In cities like Mumbai, Thane, Navi-Mumbai, Pune etc., where the property
prices have Sky rocketed, it
is very important that you should examine the
titles
deeds of the property very
carefully and the most important part is the drafting of Agreement
of Sale & other documentation.
You have
now done with the task of narrowing down on a Home/ Office/
Shop that suits you in all aspects, which
is not a small task in itself. This is however
the beginning of the next stage in the process of acquiring your
new Home/ Office/ Shop. The first of which is the ‘Agreement of Sale’ or ‘Sale Agreement’ as it is also known as.
Whether you are purchasing a site for
construction of a home (in which case it is called the Construction
Sale Agreement) or an apartment from a builder,
the Sale Agreement is a document that
you will need to scrutinise minutely before signing.
Once signed, you will not be able to counter
anything that is on it.
The Sale
Agreement being a technical document will have a series of
terms that you need to understand thoroughly with the help of a Property Lawyer.
Say for example, in a transaction
where money is exchanged, in part or in whole,
for the transferring of ownership of a particular
piece of property in whole. The property
is referred to as a freehold property when
it belongs to someone for a fixed price
that is already paid.
There is nothing
explicitly mentioned in the law about the Sale Agreement
being a written one. However, it is now common
practice and even a practical thing
to do so, especially if the document
is to hold water in a Court of Law.
An important thing to do is to get the Agreement drafted carefully from an experienced Lawyer
and then get it registered,
as a non-registered document does not have
any Legal bearing and any deal made
on the basis of it is considered void.
The Legal Basis: In
India, the ‘Property Sale Agreement’
comes under the Indian Contract Act 1872,
the Registration Act 1908, and the Transfer of Property Act. This
is applicable no matter
who the seller is, a friend, family,
acquaintance or complete stranger. A Written Agreement should be entered
into in order to legally
establish the authenticity of the property’s ownership.
All of the deeds that you receive will
have to be verified by an experienced and established Property Lawyer.
Should you be buying
an apartment from a realty company then cross-check
with the Registrar of Companies on the property being of
freehold nature. The apartment
should be completely
free of any obligations monetarily and should not be mortgaged.
It cannot be reiterated
enough on the importance
of having the documents looked into by a Property Lawyer.
Even before the main Agreement
is drafted & signed, ideally a MOU should be executed
before paying any token/ earnest money.
Here
are some important elements as to what should essentially be covered in your Sale
Agreement:
There are several inclusions or what are called clauses in the Sale Agreement. It will describe
the property, include contact details of the seller and the buyer, the negotiated price will be mentioned and also how this
payment is being disbursed. The schedule & time frame for
the payment will be included. There will also be a provision for the payment of stamp duty and sharing of other expenses for transfer of the property
title.
The clauses in a sale
agreement are important because they outline everything that will go into making this a successful transaction, which is completely legally sound. The contract will tell you if the payment is to be made in cash, in part or an agreement for it to be paid partially in the future has been agreed on.
Some of
the clauses will cover Municipal Taxes that are due by the person selling, as well as maintenance charges and in the case of an apartment being purchased, payment towards the building/ society, etc.
The onus
is on both the buyer and seller to come to a mutual
agreement on the price of the property
and all other expenses that go towards the transfer
of property. This has to be included and has to be agreed on by both
the buyer and seller.
The time
for the disbursement of the payment
should also be included right up to the last installment.
The document will need to be scrutinised by lawyers from both sides
and then signed
by both parties.
For a loan
to be sanctioned, the property titles are of utmost importance.
This should be transferred to the buyer
when the seller has got in hand the total
amounts agreed on. The transfer is the last step
in the whole process of buying the property.
The property will have to be registered
in the buyer’s name by the seller at the local Office
of Sub-Registrar of assurance.
These rates
are fixed by the relevant authorities and can vary with each State.
The onus is on the buyer to ensure
that the property has been registered
in his name at the rate
that the government has sanctioned for the transferring
of the property. Further the property
valuation for Stamp duty purpose is area specific,
like the property prices of prime locations
are valued at a premium. Again the Stamp duty has to be calculated with utmost care, as wrong valuation
can lead into higher Stamp duty and chances are that
the buyer could unknowingly loses his money.
This follows the Agreement of Sale
and is an understanding between the seller
and the buyer. Its contents need to be scrutinised
by experts multiple times before you actually sign on it.
There are different aspects of the Agreement to be looked into minutely.
The chain and title of the property has to be defined in the agreement clearly
& properly, there is involvement of TDS & other formalities as well.
Further using
standard form of Template Agreement, which is available
on net or copying contents from an old Agreement
could be very harmful, generally all Agreements
have to be customised to suit individual
requirements. Adv. R. P. Rathod says that “you type Blood Pressure
& Google will return you 1 billion
search results in half second, right from symptoms to all sort of treatments,
but if you really have blood pressure
whom will you approach & rely upon, Google
or a qualified doctor”.
Again some
property agents, typing centres, etc promise to
prepare the deeds at much lower price, but this could be
very risking
situation. The price of property in cities
have been sky rocked in last few years & a decent
home here starts from a minimum of 75 Lakhs,
but to save few thousand people usually
rely on these non-professional persons and risk their life savings & hard
earned money.
The proper drafting of an Agreement actually benefits the buyer in a long run.
In my professional experience, I have observed
that people blindly
sign papers trusting the wrong
guys and risk their money & property. Like in one case I observed that
the Agreement for Sale mentioned Sale of a Shop
Premises & the parties hurriedly signed & registered
the papers, but actually the deal between
the seller and the buyer was for a Flat and there was no shop as such.
In another case it so happened that the buyer had
paid Rs. 15 Lakhs to the seller &
the balance amount was to be financed by way
of bank Loan, but at the last moment
the bank loan was rejected and the deal had to be terminated,
the seller returned just Rs. 5 Lakhs to the buyer specifying that
a clause in the Agreement empowered him to forfeited Rs. 10 lakhs in case of Cancellation
of the Agreement.
Adv. R. P. Rathod
recalls that in another case
it so happened that the seller under trust signed all the deeds, handed
over all the original documents, the purchaser later
took possession of the premises under
pretext of just shifting his household
articles, as he had to vacate his old house. Later the buyer started to harass
the seller over the balance due
payments, which was
to a tune of 60%
of the decided consideration. The Seller issued Notice to the buyer, which the buyer
replied stating that there is no clause in the Agreement
which stipulates any time frame for the balance payment, so citing financial
problems; he stated that he will be paying the balance consideration
as per his sweet convenience.
Adv. R. P. Rathod
explains that there is no fixed Proforma
or template as such for an Agreement of Sale, a professionally customised Agreement may run anywhere between 20-150 pages.
Further the job of choosing
a Lawyer should never be left on to the Realtors, the purchaser should self choose & engage a Property Lawyer.
Normally people tend to burden the cost of drafting the deeds on the realtors
under pretext that they are paying them huge commission and in turn these
realtors get the job done from unprofessional
guys, once the deal is closed and realtor get their
commission, they immediately get out of picture and wash their
hands off for any title defect, drafting errors, leaving the buyer & seller high and dry.
In case of a flat/ shop/
premises in a Co-operative Society usually the transfer gets held up
and the buyer has to run pillar
to post for the transfer for years together.
To
conclude with all I can say
is that it’s high
time people realise & limit the role
of a realtor and entrust
the title drafting & scrutinising work only to an expert Property Lawyer, with the Right kind of Legal help at your support, there is no reason to fear the
complexities of the Agreement of Sale, it is something that you can easily surmount.
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