[ecis2016.org] An agreement for sale of an immovable property is not the same as a sale deed for the same property. We look at the differences that home buyers and sellers should be aware of, from a legal standpoint
To formalise a property sale, two crucial documents have to be drafted, executed and then, registered. These documents are the agreement to sale and the sale deed. In this article, we are going to learn about the difference between the two documents and what is the significance of the agreement to sale and the sale deed.
You are reading: Agreement to sale versus sale deed: Main differences
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What is a sale deed?
A sale deed is a legal document that proves that a property has been transferred from the seller to the buyer. The registration of a sale deed concludes the property purchase process.
What is agreement to sale?
Once the buyer and the seller reach an understanding to enter into a property transaction, they draft an agreement, which puts in place the terms and conditions based on which the transaction would take place. This document is known as sale agreement or agreement to sell or agreement for sale.
Legal aspects of agreement to sale
The Transfer of Property Act, 1882, which regulates the matters dealing with the sale and transfer of house property, defines the contract for sale or an agreement for sale as under:
“A contract for the sale of immovable property, is a contract that a sale of such property shall take place on the terms settled between the parties” – Section 54. Section 54 further provides that “It does not, of itself, create any interest in or charge on such property.”
From the above definition, it becomes amply clear that an agreement for sale contains a promise to transfer a property in question in future, on satisfaction of certain terms and conditions. So, this agreement itself does not create any rights or interest in the property, for the proposed buyer.
What the sales agreement creates, is a right for the purchaser to purchase the property in question on satisfaction of certain conditions. Likewise, the seller also gets the right to receive the consideration from the buyer on complying with his part of the terms and conditions.
In case of failure of the seller to sell or hand over possession of the property to the buyer, the buyer gets a right of specific performance, under the provisions of the Specific Relief Act, 1963. A similar right is available to the seller under the agreement, for seeking specific performance from the buyer.
Even though the signing of the agreement for sale does not mean the sale has been concluded, it is a crucial step in that direction. This is why buyers must be acutely aware of the terms and condition as mentioned in the agreement.
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Details in deed of sale
A sale deed usually consists of the following information:
- Details of the buyers and sellers (name, age and addresses)
- Property description (total area, details of construction, the exact address and surroundings)
- Sale amount including advance payment paid as well as the mode of payment
- Time frame when the property title will be actually passed to the buyer.
- Actual date of delivery of possession.
- Indemnity clause (The seller promises to pay the buyer for any damages in case of disputes with regard to the ownership, resulting in monetary losses to the buyer)
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Agreement for sale versus sale deed
Listed below in a tabular form are the key differences between sale deed and agreement to sale:
| Sale deed | Agreement for sale |
| Sale deed is an actual transfer of property ownership | Sale agreement is a promise of a future transfer of property ownership |
| Sale deed includes information about both the parties (buyer & seller), their ages, addresses and other details | Sale agreement specifies the terms and conditions under which the property will be transferred |
| Sale deed gives the rights and interests in the property to the new owner. | Sale agreement gives a right for the purchaser to purchase the property in question on the satisfaction of certain conditions. |
| Buyer has to pay stamp duty and registration fee to execute a sale deed | Sale agreement precedes sale deed, signed and executed by the seller and buyer on a non-judicial stamp paper. |
Supreme Court ruling on sale deed and agreement for sale
The sales agreement may or may not result into an actual sale of the property in question. Some of the stamp duty laws, like the Maharashtra Stamp Act, deem an agreement for sale of an immovable property, on the same footing as a proper deed of conveyance and therefore, are subject to the same stamp duty as is applicable on the proper deed of conveyance or sale deed of an immovable property. Due to such deeming provisions, requiring payment of stamp duty on an agreement for sale, people mistakenly perceive an agreement for sale, as a proper sale deed.
The Supreme Court of India in 2012, in the case of Suraj Lamp & Industries (P) Ltd (2) v State of Haryana, while dealing with the validity of sales of immovable properties made through power of attorney, has held as under:
“Immovable property can be transferred/conveyed only by a deed of conveyance (sale deed), duly stamped and registered as required by law. We, therefore, reiterate that immovable property can be legally and lawfully transferred/conveyed only by a registered deed of conveyance.”
“Any contract of sale (agreement to sell), which is not a registered deed of conveyance (deed of sale), would fall short of the requirements of Sections 54 and 55 of the Transfer of Property Act and will not confer any title, nor transfer any interest in an immovable property (except to the limited right granted under Section 53A of the Transfer of Property Act).”
According to the Transfer of Property Act, an agreement for sale, whether with possession or without possession, is not a conveyance. Section 54 of the Transfer of Property Act enacts that the sale of an immovable property can be made, only by a registered instrument and an agreement for sale does not create any interest or charge on its subject matter.
