What Are The Differences Between an Agreement of Sale and a Sale Deed?

When a property is subject to future terms and conditions and its transfer is contingent upon a future date, this is known as an Agreement of Sale. When the agreement's terms and conditions are satisfied or the transfer of property has expired, the agreement becomes a sale.

Let's review the distinctions between an Agreement of Sale and Sale Deed below:

An Agreement of Sale is the written contract that specifies the terms and conditions of a property's sale, while the Sale Deed is the document that notes this agreement. Also a Sale Deed is a legal document that transfers property ownership from the seller to the purchaser. 

What Exactly is an Agreement For Sale?

An Agreement for Sale is a contract in which one party agrees to sell an asset (in this case an immoveable property) to another. The Agreement for Sale must be in writing and must be signed by both parties. This document is also known as an agreement to sell or a deed of sale.An Agreement for Sale specifies the terms and conditions of a seller's property sale to a buyer. These terms and conditions comprise the price at which the said property will be sold, the advance amount/s paid, the balance amount/s payable and the date/s on or before which the full payment will be made. All other terms and conditions mutually decided between both the parties could be recorded in an Agreement for Sale. Technically an Agreement for Sale is deemed to be complete only upon the fulfilment of the performances mentioned therein.

The Transfer of Property Act of 1982, which regulates the sale and transfer of real property, provides the following definition of an Agreement for Sale:

A. According to the above definition, an Agreement for Sale is a commitment to transfer a property in the future, dependent on the fulfilment of particular terms and conditions. The potential purchaser has no rights or interests in the property as a result of this arrangement.

B. The sales contract offers the buyer the right to acquire the subject property if certain conditions are met. Similarly, the seller has the right to collect payment from the buyer so long as he complies with the terms and conditions.

C. The Specific Relief Act of 1963 grants the buyer the right to specific performance if the seller fails to sell or transfer ownership of the property to the buyer. The contract gives the seller the same ability to demand specified performance from the buyer.

D. Although signing the purchase agreement does not signify that the deal has been completed, it is a crucial step in that direction. Therefore, consumers must have a comprehensive comprehension of the terms and circumstances of the agreement.

In India, an Agreement for Sale is distinct from a Sale Deed.

What exactly is a Sale Deed?

A sale deed is a legal document that demonstrates the transfer of title, rights, and ownership of a property from the seller to the purchaser. It is the most essential evidence document for both the buyer and the seller. It is necessary for both the purchaser or transferee and the seller or transferor. The purchase or sale of the property is not legally complete until the buyer and seller execute a sale deed. Typically, a sale deed is not executed until both parties are content with the terms and conditions of the selling transaction. 

Typically, a Sale Deed will include the following details:

Contact information for buyers and vendors - name, age, addresses, KYC details including PAN number / Aadhaar number, etc.

Exhaustive description of the residence - total area, details of construction, the exact address and surroundings.

The selling price, including any advance payments made, as well as the payment method.

Duration of the actual property transfer.

The exact date of transfer of possession.

Compensation provision - The seller promises to pay the buyer for any damages in case of disputes about the ownership, resulting in monetary losses to the buyer.

In one sense, a Sale Deed is a complete document that certifies that all terms and conditions agreed upon by the buyer and seller for the sale of a certain property have been met and completed in full.

What Are the Benefits of an Agreement for Sale?

An Agreement for Sale is a legal agreement used to transfer the ownership of real estate and may be used to transfer the ownership of real estate, such as a home, office, shop or land or other assets.

An Agreement of Sale has the following advantages:

An Agreement of Sale is less expensive than a Sale Deed.

Both the buyer and seller may sign the Agreement of Sale.

An Agreement of Sale may be recorded with the government.

An Agreement of Sale is amendable if required.

Important Points to Remember About an Agreement for Sale

As required by law, the Sales Agreement is a contract of utmost importance owing to a number of relevant factors. Due to the varying rate of housing demand, a variety of finalisation phases must be taken into account. Numerous stamp duty laws, like the Maharashtra Stamp Act, have created an authority for agreement of sale of immovable property, which has the same value and requirements as sale deed or other conveyancing papers.

