When it comes to purchasing a property in India, understanding the Agreement for Sale and Sale Deed is crucial. These legal documents provide a formal structure to verbal agreements between buyers and sellers, ensuring that both parties are protected. In this article, we will delve into the important terms and conditions found in these documents and discuss their significance in property transactions in India.
AGREEMENT FOR SALE VS. SALE DEED:
An Agreement for Sale, also known as the Sale Agreement, outlines the terms and conditions agreed upon by the buyer and seller. It serves as a roadmap for the transaction, covering details such as the property's location, sale price, payment plan, completion timeline, and other essential terms.
On the other hand, a Sale Deed, also known as the conveyance deed, is the legal document that transfers ownership of the property from the seller to the buyer. It is executed once the property transaction is complete and all terms of the Agreement for Sale have been fulfilled.
MODEL AGREEMENT FOR SALE PRESCRIBED UNDER RERA AND IMPORTANT CLAUSES:
The Real Estate (Regulation and Development) Act, 2016 (RERA) has introduced a Model Agreement for Sale that acts as a reference for developers and buyers when drafting a sale agreement. This model agreement includes several pertinent clauses such as the payment plan, completion timeline, carpet area, and penalty clauses for delays. These clauses provide clarity and protection for both parties involved in the property transaction.
COMPULSORY REGISTRATION OF AGREEMENT FOR SALE UNDER RERA:
RERA mandates the compulsory registration of an Agreement for Sale for both ongoing and new projects. This registration ensures that the agreement incorporates essential details like the carpet area, number of units, sale price, payment plan, and other necessary terms and conditions. By making registration compulsory, RERA aims to enhance transparency and safeguard the interests of buyers.
CONTENTS OF THE AGREEMENT FOR SALE:
The Agreement for Sale should include the following crucial information:
- Description of the property:
This section should provide an accurate and comprehensive description of the property, including its address, size, legal description, and other relevant details.
- Parties to Sale Deed:
Include detailed information about the buyer and seller, such as their names, addresses, contact numbers, and PAN card numbers.
- Property Description:
This section should provide a detailed description of the property being sold, including the unit number, address, carpet area, boundaries, and type of property (flat, plot, or house).
- Purchase Price and Payment Terms:
Clearly state the purchase price along with the payment schedule and mode of payment. Specify the payment plan, including the payment schedule, amount of earnest money, and the balance payable upon executing the sale deed.
- Timeline:
Set a specific timeline for the completion of the sale. If the sale is not concluded by the agreed-upon date, the agreement may be canceled, and any advance consideration should be refunded.
- Due Diligence:
Ensure that the seller provides complete assistance and cooperation to the buyer for undertaking due diligence of the property. This includes facilitating the verification of the property's title and addressing any queries the buyer may have.
- Encumbrances:
Unless agreed otherwise, state that the property should be sold free from any encumbrances. Additionally, the seller must clear all dues and liabilities (property taxes, electricity charges, maintenance charges, etc.) related to the property until the date of sale.
- Right to Abort:
Reserve the buyer's right to abort the deal under certain circumstances without facing any financial penalties. This includes discovering defects in the property's title or non-compliance with the agreed terms and conditions by the seller.
- Indemnity against Legal Defects:
Include an indemnity clause in the agreement to safeguard the buyer against any adverse claims arising from defects in the property's title or the actions/inactions of the seller.
- Updating Government Records:
Ensure that the seller provides all necessary assistance to update government records reflecting the buyer as the new owner of the property.
- Exclusivity of the Sale:
Include a clause on exclusivity, prohibiting the seller from conducting discussions or negotiations with third parties regarding the property while the sale is in progress.
- Default:
Specify the consequences if either party defaults on their obligations. This may include penalties, the right to terminate the agreement, or both.
- Dispute Resolution:
Specify how disputes will be resolved through arbitration, litigation, or RERA's dispute resolution mechanisms.
RIGHTS OF THE SELLER UNDER AN AGREEMENT TO SELL
The seller possesses certain rights under an Agreement to Sell, which are as follows:
- Right to Receive the Sale Consideration:
The seller has the right to receive the sale consideration from the buyer upon the completion of the transaction. The consideration can be provided in cash or any mutually agreed-upon mode of payment.
