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:

1. 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.
2. 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:

1. Parties to Sale
2. Subject Matter of a Sale
3. Price or Consideration
4. 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-

•  Details of the buyers and sellers. (name, age and addresses).  
• 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.