Difference Between Sale Deed And Agreement To Sell

An agreement for sale does not give you possession of the land on which the flat is built. To secure your rights to the flat or villa, pay registration fees so that you have a valid sale deed instead of only an agreement for sale

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Selling and buying are two activities that keep fuelling the economy by ensuring the flow of money. It brings about development and growth by giving direct and indirect employment opportunities of multifarious nature. Since selling or buying involves transfer of titles of movable and immovable property, such activities are well regulated by the government agencies who enact, implement and safeguard various laws for the safety of the resources involved in economic activities. Properties of all forms may be purchased/sold – whether movable or immovable. The protection granted to such sales also depends upon their category, inasmuch as immovable properties, for instance, are of higher value and requires stricter measures for protection. Let us observe some legal terminology related to sale agreements as applicable to movable and immovable properties.

Movable Property
Movable properties include tangible goods not being land, buildings and other immovable properties. For instance, machinery, tools, vehicles, raw materials, consumer goods, etc. In India, sale of goods is regulated by the Sale of Goods Act, 1930.
The Sale of Goods Act, 1930, clarifies the difference between Sale and Agreement to Sell. It says that the contract of sale goods is one where a seller transfers or agrees to transfer the property in goods to the buyer for a price. Such a contract may be absolute or conditional.
If the property described is transferred through the contract immediately- it is called Sale.
If the property’s transfer is on a future date and subject to further terms and conditions – it is called Agreement to Sell. An Agreement to Sell becomes a Sale when the conditions are fulfilled or when the time elapses for the property to be transferred. Thus, we may conclude that a Sale deed is created if it is subject to an immediate transfer of property. If not, it is an agreement to sell.

Immovable Property
Immovable Property has greater significance for an agreement to sell, mainly because such sales are complicated affairs requiring numerous documents and legal procedures. This necessitates detailed understanding and description of the entire procedure and roles of the parties. Thus, for a sale of immovable property, the first step is to draft an agreement to sell.

What Is An Agreement To Sell?
An Agreement to sell is by nature a memorandum of agreement wherein the terms and condition of a prospective contract of sale is enumerated along with the proposed consideration and details of payment. It is a document of major importance in a sale of immovable property. It is the document on which the Deed of Sale is based on. It enables the process of sale to happen smoothly by describing the steps in detail. This helps in creating a better understanding between the parties and their individual roles in the sale.
An Agreement to Sell includes matters like:

  1. Proposal to purchase and agreement to sell
  2. Detailed description of the property
  3. Proviso requirement of good marketable titles and no encumbrances
  4. Payment details including earnest money
  5. Delivery of original documents on payment
  6. Drafting of sale deed and registration of the same if titles found good
  7. Method of delivery of property
  8. Refund of earnest money in case of improper titles
  9. Remedies for non-completion of sale on part of vendor including specific performance and bearing of expense of proceedings
  10. Forfeiture of earnest money, if purchaser fails to complete the sale
  11. Action if the property is affected by notice from government authorities.
  12. Production of tax related certificates
  13. Schedule description of the property
  14. Memo of consideration for earnest money received
  15. All other matters incidental to the proposed Sale
    An Agreement to Sell thus shows the willingness of the parties to sell/buy a property in question and culminates in creation of the actual sale deed. It cannot be called a Sale Deed because it does not create any rights on the property for the buyer.

What Is A Sale Deed?
A deed of sale is a document that actually transfers the rights associated with a property from one party to another. It is usually drafted as a continuation of the agreement to sell. All the terms and conditions mentioned in the former would be fulfilled and observed in a deed of sale. Following are some of the points that are mentioned in a Sale Deed.

  1. Description of the ownership and property
  2. Clear titles verified by the purchaser
  3. Reference to the Agreement to Sell and the price details
  4. Release/discharge of the property with description of facilities measurements, privileges, easements and other rights
  5. Transfer of all rights, interests, claim, demand whatsoever of the property
  6. Facilitating peaceful enjoyment of the property without hindrance
  7. Indemnifying the purchaser against losses arising out of negligence/actions of seller or heirs
  8. Full authority of vendor to sell.

In short, a Sale deed mentions more of the transfer of property and rights which forms the crux of it. All other terms and conditions are mentioned in the agreement to sell. Therefore, the Sale Deed can be drafted briefly.
Key Differences Between Sale And Agreement To Sell

  1. A sale implies immediate transfer of property. It is accomplished through a Sale Deed, while an agreement to sell implies future transfer.
  2. Risks are transferred immediately in Sale, whereas they remain with the seller in case of Agreement to Sell.
  3. A Sale is an executed contract, while an Agreement to Sell is an executory contract.
  4. Breach of Sale can result in a suit for price as well as damages, while any breach of terms of an Agreement to Sell can result only in suit for damages.
  5. A Sale Deed is a compulsorily registrable instrument whereas an Agreement to Sell is subject to laws of the particular state.

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