Despite large differences in their real underlying value, each has genuine market transactions that accurately represent their value. Each transaction has its own stamp duty payments. As of 2012, the Supreme Court of India declared that only the sale of a deed with duty charges and through the registration process should qualify as a valid instrument of transfer of ownership from one party to another.

Considering the significance of the subject matter of the agreement for sale, if the registered document is not presented at the time of possession, it will not be in accordance with Section 54 of the Transfer of Property Act of the Indian Constitution, which states that the sale of immovable property can be made only by registered paperwork in the recognised form in the presence of legal witnesses, and and that the agreement for sale is not one such instrument to directly effectuate the sale.

Furthermore, the Supreme Court has emphasised the agreement for sale requirement, opening the way for the idea that period allocation of a housing unit should be based on the date mentioned in the agreement for sale rather than the date the project was registered under the Real Estate Act.

What Are the Benefits of a Sale Deed?

The Sale Deed is considered to be the crucially significant document in terms of concluding the property ownership process. At every step of an immovable property transaction, registration documents are required and must be presented to the legal and judicial authorities. According to the Indian Registration Act (1908), the transfer of immovable property accompanied by a claim for more than 100 rupees must be recorded. The transaction will be postponed until the next period of availability if either the agreement for sale or the appropriate selling document is lacking.

However, according to Section 53 A of the Transfer of Property Act, the buyer is not liable for any disturbance in the property-related matter caused by the seller in charge if he or she obtained the property through all legal means and complied with all of the terms and conditions stipulated by the seller at the time of the contract. Consequently, it is a safeguard for the transferee against the transferor. In accordance with the law, authority and ownership remain with the seller, thus this does not indicate that the buyer has all control over the possession. In any case, the sale deed has not been authorised.

In accordance with the Indian Registration Act, a property must be backed by a sale deed in order to be legally recognised as a transferred property under new ownership, even if it is acquired by the buyer and remains in their possession without interference from the seller. A selling agreement is inadequate to transfer ownership of accounts and credit to a new owner. As these documents are of similar importance, the government must inspect, stamp, and register them for transfer purposes.

Key differences Between an Agreement for Sale & A Sale Deed

An Agreement for Sale is a commitment to transfer property ownership in the future whereas A sale deed is a legal document that transfers property ownership. 

Both documents have details of both the buyer and seller and also the terms and conditions.

An Agreement for Sale allows the buyer to purchase the subject property if certain conditions are met whereas a Sale Deed conveys all property rights and interests to the purchaser.

An Agreement for Sale generally precedes the sale deed, which is signed and executed by the seller and buyer on non-judicial stamp paper and to execute a Sale Deed, the purchaser must pay stamp duty and registration fees.

However both parties can also execute a Sale Deed directly if they wish to.

Important Points to Remember:

The Indian Registration Act of 1908 requires the registration of any agreement for the transfer of any interest in an immovable property valued at more than Rs 100. Therefore, if you have acquired property according to an agreement for sale without a legal sale deed, you have no right or interest in the property that was purportedly transferred pursuant to the agreement of sale.

Under Section 53A of the Transfer of Property Act, this absolute requirement is susceptible to an exemption. Section 53A stipulates that the seller is not permitted to interfere with the buyer's ownership of the transferred property if the buyer has taken possession of the property while fully complying with his obligations under the contract. Note that Section 53A protects the intended transferee (buyer) from the transferor (seller) and prohibits the transferor (seller) from disrupting the transferee's (buyer's) possession, but it does not cure the buyer's title to the property. The seller continues to maintain ownership of the property.

Therefore, if you have acquired a property via a sales agreement and obtained possession, the developer retains ownership until a sale deed has been later completed and registered under the Indian Registration Act. Thus, it becomes evident that only a sale document may transfer the title to an immovable property. In the absence of a properly stamped and registered sale document, the purchaser has no right, title, or interest in an immovable property.

Can a Sale Deed or an Agreement for Sale be cancelled?

A Sale Deed may be cancelled if both the seller and the buyer agree to the cancellation. Specific Relief Act, 1963, sections 31 to 33 describe the criteria under which a sale deed may be annulled.

These circumstances consist of:

The conveyance should have been recorded in accordance with the Indian Registration Act of 1908. Any or both of the parties believe the act is invalid.