5 Must have clauses in sale deed

5 Must have clauses in sale deed

5 Must have clauses in sale deed

Property Sale Deed is most important document. It is different from Sale Deed though in some cases Sale Agreement is registered as Sale Deed. Sale agreement contain agreed upon Terms & Conditions between Seller & Buyer for the sale of property. It is legally binding on both the parties. It also specifies the date by which the transaction will be completed. In laymen terms, Sale agreement is a road map how the property transaction will be completed. On the other hand Sale deed is executed at the time of actual transfer of property i.e. transfer of ownership from seller to buyer.

1.Indemnity Clause in Sale Agreement

Due to sudden rise in property/land prices specially in metro cities, lot of properties are under legal litigation. These legal cases go on for decades. Some of the most common reasons for legal disputes are (a) Property was transferred under force/influence/coercion.

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(b) Legal heirs of Seller claim their right on property. Almost 40% properties in bangalore are under legal dispute. The indemnity clause in Sale Agreement indemnifies the buyer against any legal dispute / legal defect in the property. Also mention that in case of any legal dispute in future, the seller will compensate the buyer for any loss incurred by the buyer at the then prevailing market rate. This clause should be drafted carefully & should include all possible scenarios.

2.Penalty Clause

At the time of signing Sale Agreement, Buyer pay X amount as token money. Standard clause is put in agreement that if buyer will back out from the deal then entire token amount will be forfeited by seller. I would suggest to add another line in this clause that in case seller will back out from deal then Seller will return the token amount paid by buyer along with equivalent amount as penalty. If this clause is not put then seller will keep searching for new buyer who can pay extra. He will call off the deal, if he gets new buyer at higher rate before execution of Sale Deed.

3.Right to Call off the deal

As a buyer you should reserve the right to call off the deal under certain circumstances without being penalized financially. Some of these circumstances are as follows

  • (a) If Seller fails to provide legal/statuatory property documents required by the Buyer
  • (b) If the Buyer find out any legal defect in property before execution of sale deed
  • (c) If Buyer’s home loan is rejected by bank due to some legal/statutory issue in property/property documents
  • (d) If the seller fail to provide all original documents at the time of execution of sale deed. You may check my post on List of Documents required for Property Purchase
  • (e) If the seller fail to provide vacant possession of property at the time of execution of sale deed.
4.Outstanding Dues

It is critical to mention in Sale Agreement that Seller will clear all the dues accrued in respect of the property prior to the date of registration.

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5.Transfer of Deposits / Membership of Owner’s Association

The clause should clearly mention that scope of agreement also include transfer of all deposits paid by seller for Electricity connection, Water connection, to apartment owners association, Club house membership, Gym Membership, contribution towards sinking fund of association etc . In the absence of this clause, the seller might demand extra money at the time of sale deed against all the deposits paid by him.


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