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Interface and Distinction between Agreement to Sell and Sale Deed

Between the formalities of buying and selling, there are various legal approaches not everyone understands or undertakes. When people purchase a property, they are supposed to enter into a seller agreement. The contract can be different in type and nature. Whether it can be a sale deed or it can be a sales agreement. The distinction between these two documents is not widely known and both are regarded as synonymous. Yet that's not the case.

An agreement to sell is not equivalent to a sale deed of the same property. The differences that the buyers and agents of properties must know are discussed in this article at length.
Because the selling or purchase of movable and immovable property titles is a prerequisite for transfer, these operations are well regulated by certain binding documents.

What are Movable Properties?

In the course of purchasing and selling, the property which is not permanently affixed to the land or the original property, or that can be moved or taken out of the original property, or that does not form an integral part of the fixed property.

For an instance, one may not purchase a sofa-cushions set along with the house. Here, the sofa-cushion set is considered to be movable property.

Movable property has its value different than the property it has been placed or used at. Such property holds separate price of its own and can be purchased or sold solo, as per the requirement of the buyer.

What are Immovable Properties?

The property and all structures on the ground as well as all permanent facilities included in the sale may be known as Immovable property. These are things that are stuck onto the ground, cemented or bolted.

It is also known as Fixed Property. Fixtures to it are also parts of it, being installed to the property is also said to be immovable property.

Be it Movable or Immovable, any property that has to go through title transfer or selling and purchasing process must be followed by legally binding documents like agreement to sell, sale deed and more.

What is an Agreement to Sell?

An important document, the sale agreement helps the sales process to run smoothly. Both the parties shall fully recognize and follow all terms and conditions contained in the sales agreement before the selling deed is signed. The base document for drawing up the sale deed is the selling agreement.

A Sale Agreement is by definition a document in which the terms and conditions of a prospective sales contract are outlined along with the agreed consideration and payment details.
´┐ŻA contract for the sale of immovable property is a contract for the sale of such property on terms agreed between the parties". These words are contained in Section 54 of the Transfer of Property Act, 1882. The aforesaid provision further contains that the contract of sale does not itself, create any interest or charge on the immovable property. It only creates a right of the seller to receive consideration and of the purchaser to purchase and enjoy the property rights.

The matters included in the agreement to sell are:

  1. Purchase/sales proposal or agreement.
  2. Mode of Payment (entire consideration amount).
  3. Details and description of the property and its fixtures.
  4. Amount and payment mode for the earnest money.
  5. Details of Refund of earnest money in case of termination.
  6. Provision for delivery of Documents on successful payment.
  7. Provisions relating to Tax-related certificates.
  8. Consideration memo/receipt for earnest money.

Thus, an agreement to sell is merely an arrangement that shows willingness of the parties to enter into the transaction of buying or selling. However, it cannot be concluded as a sale deed because no direct right or interest is created.

What is a Sale Deed?

Essentially, sale deed is a document of proof for transfer of a certain property. In routine business, there takes place, a number of transactions relating to sale and purchase of properties. To keep a track on them, certain legal approaches have to be undertaken. Deed of sale is one such important document required to be executed between buyer and seller in order to complete the process.

The sale deed ensures that the title of ownership is transferred from the seller to the buyer in return of a valid consideration.

Sale deed must involve the following:

  1. Detailed description of the immovable property.
  2. Title clearance verification.
  3. Amount of consideration as referred to agreement to sell.
  4. Transfer details of all rights, claims and privileges.
  5. Delivery of the property and full enjoyment rights.
  6. Provision authorising the buyer to sell the property further, if he wishes.

Distinction between Agreement to Sell and Sale Deed

  1. An agreement to sell is a promise or willingness to transfer the rights in the property to another person. Whereas, Sale deed is a document showing actual transfer of ownership rights.
  2. Agreement to sell involves the terms and conditions on which the sale/purchase will be transacted. While, a sale deed involves the detailed information about the parties, the property, the amount of consideration, whether paid or not, and more.
  3. An agreement to sell shows future transfer, while a sale deed signifies immediate effect of the transfer.
  4. Rights and obligations remain with the seller in case of mere agreement to sell, whereas in the scenario of sale deed, the rights and liabilities are transferred to the buyer instantly.
  5. An agreement to sell needs not to be executed by a stamp duty, unlike a sale deed. Buyer has to pay a certain amount of stamp duty for the transfer to be registered.
  6. An agreement to sell is a mere understanding between the parties. While, the sale deed requires witnesses to be present before the registrar at the time of registration of the deed.
To conclude, while going through the transaction of property transfer one must be aware of the interface and distinction between the two essential documents, an agreement to sell and a sale deed. Both stand with firmness at their own places, but have slightly different role and purpose. The title of property remains with the seller until there is a valid sale deed executed and registered under the Indian Registration Act, 1908.

Written By: Thakkar Nishita

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