Sale Deed Preparation - Requirements and Precaution
Today, in India, the Conveyancing is being done by semiskilled persons who do not possess the full and required legal knowledge and skills. Many people involved in Conveyancing are hanging around the Sub Registrar Offices with little knowledge regarding Contract Act, Transfer of Property Act, Indian Stamp Act and Registration Act. They basically got the skills of a computer operator and use cut and paste options extensively to prepare any document by using the templates available without understanding the uniqueness of each document and also importance of capturing all the vital issues/aspects involved in the transaction.
But, Conveyancing has been practiced as a fine art in England and other developed nations by a class of trained lawyers who have specialized as conveyancer after an intensive study of the law relating to contracts and real property. Though the term conveyancing used by most of the England Lawyers for drafting the documents of their clients but as the years rolled by Conveyancing got its own importance even in India too.
In Modern India Draftsman plays an important role while drafting any legal documents or deeds and he can do so if he is highly qualified in the field of law so draftsman must keep in mind all the legal principles before preparing any legal documents or deeds.
The word "CONVEYANCING" means transfer of property inter-vivos i.e. between two living persons.
Conveyancing is an art of drafting deeds and legal documents whereby any right, title or interest in tangible immovable property is transferred from one person to another. Conveyancing is not just an ordinary art but it is thoroughly based on legal knowledge and principles evolved over the years. The term conveyancing is restricted to deeds and documents concerned with the transfer of property; whereas drafting carries a general meaning that of preparing any legal documents or deeds or any other business oriented documents.
The word "SALE" defined under Section 54 of "The Transfer of Property Act, 1882" is a transfer of ownership in exchange of price paid or promised or part-paid and part-promised..
It means absolute transfer of tangible immovable property by the vendor to the purchaser by entering into a contract for sale wherein both the parties will settle the terms and conditions of transfer. Such transfer can be done through the registered document and thus delivery of the property can be by handing over the actual possession of the immovable property by the vendor to the purchaser or the person legally authorised by him. In a sale of tangible immovable property, all the statutory rights i.e. easementary rights, beneficiary rights, actionable claims as well as vested interest in the immovable property will be transferred in-toto in favour of buyer from the vendor.
Before explaining the term "Sale Deed", let us define "Agreement to sell" which precedes "SALE DEED" and it protects the interest of both buyer and seller. An agreement to sell is a legal written document on which the conveyance deed is drafted under which both the parties will settle certain terms and conditions i.e. seller will be intending to transfer/sale the property and buyer will be intending to purchase it.
An agreement to sell has to be executed by the seller and the buyer on a non-judicial stamp paper and the same has to be duly signed by both the parties. It has got legal value and if necessary can be produced as evidence in a court of law. An agreement is a pre-requirement for the sale of an immovable property wherein the buyer will pay to seller some token amount as advance and seller must issue receipt for the amount received as token amount.
While entering into an agreement to sell, the seller should mandatorily state all the material defects in the property as well as in the title and it is the right and duty of the buyer to investigate the title before buying the property. There should not be any lis pendens i.e. pendency of suit in a court of law regarding the property in sale. Lastly the agreement to sell must contain all the terms and conditions which are necessary for transaction of a valid sale of an immovable property.
In Andhra Pradesh Agreement to sell is a compulsory registrable document from the year 1999, now it is made compulsory registrable document all over India. In Andhra Pradesh, 5% Stamp Duty shall be paid on the market value of the property or consideration whichever is higher on the agreement to sell; and the same is adjustable on sale deed executed in pursuance of this agreement.
The word "SALE DEED" otherwise called as "Conveyance Deed" is a legal written document executed by the vendor and the purchaser which evidences the sale and transfer of ownership of the tangible immovable property.
A sale deed is governed by the Transfer of Property Act and the Registration Act, 1908 and is an important document for both the buyer or the transferee and the seller or the transferor. A sale deed is executed, usually, after the execution of the agreement to sell, and after compliance of various terms and conditions between the seller and the purchaser mutually. A sale deed is the main document which gives details of how the seller got the property, at what consideration the seller is selling the property and assurance to the purchaser that the property is free from any encumbrances, liabilities or indemnity clauses. A sale deed acts as an essential document for the further sale of the property by the purchaser as it establishes the proof of ownership of property.
