Sale Deed: Format, Meaning and Purpose

Legal disputes concerning the transfer of ownership in immovable property are a nightmare. An essential tool that will protect any party to a transfer of immovable property is a valid and duly executed sale deed. The sale deed is the most important legal document when it comes to the sale of a property. A well-executed sale deed draft is the legal proof of ownership of the buyer. Once they go through the deed registration process, the buyer can claim their rights to own, use, and lease the property in question. Through this article, let’s look at what a sale deed is, its essential elements, and how it can protect the parties from unnecessary legal disputes.

Table of Content

What is a sale deed? What is the format of a sale deed? Sale Deed v/s Sales Agreement What is the process of executing a sale deed? Documents required for sales deed registration Are all registered sale deeds legally valid and enforceable? Points to note Frequently Asked Questions

What is a sale deed?

A sale deed is a written formal document that allows the owner of a property to transfer the whole of their rights in the property to another in exchange for a consideration. A sale deed is the final document that is required to transfer the right of ownership in a property. Once you register a sale deed, the transaction of the transfer of a property is complete. The is to allow the new owner of the property to register themselves as the owner to the sub-registrar office of the district. A sale deed draft about the sale or purchase of property is governed by the terms of the Transfer of Property Act, of 1908.

What is the format of a sale deed?

The sale deed is that legal document that will govern the entire property transfer transaction. Once the deed is duly executed, both the parties, i.e. the transferor and transferee are bound to it. Hence, you must ensure that the sales contract draft you have includes the following terms:

Indemnification

While drafting a contract of sale, the seller/original owner must indemnify the buyer from all past claims and liabilities of the property i.e., pending charges, lawsuits, mortgages, damages, etc. This protects the buyer from incurring any liabilities incurred to the property before the sale transaction.

Payment details

This clause must have the exact cost of the property, date of payment, and mode of payment. Further if the payment is supposed to be taken in installments, then details of each such applicable installment are necessary.

Possession of property

The buyer needs to ensure that there is a clause that expressly that the new owner, i.e., the buyer will retain the possession of the property on a fixed date. As a result, this date is known as the date of possession.

Other mandatory disclosure

If there are any damages to the property, the seller must mention all damages, etc in the final contract of sale. Besides, this clause helps the buyer in figuring out whether they want to execute the deed or not.

Sale Deed v/s Sales Agreement

At a glance, the two terms seem interchangeable to each other. However, both these terms apply to different legal documents. Hence, let’s take a look at all the points of difference between a conveyance deed and a sales agreement.

No.	Sale Deed	Sales Agreement
1.	Sale Deed refers that the sale is immediate in nature.	Sales agreement refers to the fact that both parties have agreed to make a sale/purchase in the near future.
2.	In a sale deed, the risk is highly on the buyer, since the sale has been made.	In a sales agreement, the onus and risk are still on the seller of property.
3.	A sale deed is legally executed.	A sale agreement is executable in the future.
4.	Registration of a sale deed is mandatory.	Registration of a sales agreement is not mandatory. It depends on the state laws.
5.	All rights and claims of the property are transferred to the buyer.	Here, there is only a transfer of the right to buy the property at a future date.
6.	The scope of a sale deed covers all the final informational aspects of a property sale transaction.	The scope of this agreement covers the terms and conditions leading up to a sale.

What is the process of executing a sale deed?

Only a duly executed deed is legally valid. The execution is very important since in the terms of law, it completes the transfer of ownership process. Let’s dive into how the execution process takes place.

Finalize the draft

Usually, the seller prepares the contract of sales after taking assistance from their lawyers. However, it is both the right and duty of the buyer to negotiate the terms as per their interest. Hence, the final deed draft must be framed after keeping the interests of both parties in mind.

Get Non-Judicial Stamp paper of appropriate value

Once the deed draft is final, the parties need to print it on non-judicial stamp paper. Besides, the value of stamp duty varies based on state laws. However, the usual charges are between 4 to 6% of the property’s sale value.

Registration of Sale Deed

According to the Registration Act, all agreements for the sale of immovable property, where the value of the property is more than Rs. 100 must be registered at the sub-registrar’s office of appropriate jurisdiction. To register a deed, both parties need to physically visit the sub registrar’s office, submit the required documents, along with the requisite registration fees, and get the name of the buyer registered as the new owner of the property. Lastly, for more information on drafting a contract of sales, feel free to connect with LegalWiz.in experts. Contact us today!

Signature of two witnesses

For this transaction to be legal and valid after registration, both parties need to provide one witness each.

Documents required for sales deed registration

The following documents are mandatory while executing a sale deed: 

• Copy of building plan;
• Power of Attorney (if applicable);
• Copy of Sale Agreement; 
• Allotment letter from a builder;
• Encumbrances clearance letter;
• No Objection Certificate (if applicable);
• Recent Tax Receipt;
• Utility Bills;
• Title Clearance documents;
• Documents of previous sale (only applicable in case of resale); and
• Power of Attorney (if applicable). 

Did you know? Lease Deed registration is also sometimes mandatory. Read all about lease deeds to understand the implications.

Are all registered sale deeds legally valid and enforceable?

As we all know there is a huge backlog of property title disputes in India. Keeping that in mind, the Hon’ble Apex Court has passed varied orders in different matters related to the legal validity of a deed of sales. For instance:

In a recent landmark judgment, the hon’ble Supreme Court stated that payment or consideration is an integral part of any sale. Hence, the registration of a deed, which does not have any mention of a consideration or any payment term is legally unenforceable.

However, in another case, the payment terms were mentioned in the registered deed, but part of the payment was not made by the buyer. Here, the Supreme Court stated that the mere non-payment of the part of the consideration did not render the wholesale deed invalid.

From the above two examples, we can understand that the legal validity and enforceability are completely dependent on the contents of the final deed itself. Hence, making it even more necessary to draft such agreements with utmost care.

Points to note

• That the seller mentions transfer of ownership rights expressly; 
• Ensure that the title to the property is free of all encumbrances, liabilities, etc; 
• Re-check that the old owner has paid all utility bills, maintenance charges, etc; and 
• Vetting of all terms and conditions leading up to the sale.