Difference between Agreement of Sale and Sale Deed

In real estate, people often use the terms – agreement of sale and sale deed – as synonyms. However, both are very different and executed at separate events.

Agreement of Sale validates the seller and buyer entering a deal whereas Sale Deed legally identifies the new buyer as the owner of the property. When buying or selling immovable property, it is imperative to safeguard the activity through a legal contract. Generally, there are two types of contracts – the agreement of sale where the property transfer is promised on a future date and the sale deed that entails an immediate transfer of the property rights. Thus, depending upon the nature of the deal between the buyer and the seller, the covenant is drafted.

What is an agreement of sale?

The agreement of sale shows the willingness of the parties to buy/sell the property in future upon the satisfaction of certain terms and conditions. However, since it does not involve an immediate transfer of ownership, the buyer has limited rights and interest in the property in question.

Terms included in agreement of sale

• Proposal to purchase and agreement to sell in future
• Detailed description of the property
• Disclaimer that the property is free from legal encumbrances
• Value of the property including payment details
• Delivery of the original documents on the final payment
• Execution of sale deed and registration of the same if the titles are found good
• Method of property delivery
• Payment refund in case of improper titles
• Action course for non-completion of sale on the part of the seller
• Loss of advance payment if the purchaser fails to complete the transaction
• Remedy if legal issues besiege the property
• Transfer of tax-related certificates
• All other matters related to the proposed sale

The process to register a sale agreement is the same as when registering a sale deed. Therefore, it would be prudent to check the local area regulations regarding the same.

What is a sale deed?

A sale deed is drafted as the actual sale/transfer of the property. Once the deed is executed, the new buyer takes the complete ownership of the property. However, the deed is drawn only after all the contractual terms of the sale agreement have been explicitly settled. Moreover, it is mandatory to register a sale deed at the registrar’s office under the Registration Act, 1908.

Details included in sale deed

• Details of the parties involved in the transaction
• Description of the property
• Transfer of titles
• The clause of sale consideration
• References to the agreement of sale and the price details
• Transfer of rights, interests and claim of the property to the new buyer
• A clause that the previous owner does not hold any authority on the facilities, privileges and easements of the property
• Compensation to the purchaser for losses arising out of the negligence of the seller or heirs of the asset
• The authority of the vendor to sell the property.

Generally, the sale deed is brief as most of the contractual terms have been already delineated in the agreement of sale.

Conclusion

If you bought a house under the agreement of sale and failed to execute a sale deed, then even after you avail the possession of the property, the right to property would remain with the developer. Even with regards to a resale property transaction, unless the registration of the sale deed follows the agreement to sell, the government will continue to consider the original owner as the current owner. Thus, to avoid such situations, it is imperative to draft a sale deed and get it registered. Only a stamped and registered deed guarantees legitimate property ownership to the buyer.

Credits : 99Acres