'Sale' is defined as "a transfer of ownership in exchange for a price paid or promised or part-paid and part promised'. (Section 54, Transfer of Property Act, 1882)
A Sale, as the name suggests, involves two parties, a seller and a buyer of the goods. The buyer agrees to pay a price as fixed mutually or by contract of sale. If the sale involves a movable object, then with the transfer of ownership, the property also goes into possession of the buyer but if the property is immovable, only the ownership of that immovable property changes hands.
After every Sale, the buyer (owner) acquires all rights of ownership and possession over the property as per the "Sale Agreement". Ideally every Sale is registered at the Sub-Registrar Office. A verbal contract is also valid along with a written contract, though not advisable.
Stamp duty is paid in each sale transaction, depending upon the price determined or the sale value of the property.
Elements of a Sale:
- Parties: Individuals competent to enter into Contract as per the provisions of Section II of the Indian Contract Law, 1872.
- Subject Matter: The concerned immovable property that is considered as saleable.
- Price: Money that is mutually agreed to by both parties to be paid/ received. An agreement at the price is reached at, before the property changes hands.
- Delivery of Property: Delivery can either be through a registered instrument (in case sale is more than Rs. 100 and is registered) or by placing the buyer with possession.
Process of a Real Estate Transaction
- The first step is to find two parties willing to enter into a transaction.
A potential buyer either places an offer to purchase the property
or the seller markets his property for sale. This might involve
a third party also (advisable), the real estate agent who
initiates communication between the two parties.
- When the buyer decides in on a particular property, a price is fixed and
terms of sale are laid down in Sale Agreement.
- A seller should keep his lawyer's title certificate updated.
- A contract called "Agreement of Sale" is signed and a commitment is made. (It is highly advisable to seek professional legal advice in drafting a sales agreement as there can be many legal tangles involved that might need resolution before proceeding)
- Titles of the property are transferred from the seller to the buyer all
the way through "convincing". Generally, buyer pays 10-20%
of the sales price to the seller.
- The seller has to clear all dues linked to the property. Any other negotiation
include tenants, associated mortgages and lessees and employees,
if required.
- Buyer completes the imbursement (of price) agreed.
- Contracts are swapped between both parties and buyer gets possession over
the property.
- Sale is registered with the concerned authority.
- Subsequently, the buyer/purchaser takes the physical possession of the property.
Clauses to be included in a Sale AgreementA "Sale Agreement" is prepared when any immovable property transaction is underway. It outlines the terms and conditions that form the foundation of the sale of property. The guidelines are based on the Transfer of Property Act, 1882.
The terms of the Agreement boils down to a handful of basic points which are stated below.
- Full name and addresses of seller and buyer:
Complete narration of the property including location, usability
and other details.
- Price: The correct price including any
tax or discounts should be clearly mentioned here.
- Time frame and payment mode and terms:The time period should be mentioned. In case of payment in installments, the payment terms should be clearly mentioned along with the due dates.
- Taxes: Ensure that the purchaser is responsible
for all sales tax.
- Definitions of property lexicon: A lucid presentation of the terms used in the agreement so that it is easily understandable to both parties.
- Limited-liability claims: A typical clause for liability states that the seller's maximum amount of liability is equal to the purchase price. The seller can include a sentence that states he is not responsible for consequential damages, punitive and speculative damages, or lost projects.
- Requirements for the payment of Stamp Duty and Registration Charges.
- A clause stating that the signed agreement is the only legally binding agreement and no other agreement, whether oral or written is acceptable after the agreement is signed.
- A clause stating that both parties must acknowledge any changes or additions to the agreement, in writing. (Also, how each party must deliver changes to the signed Sale Agreement or any notices related to the agreement.)
- State whose laws will govern the Agreement.
At Indiarealtylaws.com, we give you an excellent opportunity to capitalize on the expertise of registered lawyers aboard our panel to help you navigate around the complexities of a sale-purchase liaison with ease.
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