Things You Should Know About the Agreement to Sell
Jun 13, 2018 Legal Guidance
The property market is confusing such as an amateur investor or a buyer would not know the difference between a sale deed and an agreement to sell. They sound like one or the same thing but actually they are different.
An agreement to sell refers to that document which sets the terms and conditions based on which the property transaction gets completed. On the other hand, a sale deed is created when a property purchase has been made.
But there are certainly more details in sale agreements that you might have missed to notice. Here are some of those. It is important to note that Indian Law does not have any specific mention about written sale agreements. In order to make such documents legally valid, the documents must be registered under the Indian Contract Act, 1872. If it is not registered then the document does not have legal validity. The parties involved should lay out the terms and condition of the agreement in such a manner that the document remains valid in case any disputes arise in future and one has to go to the court.
An agreement to sale comprises of all the details of the property starting from owner, location, ownership type, parties involved like details of the seller and the buyer, various payments, the time within which the transaction needs to be completed etc. However, it is important to mention that there is no limit on the clause that you can insert in the document but it is best to have an agreement to sell for the sake of clarity in future. For this reason, the new age sale agreements have clauses that did not exist earlier.
Then comes the home loan factor. Usually, in urban areas, buyers opt for home loans to buy property. And banks do not process the home loan application until they get the agreement to sell from the borrower. In such case wherein you do not have an agreement to sell, you are actually signing up for something without being sure that whether you will be getting a loan or not. You savings that you might have used for down payment might get forfeited if the banks do not give you the loan at a later stage. For this reason, nowadays buyers include a clause in the agreement stating that deal would only materialise if the bank sanctions a certain loan amount.
Buyers have to incur the cost of stamp duty while buying a property that varies between 4 to 10 percent of the transaction and is different in different states. But the buyers are not legally bound to make this payment. The cost can be shared by both the parties. This aspect must be clearly included in the sale agreement if a deal has happened.
Sale agreements do mention about the utility bills that include water and electricity charges and property tax should be cleared to get the deal going. There are certain clauses made in the document with regard to this. However, today’s modern housing societies offer much more luxuries in the form of swimming pool, gym, club house and charges certain amount to become members. But those who are buying a resale home in such societies should include a clause in the sale agreement that the purchase covers the membership fees for various amenities. This ensures that in the later stage the seller does not ask for additional money to transfer the membership right in the name of the buyer.
An agreement to sell refers to that document which sets the terms and conditions based on which the property transaction gets completed. On the other hand, a sale deed is created when a property purchase has been made.
But there are certainly more details in sale agreements that you might have missed to notice. Here are some of those. It is important to note that Indian Law does not have any specific mention about written sale agreements. In order to make such documents legally valid, the documents must be registered under the Indian Contract Act, 1872. If it is not registered then the document does not have legal validity. The parties involved should lay out the terms and condition of the agreement in such a manner that the document remains valid in case any disputes arise in future and one has to go to the court.
An agreement to sale comprises of all the details of the property starting from owner, location, ownership type, parties involved like details of the seller and the buyer, various payments, the time within which the transaction needs to be completed etc. However, it is important to mention that there is no limit on the clause that you can insert in the document but it is best to have an agreement to sell for the sake of clarity in future. For this reason, the new age sale agreements have clauses that did not exist earlier.
Then comes the home loan factor. Usually, in urban areas, buyers opt for home loans to buy property. And banks do not process the home loan application until they get the agreement to sell from the borrower. In such case wherein you do not have an agreement to sell, you are actually signing up for something without being sure that whether you will be getting a loan or not. You savings that you might have used for down payment might get forfeited if the banks do not give you the loan at a later stage. For this reason, nowadays buyers include a clause in the agreement stating that deal would only materialise if the bank sanctions a certain loan amount.
Buyers have to incur the cost of stamp duty while buying a property that varies between 4 to 10 percent of the transaction and is different in different states. But the buyers are not legally bound to make this payment. The cost can be shared by both the parties. This aspect must be clearly included in the sale agreement if a deal has happened.
Sale agreements do mention about the utility bills that include water and electricity charges and property tax should be cleared to get the deal going. There are certain clauses made in the document with regard to this. However, today’s modern housing societies offer much more luxuries in the form of swimming pool, gym, club house and charges certain amount to become members. But those who are buying a resale home in such societies should include a clause in the sale agreement that the purchase covers the membership fees for various amenities. This ensures that in the later stage the seller does not ask for additional money to transfer the membership right in the name of the buyer.
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