Agreement For Sale Versus Sale Deed And Everything you Need To Know About It!

Sale deed

As most might tend to confuse themselves with, 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;

Agreement For Sale: Meaning And Importance!

It is an agreement to sell a property in the future that specifies the 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.

Importance:

  1. An agreement to sell offers to purchase the property in question
  2. It is considered to be a complete report of the property
  3. There are no encumbrances in the prerequisite requirement
  4. Includes the details of the payment along with earnest money
  5. Provides the original papers of the property after the payment
  6. It is a process of delivering the property
  7. Refunding the earnest money is her in case the titles are not proper
  8. The penalty on the earnest money fails to complete the sale in case the purchaser fails
  9. Production of tax-related documents
  10. Includes description of the property schedule
  11. Is a memo consideration for the received earnest money.

Sale Deed: Meaning And Importance!

Sale Deed Meaning And Importance

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:

  1. All the details of the buyers and sellers, including their name, age, addresses, etc
  2. It has the property description including the total area, details of construction, the exact address, etc
  3. The sale amount including the advance and the mode of payment
  4. The time when the property title passes to the buyer
  5. The date of delivery of possession.
  6. Indemnity clause

Importance:

  1. Includes the explanation of the property and the ownership
  2. The verified titles by the purchaser
  3. Reference to the agreement of sale and details of the amount
  4. The discharge of the property details such as the measurements, easements, privileges, and other rights
  5. Transfer of all rights, claim, interests, demands of the property in question
  6. Provides a peaceful enjoyment without any interruption
  7. A complete authority document of the vendor to sell

Agreement Of Sale VS The Sale Deeds

Agreement Of Sale VS The Sale Deeds

Property sales or an agreement of sale are 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, 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 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.

What Is The Sale Agreement During The Registration Of The Property?

Sale Agreement During The Registration Of The Property

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.

What Is The Ruling Of The Supreme Court On The Sale Deed And The Agreement For Sale?

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, deem an agreement for the sale of immovable property aligning a proper deed of conveyance, resulting in the subject to the same stamp duty as applicable on the proper deed of conveyance or sale 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 Supreme Court of India in the case of Suraj Lamp & Industries (P) Ltd (2) v State of Haryana, made through power of attorney, has held as – an immovable property that can be transferred/conveyed only by a deed of conveyance (sale deed), duly stamped and registered 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 agreement to sell contracts that are not registered deed of conveyance (deed of sale), would fall under Sections 54 and 55 of the Transfer of Property Act and will not confer any title and transfer any interest in immovable property (except the right granted under Section 53A of the Transfer of Property Act).

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.

To Conclude: What Are The Consequence In Case A Sale Deed Of The Property Fails To Execute?

According to the Indian Registration Act of 1908, any agreement of any interest for the transfer in immovable property that holds that value of more than one hundred rupees is expected to get registered. Therefore if you have purchased a property under any agreement for sale with the absence of a proper sale deed, 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 proposed transferee against the transferor and debars the 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 still remains with the developer, unless a sale deed of the property is executed and 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 means that in the absence of a duly stamped and registered sale deed, there are no rights, title, or interest in immovable property that can be accrued to the buyer of the property.

FAQs: Agreement For Sale Versus Sale Deed And Everything you Need To Know About It!

1. What is an agreement for sale?

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.

2. What is the meaning of a sale deed?

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.

3. What is the difference between the agreement for sale and sale deed?

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.
Property Geek

Property Geek

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