- Date : 08/02/2022
- Read: 4 mins
Understand where you stand in a property transaction by knowing the difference between a sale deed and an agreement for sale.
An agreement for sale and a sale deed both loosely indicate a transaction of sale and purchase of a property. However, when it comes to legal implications, both are quite different from one another. The prevalence of multiple terms complicates things. For instance, an agreement for sale may also be referred to as an agreement to sell, or a sale agreement. Likewise, a sale deed may also be called a deed of sale or a conveyance deed.
Irrespective of what you choose to call it, an agreement for sale and a sale deed are quite distinct entities. Here are the key points of difference between the two.
- Meaning: An agreement for sale indicates the agreement between a buyer and a seller to buy/sell a property. It documents the agreed details that will form the basis of the property transaction. So, it indicates a future transaction. A sale deed is prepared to conclude the property transaction and it indicates that the property transaction between the two parties has taken place.
- Contents: An agreement for sale typically contains the specific terms and conditions of the transaction. The sale deed documents the details of the two parties, along with their age and addresses and the details of the property transacted. This includes the area of the property, construction specifications, address, surrounding details, sale amount, advance paid (if any), mode of payment, time frame, a milestone towards the transfer of title, property possession date, indemnity clause etc.
- Rights of the buyer: In the case of an agreement for sale, the buyer has the right to purchase the property, provided they fulfil the terms and conditions mentioned in the agreement. A sale deed, on the other hand, completely transfers the property rights and interests to the buyer.
- Documentation method and charges: An agreement for sale can be documented on a non-judicial stamp paper. It needs to be stamped and executed by both the seller and the purchaser. It is generally not mandatory to register an agreement for sale. In the case of a sale deed, however, the purchaser executes it by paying the registration fee and stamp duty as applicable.
- Transfer of risk: At the stage of the agreement for sale, the risk and liability of the property rest with the seller. This is because an agreement for sale is an executory contract. As a sale deed is an executed contract, any risk or liability related to the property gets transferred to the new buyer/owner.
- Consequences of violation: In case an agreement for sale is violated, the aggrieved party can file a suit for damages. They get the right to specific performance under the Specific Relief Act, 1963. However, a breach of a sale deed can be cited as a cause for a legal complaint by the aggrieved party. Monetary compensation for damages can also be claimed.
Legal rights of the transferee: An agreement for sale offers the purchaser the right to purchase the property, provided they fulfil the terms and conditions mentioned in the agreement. It is only with the execution of the sale deed that the purchaser becomes the owner. An exception to this is provided by Section 53A of the Transfer of Property Act. This section protects the right of possession of the property of the purchaser. If the purchaser has fulfilled the obligations required under the agreement, the seller cannot obstruct the possession of the purchaser. The title, however, remains with the seller till the execution of the sale deed. This protects flat buyers while buying a property from a real estate developer.
Typically, an agreement for sale precedes a sale deed. However, depending on state laws, an agreement for sale may be considered to be as valid as a sale deed. In such cases, an agreement for sale is subject to registration and stamp duties just as with a sale deed.
In the case of a home loan, a sale deed or agreement for sale is required to be furnished, but generally not both. This is because a home buyer may enter into an agreement for sale with the builder by making a down payment, and apply for a home loan for the remaining amount. In such cases the sale deed may be finalised later, subject to fulfilment of conditions and completion of construction as well.