In real estate, you are often sold the idea of your dream. All good real estate thrives on selling emotions. After all, buying a home is not just an investment, but also an emotional decision. Yet, once the initial excitement is over, reality sets in. Buying a house requires a lot of paperwork. A lot. One of the most important documents is the Sale Agreement. Find out why you need to have basic knowledge of this critical document.
What’s the sale agreement?
A ‘Sale Agreement’ or ‘Agreement to Sell’ is an agreement entered into by the buyer and seller, which sets out all the essential terms of the transaction and the rights of the parties. It binds the parties to the sale.
It is important to distinguish it from the execution of the Sale Deed, as an Agreement to Sell precedes the Sale Deed. The Sale Agreement is a basis document on which the Sale Deed is drafted and executed on non-judicial stamp paper, and only then is the sale complete.
Some of the essential clauses to be checked are as follow –
● The Agreement to Sell starts by stating the names of the parties, their respective ages, and their full residential addresses. This is followed by the date and place of the execution of the agreement.
● The Agreement then states the full description of the property and its location. Make sure to check if the correct property has been described.
● The next important aspect of the Agreement is the ‘consideration’ clause, which states the amount of consideration and the mode and time of payment. It could provide a payment schedule for payment in instalments. The Agreement only binds the parties to make the transaction for a certain sum at the time and place specified in this clause and should not be taken to mean that the payment is complete.
● Once the competence of the parties to contract is established, the agreement sets out the various rights and liabilities of the buyer and seller separately. It could also provide for timelines for completion of certain obligations such as repair, maintenance, etc. It is extremely important to go through these clauses carefully with the help of a legal advisor. This will include various amenities that are available to the buyer along with the property itself.
● Another important clause in the Agreement is the date of possession of the property. It is important to make sure that the property is being handed over by the set deadline. If the property is being bought from builders, it is essential to acquire a ‘completion certificate’ or ‘occupancy certificate’. The Agreement should mention the certificate and specify that it will be handed over to the buyer, if not done so already.
● The Agreement usually provides for a clearance of all outstanding dues on the property by the seller. This will ensure that the buyer is not unnecessarily burdened with old property tax liabilities or utility taxes that were applicable before purchasing the property itself.
● The penalty clause is essential for such a contract as it provides for situations where either of the parties defaults in fulfilling their obligations.
● An indemnity clause provides a protection to the buyer from any legal disputes or claims that may arise against the property. For example, if a legal heir of the seller sues for the property, the indemnity clause will protect the buyer from any such legal action.
● A termination clause is provided to protect either party in case the other party backs out of the transaction. It also provides for a situation where termination happens due to no party’s fault, such as the death of either party before the completion of the transaction.
While these are some of the important clauses to check in a Sale Agreement, many hidden clauses could be included in the contract. It is vital to go through each clause carefully and get it verified by a legal advisor before proceeding with the sale.