Agreements to sell are also a type of sales contract, but they can be more thorough and legally binding than a simple sale.
In an agreement to sell, the contract clearly states the price a buyer agrees to pay for either goods or the fulfillment of some kind of condition stipulated. Both parties must agree to these terms and sign the contract to make it valid.
The performance of an agreement to sell contract must be done at the time specified in the contract, which will be a future date. An agreement to sell contract cannot cover a sale that has already taken place. The deadline might be a specific date, once a certain amount of time has elapsed, or once certain conditions have been satisfied.
An agreement of sale is a legal document that outlines the terms of a real estate transaction. It lists the price and other details of the transaction, and is signed by the seller and the buyer.
In many cases, the property till won’t legally become the buyer’s until he or she pays the entire purchase price, which could take years. Even so, the buyer still might take possession of the property while paying for it.
For example, a buyer and seller might use this method if the buyer doesn’t have the money to pay in full. If the seller doesn’t need all the money or doesn’t mind letting the buyer live on the property while paying for it, they could draw up an agreement of sale to make the arrangement clear and to protect both parties.
To be sure, an agreement of sale is often used in seller financing, when the seller lends money to the buyer to pay for the house. This type of deal might occur if the buyer can’t qualify for a traditional mortgage.
Under this arrangement, the owner retains ownership of the home while the buyer makes monthly payments just as he or she would make to a mortgage lender. When the purchase amount is paid off, the seller signs the deed over to the buyer.
The Sale Deed Is Same As Conveyance Deed
Even though one often gets to hear the two terms being used interchangeably, a sale deed and a conveyance deed mean different things. The sale deed is basically a type of conveyance deed, considering the latter is rather a wide term, which also covers gift deed, exchange deed, mortgage deed, lease deed, etc. Basically, all these documents are various types of conveyance deeds.
“Each type of legal document that transfers the ownership of property from one person to another is a conveyance deal. In that sense, a sale deed is a conveyance deed too. Buyers should be mindful of this and should not get unduly confused, thinking that they need two documents for the property purchase rather than one,” says Prabhanshu Mishra, a Lucknow-based lawyer with expertise in property law.
Supreme Court Judgements
The sales agreement may or may not result into an actual sale of the property in question. Some of the stamp duty laws, like the Maharashtra Stamp Act, deem an agreement for sale of an immovable property, on the same footing as a proper deed of conveyance and therefore, are subject to the same stamp duty as is applicable on the proper deed of conveyance or sale deed of an immovable property. Due to such deeming provisions, requiring payment of stamp duty on an agreement for sale, people mistakenly perceive an agreement for sale, as a proper sale deed.
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.
The Supreme Court further reiterated the importance of sale agreement between the builder and buyer, as it recently ruled that the period of allotment of a housing unit to a home buyer has to be considered from the date of the builder-buyer agreement and not from the date of registration of the project under the Real Estate (Regulation and Development) Act, 2016. The court further ordered the RERA authorities to order payment of compensation from the builder as per the sale agreement, the sanctity of which has been upheld through this order.
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