• Selling flat without Agreement for Sale

Hi,

For some months I have been wanting to sell a flat in Greater Noida that is worth Rs 10 lakhs approx. Now I have a buyer who is willing to pay the desired price but he is asking me to sign an Agreement for Sale - terms of this agreement are that the buyer would pay me Rs 50,000 right now and the rest Rs 9.5 lakhs would be given after 1 month - on the day of sale deed registration. This agreement also states that if in case the sale deed registration doesn't take place because I (seller) refuse to go forward with it then the Rs 50,000 advance should be returned along with extra Rs 50,000 as penalty to the buyer and the agreement would stand void. And if the buyer changes his mind to purchase then the Rs 50,000 advance would be forfeited by me.

I have following queries:

1) I am afraid that if I sign the agreement right now and later the buyer refuses to go forward with the sale then I would have created a legal encumbrance on my property and would have trouble in finding good buyers. Though the agreement for sale states that if the sale doesn't take place in 1 month then the agreement would be void but I think this is something that the court would decide and the buyer can file a suit for specific performance till 3 years from now unless I get him to sign a separate cancellation agreement (which he may not be willing to sign). Is this a valid fear? 

2) If I don't want to sign any agreement for sale - can I ask the buyer to pay me the entire amount through RTGS just before sale deed registration at the registrar's office? If the buyer says no then I think he should pay atleast 50% of property value (Rs 5 lakhs) as advance through the agreement of sale instead of just Rs 50,000. Is this a reasonable proposal?
Asked 2 years ago in Property Law
Religion: Hindu

16 answers received in 1 day.

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17 Answers

You can put such conditions in agreement to sale which will automatically cancel it if such conditions are not fulfilled. 

No one will pay you such a huge amount without an agreement to the same

Prashant Nayak
Advocate, Mumbai
28570 Answers
101 Consultations

4.4 on 5.0

Best option is don’t enter into any agreement for sale 

2) ask the seller that as and when he has funds you would enter unit registered sale deed with him 

 

3) as far as agreement t for sale is concerned your fears are unfounded . If you don’t extend the period for making payment then you can cancel agreement and forfeit advance 

Ajay Sethi
Advocate, Mumbai
89848 Answers
6516 Consultations

5.0 on 5.0

1. Yes a suit can be filed if the agreement terms are not followed and the court may stay transfer of the property. Take a substantial amount at the time of signing of the agreement.

2. Yes you can ask.complete amount and directly sign the sale deed. 

Shubham Jhajharia
Advocate, Ahmedabad
25516 Answers
179 Consultations

5.0 on 5.0

1) No.  It is only your apprehension.  Once the  agreed time lapses, you can issue a formal notice cancelling the AOS in line with the agreed terms and conditions of AOS.  There ends the matter.  It is advisable to avoid this person out  right because, he charges 100% as penalty and forgoes actual paid by him if he is at fault. 

2) Straight away you can go for Sale Deed upon transferring the entire sale consideration.  Only upon receiving total sale consideration then only sale deed will be executed.  It is advisable  to go for one time payment rather than in installmennts, more particularly, you are not in India, and that, there are chances of you being taken for a ride.

S Srinivasa Prasad
Advocate, Hyderabad
2876 Answers
9 Consultations

5.0 on 5.0

1. Don't go with this kind of phrase.  Make at least 5L as advance amount while remaining amount to be paid on day of registration.  If larger amount was stuck he would not delay the registration. 

2. Yes. You can go ahead. 

Devajyoti Barman
Advocate, Kolkata
22515 Answers
416 Consultations

5.0 on 5.0

No, you must have sign the agreement first.

Swarupananda Neogi
Advocate, Kolkata
2951 Answers
6 Consultations

4.7 on 5.0

An agreement for sale usually precedes a sale deed 

It is absolutely fine to have terms and conditions set out in the agreement for sale with mutual agreement of the parties as to how the final sale transaction will go through 

If you do not wish to have this agreement then the buyer can do all the due diligence he wishes to ascertain that your title to the property is clear and marketable and parties can directly sign the sale deed simultaneously with exchange of consideration on the day of registration 

Even if there is no agreement for sale, specific performance can also be enforced for oral agreement 

An agreement for sale whether oral or written does not create any interest in the buyer until the final sale deed is registered in his favour 

The terms of the agreement should spell out in clear terms as to how the transaction will be terminated in case of breach of obligations by either party 

The condition that if you refuse to complete the deal you will be liable to refund the advance with an equal amount towards penalty is in my view not reasonable 

Generally if the seller refuses to complete the sale for valid reasons and as per the terms of the agreement then he has to refund the deposit paid by buyer plus 10% 

All of this is a matter of contract between the parties which should be drafted properly in clear terms 

In many states an agreement for sale is required to be fully stamped as applicable for a conveyance. If it's not stamped then it cannot be accepted as an evidence in the Courts unless proper duty is paid

So that acts as a deterrent for the buyers because generally duty is paid by buyers and after having paid full duty as applicable for conveyance, the buyers would not cry foul and terminate the agreement without a reasonable cause and in violation of agreed terms

Also the duty paid on agreement is later on adjusted against the duty to be paid on final sale deed

Though such an agreement is not compulsorily registrable, yet parties register it

But that is optional 

Whether this agreement is registered or not, what you can do to safeguard against any foul play by the buyer, is to take a limited POA from him for purpose of executing a cancellation agreement only and only in the event there is a breach by the buyer of the agreed terms in the agreement. This will ensure that if there is indeed a termination by you due to buyer's default, you dont have to run after him to execute the cancellation deed

Even otherwise as earlier stated an agreement for sale does not of itself create any right title or interest in favour of the buyer. That right crystallizes only on registration of final sale deed. 