- Right to Deliver Possession of the Property:
The seller has the right to deliver possession of the property to the buyer once the transaction is completed. It is the seller's responsibility to ensure that the property is in good condition and free from any encumbrances before handing over possession to the buyer.
- Right to Sue the Buyer for Specific Performance of the Contract:
If the buyer breaches the terms and conditions of the agreement, the seller has the right to sue the buyer for specific performance of the contract. This means that the seller can legally compel the buyer to fulfill their obligations as per the agreed-upon terms and conditions.
- Right to Terminate the Contract:
The seller has the right to terminate the contract in case of a breach by the buyer. However, the seller must provide prior notice to the buyer and adhere to the terms and conditions outlined in the agreement.
- Right to Withdraw from the Sale:
In the absence of an agreement or if either party cancels or withdraws from the sale, the seller has the right to completely withdraw from the transaction.
CONTENTS OF THE SALE DEED
The Sale Deed should contain the following details:
- Parties to the Sale Deed:
The sale deed must include the names, addresses, contact numbers, and PAN card numbers of both the buyer and the seller.
- Property Description:
A detailed description of the property being sold, including its address, area, boundaries, type (flat, plot, or house), and other relevant information should be mentioned in the sale deed.
- Sale Consideration:
The sale deed must specify the agreed-upon sale price between the buyer and the seller. Additionally, it should state the mode of payment, such as cash, cheque, or online transfer, and the sale consideration should be mentioned in both words and figures.
- Payment Terms:
The sale deed should outline the payment terms agreed upon by the parties, including the mode of payment, payment schedule, and any other relevant details.
- Encumbrances:
It is important to mention in the sale deed whether the property is free from any encumbrances, such as mortgages, liens, or charges. In case of any encumbrances, they should be specified in the sale deed.
- Indemnity:
The sale deed should include an indemnity clause in which the seller indemnifies the buyer against any losses or damages arising from defects in the title, misrepresentations, or other breaches of the sale deed.
- Possession:
The sale deed should mention the exact date of the transfer of possession of the property. Any conditions related to possession, such as vacant possession or possession subject to existing tenancies, should also be specified.
- Dispute Resolution:
A clause related to dispute resolution should be included in the sale deed. This clause outlines that any dispute arising out of the sale deed will be resolved through arbitration or the court system.
STAMP DUTY AND REGISTRATION FEES
The stamp duty and registration fees payable for an Agreement for Sale and Sale Deed vary depending on the state where the property is located. It is advisable for the buyer and seller to consult with a lawyer to determine the exact amount of stamp duty and registration fees that will be applicable.
EXECUTION PROCESS IN INDIA
The execution process of an Agreement for Sale and Sale Deed in India involves the following steps:
- Drafting and signing of the agreement by both parties.
- Payment of token money by the buyer to the seller as a sign of good faith.
- Registration of the sale agreement with the Sub-Registrar of Assurances within four months of signing.
- The seller providing all necessary documents, such as the possession letter and society transfer forms, to the buyer.
- Payment of the balance amount by the buyer and execution of the sale deed.
EXECUTION OF AGREEMENT IN ABSENCE OF A PERSON IN INDIA THROUGH POA
If one of the parties is not present in India during the execution of the agreement, they can appoint a Power of Attorney (POA) holder to act on their behalf. The POA holder must be authorized in writing and possess the requisite documents to execute the agreement.
PRESENCE OF PARTIES
The presence of only the seller is required at the time of registration of the agreement for sale before the registrar. However, both parties must be physically present at the time of executing the sale deed.
CONCLUSION
In conclusion, an Agreement for Sale and Sale Deed are two essential legal documents that must be executed while purchasing a property in India. It's crucial to include all the necessary clauses in the agreement to safeguard the interests of both parties. Stamp duty and registration fees are payable while executing the agreement, and the execution process involves several steps. In exceptional circumstances, the parties can execute the agreement through POA or video conferencing. The model agreement prescribed under RERA and the compulsory registration of agreements are two significant provisions that must be considered while drafting an agreement for sale.
Here are some additional tips while drafting the agreement and sale deed:
- Be sure to use clear and concise language.
- Avoid using jargon or technical terms.
- Be as specific as possible.
Have the agreement reviewed by a lawyer