The Supreme Court further reiterated the importance of sale agreement between the builder and buyer, as it recently ruled that the period of allotment of a housing unit to a home buyer has to be considered from the date of the builder-buyer agreement and not from the date of registration of the project under the Real Estate (Regulation and Development) Act, 2016. The court further ordered the RERA authorities to order payment of compensation from the builder as per the sale agreement, the sanctity of which has been upheld through this order.
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ALL ABOUT AGREEMENT FOR SALE
Importance of agreement for sale
Signing an agreement for sale becomes important in light of several factors. First, this is a legal proof of the buyer and seller entering into an agreement, based on which the future course of action would be decided, in case of a dispute. Also, if you are applying for a home loan, the bank would not accept your application till you sign an agreement for sale.
Recall here that both parties will have to abide by the conditions laid in the agreement to sale. Any party flouting any of the terms, as prescribed in the agreement, might be dragged to court, if the other party so wishes. All parties concerned should also be mindful of the fact that this document can be cited as a legal proof in the court of the law and all those who have agreed to abide by the terms are obliged to do so legally.
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Can sale agreement be verbal?
Section 9 of the Transfer of Property Acts states that the title of a property can be transferred through a verbal agreement, unless the law explicitly states that a written agreement must be prepared to conclude the transaction. In the case of immovable property of a value less than Rs 100, such transfer may be made either by a registered instrument or by delivery of the property, for instance. Since it is seldom the case, where immovable properties are valued less than Rs 100, all sale agreement have to be documented and a verbal agreement will not suffice.
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Sale agreement at the time of property registration
At the time of property registration, home buyers also have to present, along with other key documents copies, the agreement to sell. Doing so is important, for the authorities to ensure that the transaction is being concluded, based on the agreement made between the buyer and the seller previously.
Agreement for sale format for property
THIS AGREEMENT for SALE executed on the…………………. day of………………. 2021
between (name of seller) son of …………,, resident of…………………., hereinafter called the “Vendor” of the one part and (name of buyer), son of …………, resident of…………………. hereinafter called the “Purchaser” of the other part.
WHEREAS the vendor is the sole and absolute owner of the property more fully set out in the Schedule hereunder:
AND WHEREAS it is agreed that the vendor shall sell and the purchaser shall purchase the said property for the sum of Rs………………….. (Rupees in words) free of all encumbrances.
NOW THIS AGREEMENT OF SALE WITNESSES AS FOLLOWS:
- The price of the property more fully set out in the Schedule is fixed at Rs…………………..(Rupees………………….) free of all encumbrances.
- The purchaser has paid to the vendor this day the sum of Rs………………….(Rupees………………….) by way of earnest money for the due performance of the agreement, the receipt of which the vendor doth hereby admit and acknowledge.
- The time for performance of the agreement shall be…………………. months from this date, and it is agreed that time fixed herein for performance shall be the essence of this contract.
- The purchaser shall pay to the vendor the balance sale price of Rs…………. (Rupees…………………………………………………) before registration of the sale deed.
- The vendor agrees that he will deliver vacant possession of the property to the purchaser before registration of the sale deed.
- The vendor shall execute the sale deed in favour of the purchaser or his nominee or nominees as purchaser may require.
- The vendor shall hand over all the title deeds of the property to the purchaser or his advocate nominated by him within………………. days from the date of this Agreement for scrutiny of title and the opinion of the vendor’s Advocate regarding title of the property shall be final and conclusive. The purchaser shall duly intimate the vendor about the approval of the title within……………. days after delivering the title deeds to him or his advocate.
- If the vendor’s title to the property is not approved by the purchaser, the vendor shall refund to the purchaser the earnest money received by him under this Agreement and on failure of the vendor to refund the earnest money within…………………. days he shall be liable to repay the same with interest thereon at…………………. per cent per annum.
- If the purchaser commits a breach of the Agreement, he shall forfeit the earnest amount of Rs…………………. (Rupees………………….) paid by him to the vendor.
- If the vendor commits a breach of the Agreement, the vendor shall not only refund to the purchaser the sum of Rs…………….. (Rupees………………….) received by him as earnest money, but shall also pay to the purchaser an equal sum by way of liquidated damages.
- Nothing contained in paras 9 and 10 supra shall prejudice the rights of the parties hereto, to specific performance of this Agreement of sale.
(Schedule of Property)
IN WITNESS WHEREOF the vendor and the purchaser have set their hands to the Agreement of sale on this the………………day of…………………. 2021 in the presence of the witnesses:
Witness: Vendor
Witness: Purchaser
Specimen Schedule of the Property
- Municipal No/ward no/plot no/khasra no
- Location: Street number, name
- Place/Area: North, South, East,West
- Sub-District Hqrs./Tehsil/Mandal:
- Police Station
- District/State
- Measurement of all sides
- Plinth area/floor area
- Carpet area
- Fixtures
- Permitted use of the land/building:
Can verbal agreements be challenged in court?