For enforcing the agreement in the Court he will have to file a suit for specific performance of contract and obtain a stay against you to prevent you from creating any third party interest. All that is not so simple. 

Yusuf Rampurawala
Advocate, Mumbai. E: adv.yusuf.rampurawala@gmail.com
7074 Answers
79 Consultations

5.0 on 5.0

Well, this is true that if the agreement to sell us violated by either of the parties a case can be filed by either one of them and it would be an unnecessary harassment. What you suggest is correct. You should tell him that you will wait for a month. Take the money through rtgs. In case he doesn't want the property so be it.

Rahul Mishra
Advocate, Lucknow
13945 Answers
65 Consultations

5.0 on 5.0

Tech sir,  there are two instruments (documents) which needs to be executed. First is just an agreement for sale which is just an agreement whereby the buyer and seller agree that on a specified date, they will execute the second which will be the main instrument ie Agreement to Sell, which is termed as Sale Deed. 

It's during execution of first instrument that advance (or token amount)  is paid. This need not be registered. This agreement for sale, may contain mutually agreeable consequences as to what will be the liabilities of both, if for some reason or other, they donot get the Sale Deed executed at the date specified. 

So if Sale Deed isn't executed, there's no encumbrance upon the property 

Netra Mohanchandra Pant
Advocate, Navi Mumbai
1447 Answers
5 Consultations

4.4 on 5.0

Dear Client,

You may sell your flat without Agreement. 

If the buyer is insisting to get signed the agreement to sale then your do it but take atleast 50% advance. If the buyer later on don't buys the property as per time limits of Agreement, you don't need to return the amount.

Jaswant Singh
Advocate, Gurugram
929 Answers
2 Consultations

4.8 on 5.0

If you wish to go with direct sale deed and not with Agreement to Sell than its okay.

 

You can mention in sale deed the payment schedule accordingly between both of your understanding.

Ganesh Kadam
Advocate, Pune
12638 Answers
205 Consultations

4.9 on 5.0

Agreement is valid for both. No need to register it, just get it notary. 

Limitation to file Suit of SP is 3 years but if builder failed to honor the agreement in one month, agreement will expiry.

You can refuse to execute agreement to sell or demand 50% in advance. 

Or do not register it but only notary. This is also valid agreement 

Yogendra Singh Rajawat
Advocate, Jaipur
21481 Answers
31 Consultations

4.4 on 5.0

Hi 

1) It appears that the buyer is unjust in claiming that he will pay 50000 and claim a right / interest in the property worth Rs10Lakhs and hence your fears are valid . Hence you should refrain from complying with the unjust claims of the buyer.

2) You can enter in to agreement to sell only if

a) the buyer  remits atleast 50% of sale value now and balance 50% within 30 days and 

b)In the agreement to sell , make it specific that Time is Essence of the agreement and 

c)In  the agreement you should clearly mention that If the buyer does not pay the balance 60% of consideration and comes forward for registration, you can forfeit 10% of Rs5Lakhs as costs. 

d)In the agreement to sell, you can also undertake that in the event of seller not coming forward to execute the sale deed and handover possession on the same day, the buyer is entitled to get the entire amount paid by him along with Interest @14% per annum. 

 

Alternatively

3) You can ask for the buyer to pay the entire amount through RTGS just before sale deed registration and then execute the sale deed directly. 

Hope this information is useful 

Rajgopalan Sripathi
Advocate, Hyderabad
2169 Answers
394 Consultations

5.0 on 5.0

1. Your fear is unnecessary.

If the buyer is not turning up after the the stipulated time mentioned in the agreement to sale, you may issue a legal notice mentioning the conditions of the sale agreement and communicate your decision to cancel the agreement.

If the sale agreement is made by an unregistered document, then this legal notice and followed up b y a general notification in a local newspaper intimating about the cancellation of the sale agreement would be sufficient, he may not be able to pursue the matter legally after that.

 

2. You can refuse to execute a sale agreement if you are not in favor of this arrangement, you can even ask him to come with the full sale consideration amount after a month when he will make the amount ready for buying this property, because you in any case may not be benefited by this sale agreement.

If he is not willing to go ahead with your proposal, you may change the buyer.

 

 

T Kalaiselvan
Advocate, Vellore
80015 Answers
1674 Consultations

5.0 on 5.0

1. Yes the fear is valid but it is a normal practice for selling the flat and if you are not comfortable with agreement of sale then ask buyer to go directly for registration of sales deed. 

2. You need to go for negotiations before entering into agreement with buyer. 

Mohit Kapoor
Advocate, Rohtak
10687 Answers
7 Consultations

5.0 on 5.0

Sale Agreement is vital legal documents, its importent for both buyer and seller. 

Mohammed Mujeeb
Advocate, Hyderabad
19036 Answers
32 Consultations

4.5 on 5.0

Forget everything and go ahead to sign the sale agreement 

Rahul Jatain
Advocate, Rohtak
5365 Answers
4 Consultations

4.8 on 5.0

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