The sale and purchase of immoveable property requires an agreement between 2 (or more) parties, wherein there is required to be a transfer of title of the property for a consideration.
The terms agreed between the seller and purchaser when put in writing in the form of an agreement is known as a sale agreement or a purchase agreement. These agreements are governed by the provisions of the Indian Contract Act 1372 and the Transfer of Property Act 1882.
According to the Indian Registration Act 1908, the registration of the agreement to sell is only optional. If registered, it helps in establishing the bona-fide nature of the transaction. Further, encumbrance certificate discloses the subsistence of such an agreement, which deters any further agreements, unless the existing one is cancelled.
Such contracts need to be diligently prepared referring to minute details. The services of an expert advocate in property matters should be availed.
Why should you have a 'sale / purchase agreement'?
A sale or purchase agreement is basically lists out the terms agreed upon between the seller and purchaser. Due to the clarity of the terms and conditions as captured in the agreement the probability of mis-interpretation or mis-understanding is minimized protecting the interests of both the purchaser and the seller. These agreements are governed by the provisions of the Indian Contract Act 1372 and the Transfer of Property Act 1882.
What does a 'sale / purchase agreement' include?
A sale or purchase agreement normally will include the following basic details:
Persons entering into the agreement, ie: names of the buyer and seller should be mentioned to clearly identify the parties to the contract.
Title of the property, ie: authorized description of the property which the seller is willing to sell and the buyer is willing to buy. This description needs t take into account all legal provisions of the property location.
Consideration should be clearly mentioned in the agreement and the amount of earnest money paid (advance) by the purchaser to the seller while coming into this agreement should also be clearly mentioned with the details of the instrument of payment made among other details.
Date and time-lines are required to be clearly mentioned in the agreement as the agreement should not be indefinite in execution.
Inspection and access to the property and documents by the seller or purchaser during the execution of the agreement should be clearly mentioned to verify original title documents and clear end dates for access or vacating or handing over a unencumbered property should be mentioned.
Possession mode, time and terms and conditions should be clearly mentioned in the agreement.
Dispute Resolution mechanisms such as any mediation or arbitration and clauses therein should be a part of the agreement where in case of disputes (if any) the way forward is clearly demarcated.
Damages to the seller and the purchaser in case of non-fulfillment or non-execution of the agreement should be clearly mentioned.
Other terms and conditions pertaining to the agreement between both the parties should be clearly mentioned in the agreement.