Yes, verbal agreements can be challenged in court but it can be complicated. It is very difficult to prove the dishonesty of one party or their misdeeds, because the agreement is verbal and there is no documented evidence.
ALL ABOUT SALE DEED
Is sale deed the same as conveyance deed?
Even though one often gets to hear the two terms being used interchangeably, a sale deed and a conveyance deed mean different things. The sale deed is basically a type of conveyance deed, considering the latter is rather a wide term, which also covers gift deed, exchange deed, mortgage deed, lease deed, etc. Basically, all these documents are various types of conveyance deeds.
“Each type of legal document that transfers the ownership of property from one person to another is a conveyance deal. In that sense, a sale deed is a conveyance deed too. Buyers should be mindful of this and should not get unduly confused, thinking that they need two documents for the property purchase rather than one,” says Prabhanshu Mishra, a Lucknow-based lawyer with expertise in property law.
Consequence of failure to execute a sale deed
As per the Indian Registration Act, 1908, any agreement for transfer of any interest in an immovable property of value more than one hundred rupees, is required to be registered. So, if you have purchased any property under any agreement for sale, without it being followed by a proper sale deed, you do not get any right or interest in the property purported to be transferred under the agreement of sale.
This absolute rule is subject to the exception provided under Section 53A of the Transfer of Property Act. Section 53A provides that where the buyer has obtained possession of the property that is subject matter of the transfer, while fully complying with his part of the obligation under the agreement, the seller shall not be entitled to disturb the possession so granted to the buyer. It may be noted that Section 53A provides a shield to the proposed transferee against the transferor and debars the transferor from disturbing possession of the transferee, but it does not cure the title of the buyer to the property. The ownership of the property still remains with the seller.
So, in the cases where you have purchased any property under a sales agreement and got possession, the title of the property still remains with the developer, unless a sale deed subsequently has been executed and registered under the Indian Registration Act. Thus, it becomes clear that a title in an immovable property can only be transferred by a sale deed. In the absence of a duly stamped and registered sale deed, no right, title or interest in an immovable property, accrue to the buyer of the property.
Who pays the stamp duty for sale deed registration?
It is the responsibility of the buyer to pay the stamp duty and the registration fee for registration of the sale deed.
Who pays the stamp duty for sale agreement registration?
It is the responsibility of the buyer to pay the stamp duty and the registration fee for the registration of agreement for sale.
What if the sale deal fails after sale agreement registration?
In case a property deal cannot be materialized after the sale agreement is executed, each party will have to settle the matter based on the terms and conditions stated in the sale agreement. If the sale could not complete because of a fault of the buyer, the seller may be entitled to not refund the earnest deposit or token money given by the buyer. In case the seller is responsible for the sale deal to be unsuccessful, he may have to compensate the buyer for loss of time and mental agony.
Sale deed format
This DEED OF SALE is made and executed on this _______ day of ______________,
BETWEEN
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Sri ____________________, son/wife/daughter of Sri/Late _______________, aged about _______ years, holding PAN _____________, by Caste ________, by Nationality Indian, residing at _____________________________________________, hereinafter called the “SELLER” (which expression shall mean and include his legal heirs, successors, successors-in-interest, executors, administrators, legal representatives and assigns) of the ONE PART.
AND
Sri __________________________________, son of _______________________, aged about _______ years, by Caste __________, by Nationality Indian, holding PAN _____________, residing at _____________________________________________, hereinafter called the “PURCHASER” (which expression shall mean and include his legal heirs, successors, successors-in-interest, executors, administrators, legal representatives and assigns) of the OTHER PART.
The SELLER and the PURCHASER are hereinafter referred collectively as parties and individually as party.
WHEREAS the SELLER is the absolute owner, in possession and enjoyment of the piece and parcel of ______ land measuring about ____ decimal, lying and situated in R.S. Plot Number ____, corresponding L.R. Plot Number ____, Recorded in R.S. Khatian Number _____ and L.R. Khatian Number ____, at Mouza _____, J.L. Number _____, Touzi Number ______, under Police Station __________, Registration Sub-District _________, in the district of ________________, more fully and particularly described in the schedule here under written and hereafter referred to as the “SCHEDULE PROPERTY”.
ANDWHEREAS the SCHEDULE PROPERTY was the self acquired property of __________, deceased father of the SELLER and he purchased the same from Sri __________________, son of _____________ of _________________________________, by virtue of a Sale Deed dated ________________, registered in the office of the _____________________________, in Book 1, Volume No. ____, Pages ____ to _____, Being Number ___________ for the Year _____.
