Before purchasing your property, it is important to keep in mind the terms and differences between the Sales deed vs. sale agreement so that you have no confusion or misunderstanding. These terms might confuse you a bit. Since they are important to know, the information below will shed light on everything.

Key Differences between an Agreement for Sale and a Sale Deed

The sale of a property allows an instant transfer of ownership. A sale deed allows the transfer. The deed refers to an executed contract.

An agreement for sale, on the contrary, is an executory contract. It displays the possibility of a future transfer. Risks, with an agreement for sale, stay with the seller until the execution of the sale deed.

A sale deed is an accepted ownership document, registered by the country’s civil law courts. Whereas an agreement for sale is a mutual agreement between the buyer and seller, it can differ from contract to contract.

Agreement of Sale

An agreement of sale refers to an agreement to sell out a property in the future. Such an agreement entails terms and conditions for the proposed transaction of the property in question. Section 54 of the Transfer of Property Act, 1882 defines the contract sale as a contract to sell the immovable property as per the conditions agreed by the involved parties.

Section 54 further states that such a property should be free of any charge or interest that hinders the parties’ interest.

The Supreme Court’s Ruling on the Agreement for Sale and the Sale Deed

Though the agreement of sale and sale deed sound similar, there are some key differences that you need to take care of. Both these documents refer to a legally binding agreement that encloses a long list of clauses for a property’s transfer. In this article, you will know the difference between the two.

The formalization of property sales is done in a stage-wise manner. One of the initial paperwork that is done, to render a legal status to an understanding between a seller and buyer, refers to an agreement of sale. This important document is widely known as a sale agreement. But, you are requested to not confuse this agreement with a sale deed.

There is a common misconception about these agreements that they are all same and serve an identical purpose. However, that’s not the truth.

An agreement for sale is a land sale agreement that shows that both parties agree to buy or sell the property under specific stipulations and conditions.

• Proposal to purchase and an agreement to sell in the future.
• Description of the property.
• A notice stating the property is free from any legal encumbrances.
• Value of the property.
• Payment details.
• Original documents submitted on the final payment.
• Description of the method of property delivery.
• Carrying out of the sale deed.
• Sale deed registration.
• Payment refund in case of any conflict.
• A remedy for any legal issues that may occur.
• The transfer of tax-related certificates.

The sale of an agreement is important because of the following factors:

• A Sale agreement acts as an important legal proof in a court proceeding, helping the non-offending party to demand compensation for losses triggered by the defaulter.
• If you are seeking a home loan, the bank would reject the application for the same if you refuse to sign an agreement of sale.
• Adherence to the conditions mentioned in the agreement of sale is of utmost importance. Hence, any non-conformity in this context would result in penalties and even compel the offending party to face the legal proceeding.
• Agreement of Sale is admissible in the court as it acts as prima-facie evidence.

What is a Sale Deed?

When all terms and conditions mentioned in the agreement for sale are agreed to, parties involved in the contract are ready to execute a property sale deed. The sale deed is a legal document that endorses the transfer of property ownership from the seller to the buyer.

What are the Consequences of not Executing a Sale Deed?

• As per the Indian Registration Act, 1908, the sale of immovable property, valued at over one hundred rupees, needs registration. So, if a buyer purchases a property under an agreement for sale, but does not go for a follow-up with the execution of a sale deed, then he/she will have no right to the property.
• An exception does exist to the rule under Section 53A of the ‘Transfer of Property Act, 1882’. Section 53A aims to shield prospective transferees (buyers) by granting permission to keep possession of the property, if a transferor (seller) executes an incomplete sale instrument, not respecting the terms specified in the agreement for sale. Though the transferor cannot disrupt a transferee’s possession of the property, the title, however, remains with the transferor.

The sale deed usually encloses information, such as;

• Detail of the sellers as well as buyers, such as name, age, and addresses.
• Property details, such as total area, exact address, and details of constructions.
• Sale amount + advance payment paid
• Mode of payment
• The time frame when the property in question shall be actually passed to the buyer.
• The exact date for the delivery of possession.
• Indemnity clause for ensuring reimbursement of losses incurred by the buyer with regards to the property in question. It is a kind of assurance for the buyer to negate any mishaps from the seller’s end.

Conclusion

To conclude, homebuyers should keep in mind that only a registered sale deed can facilitate the transfer of ownership of immovable property. Those who have purchased a property under an agreement for sale, have no right to the title of the property. They should, without delay, ask the seller to prepare the sale deed, and get it registered under the Indian Registration Act.

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