Sale Agreement: Clauses and Important Notes

You’ve found a buyer, talked about the price, and shaken hands to close the deal. But that is not enough on its own. A “Sale Agreement” or “Agreement to Sell” should be written up to make sure that the buyer is real and to get all the details of the property sale in writing.

A “Sale Agreement” or “Agreement to Sell” is a document that states in writing the seller’s plans to sell the property and the buyer’s plans to buy that property. This document has the terms and conditions of the sale of the property. Both the buyer and the seller talk about and agree on these terms and conditions. It is the main document that will be used to write the sale deed, which we will talk about in the next chapter.

It includes information like how much earnest money or token money has been paid by the buyer to the seller (usually 10 to 20 percent of the final selling price of the property) and when the rest of the payment will be made (usually within one to two months or as agreed by both parties), a description of the property, and information about both parties.

Right to abort the deal and indemnity clause: The buyer’s lawyer may add a clause that says the buyer has the right to back out of the deal without having to pay anything. This clause will come into play if the property documents given by the seller are not legal or if there is a problem with the property title. A property’s title is said to be clear if the owner has the right paperwork to prove ownership and there are no debts or claims from other people on the property.

For example, if you are the owner and you are selling the property, your name should be on the sale deed, which you got when you bought the property.

Also, an indemnity clause may be added in which the seller says that there will be a financial penalty if he or she doesn’t follow the terms of the contract. So, as the seller, you should make sure that your property doesn’t have any encumbrances so that there aren’t any problems during the property registration process. Because of this, you would need to get an Encumbrance Certificate (EC). Because of this, you would need to get an Encumbrance Certificate (EC).

You can get this document by going to the office of the Sub-Registrar of Assurances. whose area of responsibility includes the property in question. You will need to fill out Form 22 and send it with an attested copy of your proof of address, the property’s title details, and its details, along with the required fees. The EC will be sent to you in 10 to 15 days.

The EC is given out on two forms: Form 15 and Form 16. If the property doesn’t have any liens on it during the time period asked for, Form 16 will be given out. This is also called the “Nil Encumbrance Certificate” (NEC).

If there are encumbrances on the property during the requested time period, form number 15 will be given out. It will list the documents that have been registered about the property. the type of encumbrances (such as a lease, mortgage, partition, or gift), and the people who are involved. This will have the names and dates of all the people who have owned the property you are selling in the last 12 or 30 years.

Nonetheless, the EC shall only specify documents and transactions that have been registered with the Sub-Registrar of Assurances’ office.

It is important to get this certificate so you can show the buyer that the property is free of encumbrances and has a clear title.

Penalty clause: It would be smart to ask the buyer to include a penalty clause in the sale agreement. This means that if the buyer doesn’t pay the rest of the money by the agreed-upon date or backs out of the sale, the earnest money they gave you won’t be returned. But if you back out of the deal, the buyer may also put in a clause with a similar financial penalty.

Outstanding dues clause: This means that before selling the property, the seller must pay off all outstanding dues on the property, such as electricity and water bills, property taxes, and maintenance fees. So, make sure you pay off all of these debts and have the receipts for these things with you so you can show them to the seller.

All in all, the sale agreement is a very important document that lists the terms and conditions of the property sale. In the next section, we’ll talk about how to use it during the sales process.

Disclaimer: The opinions shown above are mainly for informational reasons and are based on market research. Deal Acres is not responsible for any actions made as a result of relying on the provided material and makes no representations as to its accuracy, completeness, or reliability.