An Agreement of sale constitutes the terms and conditions of sale of a property between the seller and a buyer. It is an important and powerful document in any sale transaction. It enables the process of sale to go through with a clear understanding of terms and conditions laid therein. It entails all the terms agreed upon between the buyer and the seller. This document can be customized to the needs of both the parties and as per mutual understanding between the two.
Original document verification: When it comes to buying a house the deed of sale or Sale deed is one such document which holds complete details about the transfer of ownership and serves as a legal proof of ownership. When it comes to signing an agreement of sale, it's best to not rush initially and scrutinise all the property documents especially the Sale deed document, A Khata and property tax payment receipts.
Furthermore, there are few essentials which should not be ignored since the agreement of sale is a legally binding document. Ideally, one should check the below terms thoroughly:
1. Buyer and seller names and contact information: Seller names should always be as per the 'Sale Deed' document only. PAN and Aadhaar information should be captured correctly. For NRI Sellers, instead of Aadhaar No. Passport numbers can be captured. These three are known to be the most important identification documents for the validation of the process.
2. Penalty: It is the most crucial clause which is binding on both the buyer and the seller. Penalty amount should be clearly mentioned in the respective clause. This clause is very important and will be a big deterrent to sellers and buyers who might go back on their word and cancel the transaction due to unavoidable circumstances . Hence, a reasonable amount of penalty should be enforced on both the parties to the sale which is usually around 2 to 5 percent of the transaction cost
3. Outstanding dues: This clause should clearly state and put the responsibility on the seller to clear all the outstanding dues on the property (A Khata, Betterment charges of A Khata, Property tax, Bescom bills, Society maintenance charges, NOC from the Association etc.) until the date of registration. Many a times, buyers have to bear the brunt and pay the pending bills/charges since they were not vigilant during the course of the transaction.
4. Ownership transfer and time- bound deal: Clearly set out timeline within which the sale will be concluded and when the ownership of the property will be formally transferred to the buyer should be stated in Agreement of sale. A specific timeline of may be forty five days, two months or more should be explicitly mentioned. This clause must be present in an Agreement of sale for registration of property.
5. Payment terms and method: All the payments which have been made and would be made during the transaction should be set out clearly. Payment structure should be as detailed as possible.
6. Property details: The details of the property should be identical as in the 'Sale deed' document. Attention to all the details of the property in question including 'Super built up -area', 'Built up area', car parking-open/covered and car parking slot numbers should be clearly set out in the entire sale agreement document. In addition, a buyer has to be mindful about the total 'saleable area' of the property. Example: If the property sale deed document has a super built-up area of 1500 square feet but while drafting and capturing the details in the Agreement of sale it gets entered as built-up area instead of super built up will actually be erroneous and not accurate
7. TDS on sale of the property: Tax deducted at source(TDS) is required to be deducted for all sale transactions The buyer needs to verify if the seller qualifies as a 'Non-resident' or a 'Resident Indian'.
For Resident Indians, the TDS clause should explicitly state the percentage of TDS to be deducted on the sale value. For Non Resident Indians, since the TDS percentage is very high, the respective clause should clearly capture details pertaining to NRI Taxation.
One of the most important things to call out here is that the TDS amount is always inclusive of the sale consideration value. The buyer does NOT have to pay TDS separately.
8. Absence of significant property documents: At times, the seller does not have few property documents which are required for the 'registration of the property' but not for 'Signing the agreement to sell'. For example: The seller does not have 'A Khata' and has already applied for one. Here, the buyer should be extra cautious and should put in writing all the documents which the seller is required to obtain from respective authorities before registering the property. This will eliminate any kind of ambiguity in future.
