The Changing Terms In Agreement To Sell

All of us, invariably, enter the property market with a great deal of confusion in our heads. A rookie, for example, would not be able to tell the difference between agreement to sell and sale deed. They sound as if they are one and the same things. As you upgrade from being a greenhorn to a researcher, you find out what a mistake it was to assume that the things were the same.

You now know that an agreement to sell is a document that sets the terms and conditions, based on which a property transaction would be completed. The creation of sale deed, on the other hand, means the purchase has been made. However, there are still certain details that may not have caught your attention as far as sale agreements go.

Do note that the Indian law does not specifically mention anything about written sale agreements. To make this document legally valid, it must be registered under the Indian Contract Act, 1872. In case you fail to do so and the document remains non-registered, it has no legal validity whatsoever. It is also crucial for the parties involved in the transaction to lay out the terms and conditions in such a manner that the document remains valid in case of disputes arise in future and one has to move the court.

Making a difference

Typically, an agreement to sale mentions all the details of the property (location, owner, ownership type, etc.), the parties involved (all the details of the seller and the buyer), the various payments, the time within which the transaction must be completed, etc.  At this point, it is important to note that there is no limit on the clauses you can insert in the document, and for the sake of future clarity, it is only the best that you do so.

This is one reason why new-age sale agreements have clauses that did not exist in old times.

Home loan: In big cities, most purchases are made with the help of borrowing. Now, banks would not process your application for a home loan till you present in from of them the agreement to sell. In such a scenario, you are actually signing up for something without even being sure whether or not the bank would lend you the money you are seeking. Your earnest money will be forfeited if the bank refuses to lend you the money at a later stage. That is why buyers their days insert a clause in the agreement, stating that the deal would materialise only after the bank sanctions a certain loan amount.

Utility and membership: Sale agreements do often mention that utility bills (electricity and water charges) and property tax must be cleared to make the purchase possible. There are additional clauses that are made in the document with regard to this. Modern-day housing societies offer you plenty of luxuries. They have in-house clubs, gymnasiums, etc. Residents, however, have to pay certain charges to become members. Those who buy a resale home in a housing society are seen inserting a clause that says that the purchase also covers the membership fees of various kinds. This ensures the seller does not ask for additional money to transfer the membership rights.

Stamp duty: In India, buyers have to bear the cost that comes in the form of stamp duty, which varies between 4-10 percent of the transaction value. However, it is not legally binding on buyers to make this payment.  The two parties could also share it. In case the buyer and the seller have stuck such a deal, this part must be clearly mentioned in the sale agreement.

Also read: 10 Things You Should Know About Stamp Duty On Property Purchase