What is the sale agreement and what purpose does it serve?
‘Agreement for sale’, popularly called the ‘sale agreement’, contains the terms & conditions mutually agreed upon by the seller (Vendor) and the buyer (Purchaser) for the sale of the property. This agreement governs the whole property transaction and it stays valid until the property is registered or unless otherwise mentioned.
It is a legally binding agreement and helps to build complete trust between the parties to accomplish an ownership transfer without any hassle.
What are the typical clauses one must have in a sale agreement format?
It contains the following:
- The date on which the sale agreement is being executed.
- Name, Father/Husband’s Name, Age, Address and PAN card details of the Vendor(s) and Purchaser(s).
- Schedule of the property.
- Title flow of the property.
- Total sale consideration, i.e. the total sale value.
- Advance payment & mode of payment.
- Timeline for completing the transaction, i.e. registering the sale deed.
- Vendor obligations.
- Non-solicitation by Vendor.
- Dispute handling mechanism.
- TDS details.
- Default, exit and penalty clause.
What are the required documents for drafting a sale agreement?
Previous Absolute Sale Deed
Khatha certificate & Khatha extract for current year
Tax paid receipt for current year
How to execute a sale agreement:
Once the sale agreement is drafted by the lawyer and the clauses are agreed upon both the parties, it has to be executed through following steps:
As per the Karnataka Stamp Act, the stamp duty for sale agreement is 0.1% on consideration amount, Min.Rs.500/-, Max. Rs. 20,000/-
The sale agreement has to be printed on a Non-Judicial e-stamp paper worth the above value or it can be franked at the sub-registrar’s office by making the payment in the form of a Demand Draft (DD). For buying the e-stamp paper or franking the agreement physical presence of any of the parties is not required.
The sale agreement must be duly signed by both parties along with two witnesses, in the executions page. In all other pages, both parties should put their initials.
How does a sale deed format look like?
Common terms used in sales agreement
What is ‘Schedule of Property?’
Schedule of the property is to identify the property and is typically divided into two to 3 sub-schedules. For example, in case of an apartment, Schedule-A identifies the larger extent of the property i.e. the Taluk, Hobli, Village and Survey number on which the apartment complex resides along with a description of its total area and its boundary. Schedule-B, describes the exact unit or flat in consideration. Schedule-C, mentions the undivided share of the land (UDS) associated with the unit being transacted.
What is the ‘Title Flow?’
It is nothing but the chronologically ordered history of ownership flow of the property. This essentially establishes how the present Seller (vendor) has acquired the rightful possession of the property. Typically, in case of flat, it starts with the developer taking ownership from the land owners, in turn transferring the ownership to the buyers of individual flats.
What is ‘total sale consideration’?
It is the total transaction value covering all aspects of the property including parking, interiors and fixtures and but excluding the stamp duty and registration fee. Basically, it is the total amount that the buyer is going to hand over to the seller for acquiring the property.