As most might tend to confuse themselves, an agreement for the sale of a property isn’t similar to its sale deed. To help you understand why and what makes them different, we have curated this article that will focus on the differences that the potential home buyers and sellers must be aware of, all from a legal standpoint.
So, let’s get straight into it;
It is an agreement to sell a property in the future that specifies all terms and conditions under which the property that is in question would be transferred.
In other words, it is an agreement of sale which is defined as a memorandum of agreement deed under the terms and conditions of a potential contract of sale along with the payment details and consideration. It’s considered to be one of those that allow the sale process to act smoothly and helps build an understanding between the seller and the buyer and their specific roles in the sale.
Irrespective of the fact that the signing of the agreement for sale does not necessarily mean that the sale has taken place, it’s considered to be one of the crucial steps in that direction. This is why it is considered best for the buyers to be aware of the terms and conditions mentioned in the agreement.
As compared to the agreement of sale, a sale deed is a legal document that proves that a seller has transferred the ownership of the property to the buyer. Not only that, the rights and interests are also acquired by the new owner through a sale deed.
This document includes:
Property sales or an agreement of sale is formalized in a stage-wise manner and are the first documents that are executed, providing the legal status between a buyer and a seller. However, on the other hand, it shouldn’t be confused with the sale deed property, owing to the similarities it is quite different from an agreement for sale.
Now, let’s understand it all a little better with the help of the table below; Sale deed VS Sale Agreement
| SALE DEED | AGREEMENT FOR SALE |
| An actual transfer of property ownership | It is a promise of transfer of a property in the future |
| It includes information about both the buyer and the seller. Such as their full name, date of birth, age, etc | Agreement for sale only specifies the terms and conditions of the property transfer |
| It gives the right and interest of the property to the new owner | Gives the right of the purchasers to purchase on satisfying certain conditions |
| To execute the sale deed, the buyer needs to buy the stamp duty and registration | It precedes sale deeds, signed and executed by both the parties on a non-judicial stamp paper. |
The home buyers need to be present during the property registration, along with other key documents copies for the agreement to sell.
This helps the authorities to ensure that the transaction that is being concluded is based on the agreement between both the parties, that is, the buyer and the seller.
As we have discussed earlier, the sales agreement may or may not result in an actual sale of the property. There are a few stamp duty laws, such as the Maharashtra Stamp Act, which deem an agreement for the sale of immovable property aligning a proper deed of conveyance, resulting in the subject as stamp duty as proper deed applicable of sale or conveyance deed of the property. These deeming provisions require payments of stamp duty which leads to the misinterpretation where people mistakenly perceive an agreement for sale, as a proper sale deed.
In 2012, the Indian Supreme Court for the case of Suraj Lamp & Industries Ltd, State of Haryana, made through power of attorney, has held as – an immovable property that can be conveyed/transferred only by a deed of conveyance or a sale deed which is duly registered post being stamped as required by law. As per them, the immovable property can only be transferred/conveyed legally by registering the deed of conveyance.
While on the other hand, those agreements to sell contracts that are not registered conveyance deed (deed of sale), would come under Sections 54 and 55 of the Transfer of Property Act. This will also not confer any title and transfer interests in immovable property (except the right under Section 53A of the Property Act of Transfer).
However, the Transfer of Property Act, an agreement of sale, whether with or without possession, is not a conveyance as section 54 of the act enacts that the sale of immovable property can be made only by a registered instrument. And, an agreement of sale isn’t created by any interest or charge on its subject matter.
Furthermore, the Supreme Court reiterated the importance of sale agreement between the builder and buyer since it recently ruled the allotment period of a housing unit to be considered from the date of the builder-buyer agreement and not from the date of registration under the Real Estate (Regulation and Development) Act, 2016. The court had ordered the RERA authorities to order payment of compensation from the builder as a part of the sale agreement, upheld through this order.
According to the Indian Registration Act of 1908, any agreement of any interest for the transfer of immovable property that holds a value of more than one hundred rupees is expected to get registered. Therefore, if you’ve purchased a real estate under any agreement for sale with the sale deed absence, you do not get to exercise any right or interest in the property that would be transferred under the agreement of sale.
However, the absolute rule is subjected to the exception under Section 53A of the Transfer of Property Act which provides the obtained possession of the property by the buyer that is the subject matter of the transfer, while still being fully complying with his obligation under the agreement, and the seller will not be entitled to disturb the possession granted to the buyer. In other words, Section 53A acts as a shield to the transferee against the debars and transferor but still does not cure the title of the buyer to the property. Here, the ownership remains with the seller.
In case you purchased any property under a sales agreement and received possession, the title of the property would still remain with the developer, until and unless a sale deed of the property is executed and is registered under the Indian Registration Act.
This makes it clear that the title of immovable property can only be transferred via a sale deed. This also indicates that in the absence of a registered sale deed and a duly stamped, there are no rights, title, or interest in immovable property that can be accrued to the buyer of the property.
An agreement for sale acts as an agreement that helps to sell a property in the future. This agreement also specifies the terms and conditions, under which the property can be transferred.
A sale deed is a legal document through which a seller transfers the right of the property to the purchaser to the one who acquires absolute ownership of the property.
An agreement for sale is a promise in the future that the property will be transferred to the rightful owner, while a sale deed is the actual transfer of property ownership to the buyer.
