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Posted On January 10, 2020

Agreement for Sale V/S Sale Deed-Main Differences to Know

A sale agreement made towards purchasing an immovable property is often confused with a sale deed. Technically, they are two different things and one should form a clear understanding of the two. Here’s a look at the key differences that any prospective home buyer needs to know.

When purchasing a property from renowned builders and developers in North Kolkata, a buyer needs to enter into an agreement with the seller. Now, the very form and structure can be markedly different depending on the terms and conditions talked and decided upon. It can either be a sale agreement or a sale deed. Now, it’s only apparent that both the terms sound synonymous and hence they treat both document types in the same manner. In reality, it’s not the case. Let’s take a look at knowing what a sales agreement is.

Sale Agreement

Sale Agreement - Real Estate

Sale agreement or agreement for sale is nothing but an official statement that talks about the terms and conditions seceded upon two or more parties involved in buying and selling a singular or a group of properties. The agreement is drafted in accordance to The Transfer of Property Act, 1882, wherein it regulates all matters pertaining to the sale as well as the transfer of rights for the property, thus defining the contract for sale or a sale agreement subjected to the following condition stated under Section 54 and mentioned below:

“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. It does not, of itself, create any interest in or charge on such property.”

Given the above definition, it is clear that a sales agreement refers to a written promise regarding a property which in the future will be transferred to a new owner subjected to the satisfactory realisation of pre-set terms and conditions. In other words, the agreement doesn’t stand to create or include any right whatsoever for a vested interest in the property for the prospective buyer. What a sale agreement functions to create is right to a purchaser for a certain property in question and satisfactory fulfillment of a set of pre-requisites. Similar to the buyer, the seller too gets to enjoy the right for consideration from the buyer thus complying on his part. Now, in any case of failure on the part of the seller to hand over the property in question, the buyer enjoys the right for a specific action according to a set of provisions led by under the Specific Relief Act, 1963. A similar right is also bestowed to the seller under the very same agreement.

What Does the Apex Court Has to Say on This

Supreme Court of India

According to the guidelines stated by the Supreme Court of India, the sale agreement may or may not be subjected to the actual property that one intends to buy or sell. Some stamp duty deems a sale agreement on the same ground as that of a deed of conveyance. Owing to such provisions, the payment towards stamp duty for sale agreement as well as sales deed can be the same. This is precisely the reason why people tend to perceive a sale agreement and a sales deed as exactly the same. The apex court while dealing with a case concerning the validity of sale for the immovable property had clearly stated that:

Immovable property can be transferred/conveyed only by a deed of conveyance (sale deed), duly stamped and registered as required by law.”

The court further said, “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.”

Failure to Execute the Terms and Conditions of a Sales Deed

Sale Deed

In accordance to the Indian Registration Act, 1908, in order to purchase an immovable property one must enter into a written agreement for a property that is worth more than one hundred rupees needs to be registered without any exception. That being said, the above rule is subjected to a particular exception that is stated under Section 53A of the Transfer of Property Act. Herein, when the buyer has gained possession of a particular property subjected to transfer while complying his part of the obligation, the seller has no such right to disturb the buyer, whatsoever. Further, Section 53A also offers protection to any transferee debarring the transferor from “disturbing” peaceful possession of a transferee. However, the right of ownership will still reside and be vested to the seller.

So, in any case, where a buyer has purchased a particular property by executing a sale agreement and has subsequently received possession, the title still resides with the builder, unless a sales deed has been registered to keep in terms with the guidelines of Indian Registration Act. In essence, it is understood that the title rights of any immovable property purchased by an individual can only be successfully transferred by executing a sales deed alone.

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