Real Estate Basics: What is a Sale Deed?
Concept of Sale:
According
to section 54 of Transfer of Property Act 1882 sale is defined as – "Sale
is a transfer of ownership in exchange for a price paid or promised or
part-paid and part- promise.”
According
to Section 54 – Sale can be made in 2 ways:
- Where the value of Tangible Immovable Property is Rs.100 or more than that or in the case of a reversion or other intangible thing, sale can only be made through Registered Instrument.
- Where the value of Tangible Immovable Property is less than Rs.100 , sale can be made through Delivery of Possession.
Delivery
of Tangible Immovable Property is said to be completed when the Seller
handover the possession of property to buyer or such person as he directs.
What is Contract for Sale ?
A
contract for the sale of immovable property is a contract that a sale of such
property shall take place on terms settled between the parties. It does not, of
itself, create any interest in or charge on such property.
Essential Elements of Sale are:
- Parties
to Sale
- Subject
Matter of a Sale
- Price
or Consideration
- mode
of execution of sale.
Section
54 provides for two modes for transfer of property –
1. Delivery
of possession – Where the property us the tangible
immobile property of the value of one hundred rupees and upwards transfer can
be made only by a registered instrument. Where the property is tangible
immovable property of a value of less than one hundred rupees, its transfer may
be made either by a registered instrument or by delivery of property. Delivery
of tangible immovable property takes place when the seller puts the buyer or
such person as the buyer directs in possession of the property.
2. Registration
of sale deed – Where the value of the tangible
immovable property is Rs. 100 or more, the sale of such property requires
registration of the deed. Where the property is intangible immovable property
of any valuation, it will require registration for completion of sale.
What is a sale deed ?
A
sale deed is a legal document that proves that the seller has transferred the
absolute ownership of the property to the purchaser. Through this document, the
rights and interests in property are acquired by the new owner. A sale deed
usually consists of the following information-
- Property description (total area, details of construction, the exact address and surroundings).
- Sale amount including advance payment paid as well as the mode of payment.
- Time frame when the property title will be actually passed to the buyer.
- Actual date of delivery of possession.
- Indemnity clause (The seller promises to pay the buyer for any damages in case of disputes with regard to the ownership, resulting in monetary losses to the buyer).
Transfer of Title
The
signing of the sale deed implies transferring the title of the property to the
buyer by the seller which cannot be revoked. It also means that they have
adhered to the clauses, compensation agreed upon and paid in full. The buyer
holds the legal rights of the property.
How is a sale deed different from a
sale agreement ?
A
sale agreement of an immovable property is different from the sale deed for the
same property. In simple words, the sale agreement of a property is a contract
stating that a sale of such property shall happen on the terms as agreed upon
by the parties. It specifies the terms and conditions, under which the property
(to be sold) will be transferred.
So,
a sale agreement basically, contains a promise to transfer a property in
future, after compliance with certain terms and conditions. It does not develop
or establish any rights or interest in the property for the prospective buyer.
What is an agreement for sale ?
An
agreement for sale, is an agreement to sell a property in future. This
agreement specifies the terms and conditions, under which the property in
question will be transferred. The Transfer of Property Act, 1882, which
regulates the matters dealing with the sale and transfer of house property,
defines the contract for sale or an agreement for sale as under:
“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” – Section
54. Section 54 further provides that “It does not, of itself, create any
interest in or charge on such property.”
Supreme Court ruling on sale deed and
agreement for sale
The
Supreme Court of India in 2012, in the case of Suraj Lamp & Industries (P)
Ltd (2) v State of Haryana, while dealing with the validity of sales of
immovable properties made through power of attorney, has held as under:
“Immovable
property can be transferred/conveyed only by a deed of conveyance (sale deed),
duly stamped and registered as required by law. We, therefore, reiterate that
immovable property can be legally and lawfully transferred/conveyed only by a
registered deed of conveyance.”
“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 (except to the limited right
granted under Section 53A of the Transfer of Property Act).”
According
to the Transfer of Property Act, an agreement for sale, whether with possession
or without possession, is not a conveyance. Section 54 of the Transfer of
Property Act enacts that the sale of an immovable property can be made, only by
a registered instrument and an agreement for sale does not create any interest
or charge on its subject matter.
Difference
between Sale Deed and Agreement for Sale
Sale Deed
|
Agreement for sale
|
Sale deed is an actual transfer of
property ownership.
|
Sale agreement is a promise of a
future transfer of property ownership.
|
Sale deed includes information about
both the parties (buyer & seller), their ages, addresses and other
details.
|
Sale agreement specifies the terms
and conditions under which the property will be transferred.
|
Sale deed gives the rights and
interests in the property to the new owner.
|
Sale agreement gives a right for the
purchaser to purchase the property in question on the satisfaction of certain
conditions.
|
Buyer has to pay stamp duty and
registration fee to execute a sale deed.
|
Sale agreement precedes sale deed,
signed and executed by the seller and buyer on a non-judicial stamp paper.
|
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