ANDWHEREAS the said _________ died in-estate on _________ leaving behind his only son namely, Sri _______________, the SELLER herein, as the only legal heir.
ANDWHEREAS the SELLER herein, as the only legal heirs of the deceased ____________, have become the absolute owner of the SCHEDULE PROPERTY since the death of his father _____________ on and he has been enjoying the same with absolute right, title and interest sice then and he has clear and marketable title to the SCHEDULE PROPERTY.
ANDWHEREAS the SELLER being in need of funds to meet his personal commitments and family expenses have decided to sell the SCHEDULE PROPERTY and the PURCHASER has agreed to purchase the same.
ANDWHEREAS the SELLER agreed to sell, convey and transfer the SCHEDULE PROPERTY to the PURCHASER for a total consideration of Rs._________ (Rupees ___________________________) only and the PURCHASER herein agreed to purchase the same for the aforesaid consideration and to that effect the parties entered into an agreement on the _________________ .
NOW THIS DEED OF SALE WITNESSETH:
- THAT in pursuance of the aforesaid agreement and in consideration of a sum of Rs._________ (Rupees ___________________________) only received by the SELLER in cash/cheque/bankdraft and upon receipt of the said entire consideration of Rs._________ (Rupees ___________________________) only (the SELLER doth hereby admit, acknowledge, acquit, release and discharge the PURCHASER from making further payment thereof) the SELLER doth hereby sells, conveys, transfers, and assigns unto and to the use of the PURCHASER the SCHEDULE PROPERTY together with the water ways, easements, advantages and appurtenances, and all estate, rights, title and interest of the SELLER to and upon the SCHEDULE PROPERTY TO HAVE AND TO HOLD the SCHEDULE PROPERTY hereby conveyed unto the PURCHASER absolutely and forever.
- THAT THE SELLER DOTH HEREBY COVENANT WITH THE PURCHASER AS FOLLOWS:
- That the SCHEDULE PROPERTY shall be quietly and peacefully entered into and held and enjoyed by the PURCHASER without any interference, interruption, or disturbance from the SELLER or any person claiming through or under him.
- That the SELLER have absolute right, title and full power to sell, convey and transfer unto the PURCHASER by way of absolute sale and that the SELLER have not done anything or knowingly suffered anything whereby their right and power to sell and convey the SCHEDULE PROPERTY to the PURCHASER is diminished.
- That the property is not subjected to any encumbrances, mortgages, charges, lien, attachments, claim, demand, acquisition proceedings by Government or any kind whatsoever and should thereby and the SELLER shall discharge the same from and out of his own fund and keep the PURCHASER indemnified.
- That the SELLER hereby declares with the PURCHASER that the SELLER have paid all the taxes, rates and other outgoings due to local bodies, revenue, urban and other authorities in respect of the SCHEDULE PROPERTY up to the date of execution of this sale deed and the PURCHASER shall bear and pay the same hereafter. If any arrears are found due for the earlier period, the same shall be discharged/borne by the SELLER.
- That the SELLER have handed over the vacant possession of the SCHEDULE PROPERTY to the PURCHASER on ___________ and delivered the connected original title document in respect of the SCHEDULE PROPERTY hereby conveyed on the date of execution of these presents.
- That the SELLER will at all times and at the cost of the PURCHASER execute, register or cause to be done, all such acts and deeds for perfecting the title to the PURCHASER in the property hereby sold and conveyed herein.
- That the SELLER do hereby covenants and assures that the PURCHASER is entitled to have mutation of his name in all public records, local body and also obtain all documents in the name of the PURCHASER and undertakes to execute any deed in this respect.
SCHEDULE OF PROPERTY
All that piece and parcel of _____ land measuring about _____ decimal, lying and situated in R.S. Plot Number ____, corresponding L.R. plot Number ____, Recorded in R.S. Khatian Number ____ and L.R. Khatian Number ____, at Mouza _____, J.L. Number ____, Touzi Number _______, under Police Station ______, Registration Sub-District ______, in the district of ____________, butted and bounded by:
On the North :
On the South :
On the East :
On the West :
IN WITNESS WHEREOF the SELLER and the PURCHASER have set their signatures on the day month and year first above written.
______________________________
SELLER
______________________________
PURCHASER
WITNESSES:
1.
2.
FAQs
What is agreement for sale?
An agreement for sale, is an agreement to sell a property in future. This agreement specifies the terms and conditions, under which the property in question will be transferred.
What is sale deed?
The sale deed is the main legal document by which a seller transfers his property right to the purchaser, who then acquires absolute ownership of the property.
What is the difference between agreement for sale and sale deed?
An agreement for sale is a promise in future, that the property will be transferred to the rightful owner while sale deed is the actual transfer of property ownership to the buyer.
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