There should be forfeiture clause that in event balance payment not done earnest money would be forfeited
2) if you cancel you will refund advance money received with interest at 8 per cent
Sale of house and plot
I have found a buyer who has agreed to buy my plot and house property within it , and give me the payment in a period of 6 months. Sale agreement is not yet prepared, what should be cancellation clause that should be kept in this agreement to ensure that the buyer does not back out in between this 6 months and also if by end of 6 months, he is unable to pay me the agreed amount? is there a cancellation penalty as per Law? because due to this agreement i am not entertatining other potential buyers in the hope that this person will buy, and since my property is under loan to bank, i also continue to pay EMI during this 6 months. can i keep cancellation clause like example: if buyer does not pay full amount within due date period or if he cancels before due date period, i will refund his transferred amount but after deducting a specific penalty which is some % of agreed sale value of property? and is that clause also applicable to me as seller , like if i cancel for any reason within this 6 months, i refund his transferred amount and i also pay same x % of penalty amount to him?
Asked 3 years ago in Property Law
Religion: Christian
8 Answers
You can have 'Breach of Contract ', 'Penalty Clause, 'Specific Performance of the Contract' and 'Canellation Clause' in the sale agreement.
Firstly you have a mortgage home loan pending against this property, hence it becomes your duty to repay the loan amount with interest and until you discharge the entire loan amount you cannot claim title to the property hence the proposed sale is also not valid since you do not have title to the property at the time of entering into this sale agreement.
However if you enter into an agreement for sale and stipulate 6 months period as the time limit, then you can include a clause for deduction of administration charges from the advance amount not exceeding 2% of the amount paid in case he is cancelling the same and vice versa.
You can keep some amount to be forfeited if such cancellation takes place
- You can mention that if he will not pay the remaining amount within 6 months till the period mentioned in the agreement, then the paid amount by him will be forfeited without any notice
- Yes, you can deduct 10% of the paid amount legally as a penalty for the termination of the agreement.
- Further, the seller will have its right to sell the property ,if the buyer will not enter into a sale deed till the date as mentioned in the agreement.
The cancellation clause should outline the consequences if either party cancels the agreement, such as penalties or repayment of any amount already paid, as well as the timing of the cancellation and other conditions. It should also detail the remedies available if the other party breaches the agreement.
Such penal clause is quite valid and normal in agreements to sale property. But it will not be applicable on agreed sale consideration it applies only on advance paid.
Dear client,
Yes, you can include a cancellation clause in the sale agreement to protect your interests. The cancellation clause should specify the conditions under which either party can cancel the agreement, the penalty for cancellation, and the procedure for refunding the payment.
You can include a penalty clause for the buyer's failure to pay the full amount within the agreed time or if the buyer cancels the agreement before the due date. The penalty amount can be a specific percentage of the sale value of the property.
Similarly, you can also include a penalty clause for yourself if you cancel the agreement for any reason within the 6 months. This will ensure that both parties are aware of the consequences of cancelling the agreement.
It's important to note that the penalty clause should be reasonable and not excessive, as excessive penalty clauses may not be enforceable under the law. It's recommended to consult with a lawyer to ensure that the clause is legal and enforceable.
Also, it's advisable to include a provision in the agreement that specifies the consequences of default by either party, such as the right to terminate the agreement and forfeit the amount paid, or the right to pursue legal action for breach of contract.
