ownership, mode of acquisition, location, boundaries, area and complete survey/khasra details if available.
- Sale consideration and payment plan.
- If any part of the price is paid before the delivery of the property, it shall specify the total sum paid in advance.
- That the undermentioned property is/or will be free from all claims, encumbrances, liens, and litigation.
- Time line for completion and execution of sale deed.
- Terms of possession.
- Clause of default, cancel and refund.
- Indemnity.
- Distribution of the expenses for stamp duty, registration, and others.
How to Draft Sales Agreement
In drafting a sale agreement of property in India following steps should be taken:
- Begin with the main title like “Agreement to Sell”.
- What parties seem to be involved? Include full addresses and any substantiating details.
- Accuracy-describe the property accurately do not use imprecise terms.
- The complete sale price rate should be stated along with the advance paid.
- Fix a date for execution of the sale deed.
- Include checking on title and no encumbrance representations.
- Note on terms of possession delivery and whom is covering until possession of taxes or maintenance.
- Add breach and indemnity section.
- Both parties’ signatures must be present and ideally two witnesses.
- Have the document stamped and filed where needed under applicable state law.
Registration And Stamp Duty
Tag and registration costs differ for each state; always compare the draft with local rates. In transfer of property, registration makes the contract legally safe though most contracts are also stamped to make them legally acceptable.
Where the agreement is also accompanied by possession, or where it is subject to any state registration requirements, registration is even more critical. As practice on this point varies from state to state, the draft should be in accordance with the relevant state stamp and registration regime before execution.
Common Mistakes
The average error is to confuse an agreement to sell for the sale deed and leaving out details like payment ladders, possession terms and detailed particulars of the property while drafting the sale deed.
Otherwise the consequences of disregarding defects in the title, prior agreements or any encumbrance will not be met with certainty, and this in itself is a particular risk to be taken. A good agreement will provide that the seller is declaring there is free title and will indemnify the purchaser against any such defect appearing at a later date.
Sample Draft
Here is a simple sample format for a Property sale agreement in India.
AGREEMENT TO SELL
This Agreement to Sell is made this _ day of , 20__ at .
BY AND BETWEEN:
Seller:
Name:
Father’s/Husband’s Name:
Address:
PAN/Aadhaar:
Buyer:
Name:
Father’s/Husband’s Name:
Address:
PAN/Aadhaar:
NOW, for and in consideration of the promises hereinafter contained and other valuable consideration received, we do hereby agree to sell to: WHEREAS the Seller is the legal owner and in possession of the property known as:
Property Details:
Kindly furnish the details such as exact address, boundaries, area, survey number, flat number, floor, municipal details and all other particulars so that we can identify the respective particulars.
1. Agreement to Sell
The Seller shall sell and the Buyer shall purchase the said property for Rs. /- (Rupees only) as consideration.
2. Payment Terms
The Buyercash has paid Rs. /-Â Â as earnest money/advance by . The balance Rs. /-Â shall be paid on or before..
3. Title and Encumbrance
Seller affirms and agrees that the Seller is the owner of the Property and that the Property is now free and clear of all encumbrances, liens, charges, suits, seizures, attachments or claims of third parties whatsoever, except as set forth herein:
4. Possession
Physical possession of the property will be handed over by the Seller to the Buyer at/on the execution of the sale deed or before.
5. Sale Deed
The sale deed shall be executed by the parties on or before before the competent Sub-Registrar.
6. Taxes and Charges
The property tax, electricity, water charges, upkeep, stamp duty, registration charges shall be paid by the other party as mutually decided.
7. Default Clause
In case the Seller does not fulfill the transaction the Seller shall pay back the very first in advance amount along with the agreed compensation, if any, agreed upon herein. In the event the Buyer does not make payment of the remaining part within the time specified the Seller may cancel this agreement after due notice of breach and refund/forfeit the once paid in advance as agreed herein.
8. Indemnity
Seller shall protect and defend Buyer and shall indemnify the Buyer against any expense or loss resulting from the Seller’s failure of title, breach of warranty or unnotified encumbrances.
9. Governing Law
This Agreement shall be subject to the laws in force in India.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first written above.
Seller Signature:
Buyer Signature:
Witness 1:
Witness 2:
FAQs
1. Is a sale agreement legally valid in India?
Correct. A sale agreement if properly drafted is a valid contract. However, in case of property sale there is no transfer of ownership until actual sale deed registered. This registered sale deed is the sale of property.
2. Is registration mandatory for every sale agreement?
It is not universal. The rule for registration varies according to the nature of the transaction and the state laws, while several agreements are to be registered when possession or some other condition is available.
3. What do you mean by agreement to sell and sale deed?
An agreement to sell is a promise to consummate the sale at a future date whereas sale deed is the sale deed.
4. Who pays stamp duty and registration charges?
It varies according to contractual arrangement and local law. Commonly, the agreement should specify who will be responsible for them-buying or selling party.
5. Seller able to sell property to another after signing up the agreement?
A seller should not do this. Not only does the agreement incorporate contractual obligations, but it could also open up the seller to legal action for breach. A specific no-third-party-transfer clause is recommended to avoid this problem.