Requirements of Sale Deed:
Sale deed is one of the most valuable legal documents in a purchase or sale of a property. A sale deed is drafted by legal draftsman on a non-judicial stamp paper of the requisite value as prescribed by stamp act of the particular state concerned. Today, in many States including Andhra Pradesh, the stamp papers are available up to the value of Rs.100/- only. The parties shall use 5-6 Non-Judicial stamp papers and remaining amount shall be paid through challan system (AP) and through stamping and other mechanism provided by the State Government (in others States). A draftsman must include certain clauses while preparing the construction of the sale deed which are as follows:
- Name of the deed: It is the parties who have to decide that which deed has to be prepared e.g. DEED OF SALE or DEED OF MORTGAGE or DEED OF LEASE etc. and based on which there will be transfer of ownership of immovable property. Since this Sale deed, parties may use DEED OF SALE (OR) SALE DEED.
- Parties to sale deed: An absolute sale deed must contain the names, age and respective addresses of parties to the transaction and both the parties i.e. seller and buyer must be competent to enter into a contract so that it will not affect the validity of the valid sale. It is very much important that the sale deed is duly signed and executed by both the parties with their bona-fide intention. A valid sale deed must start with clear description of the parties.
- Description of the property sold: A valid sale deed must contain full description of the property which is the subject matter of sale. It must include identification number, total plot area, construction details as well as its location with its surrounding areas. A schedule of the property must be included in the sale deed which will define the exact location where the property is actually situated.
- Agreement for sale: In the agreement for sale both the parties may mutually settle the terms and conditions of the agreement so that it will not affect the rights of the parties. A sale deed may be preceded by agreement to sell.
- Sale consideration clause: A sale deed must include the clause stating the sale consideration/amount as agreed between the seller and the buyer which has to be paid by the buyer to the seller on the execution of sale deed. A sale amount should be clearly stated in sale deed as agreed in the agreement to sell so that there should not be any onus on the parties to the transaction.
- Advance payment, if any: If there is any transaction of token amount paid by the buyer to the seller then it has to be clearly mentioned in the sale deed, and how much is the remaining balance to be paid on the execution of the sale deed.
- Mode of payment: It is always the buyer who has to decide that how he is going to pay the sale consideration amount whether by Cash /Cheque/ Demand Draft and the same has to be agreed by the seller.
- Passing of the title: A sale deed should contain the clause when the original title of the property to be passed to the purchaser. A time limit should be given to the seller for the transfer of the title. Once the title of the immovable property is transferred, all the rights will pass to the purchaser.
- Delivery of the possession: The possession of the immovable property will be transferred to the purchaser by the vendor once the registration process is completed. A clause in the sale deed must state when there will be actual delivery of the possession.
- Indemnity provision if any: A seller must clear all the statutory charges i.e. property tax, electricity charges, water bills, cess, society charges, maintenance charges and all other charges relating to the property before the execution of the sale deed. In case there is any encumbrance on the property, the seller needs to repay the loan amount and get the property papers cleared of the encumbrance. It is the duty of the buyer to verify the encumbrance status from the office of the Registrar/Sub Registrar/Mee Seva Centres (in AP).
- Execution: Once the Sale Deed is prepared all the parties to the deed shall execute it by affixing their thumb impression or full signature. Each page should be signed by the seller and buyer. Any erasure, alteration, addition or deletion is to be authenticated by full signature of the parties. Execution of the sale deed requires to be witnessed by two witnesses. The witnesses shall give their full particulars and addresses.
- Registration According to Section: 17 of "The Registration Act, 1908", the registration of a tangible immovable property is compulsory if the value of the respective property exceeds rupees 100/- and it is the registration of the property which makes the sale valid. For getting the registration done both the parties must be present in person or through their duly authorized agent(s) before the jurisdictional sub-registrar office with the original documents within four months from the date of execution. A stamp duty has to be paid by the purchaser to the sub-registrar for getting the registration done. A certified copy of the registration document to be obtained for the future reference.
- Testatum: Once all the terms and conditions have been settled between both the parties, a sale deed is prepared. The executed sale deed should be witnessed by at least two witnesses one from seller side and one from buyer side, giving their full names, addresses and signatures.
- Original documents: Once the property gets registered under the registration act all the original documents of the sold property to be hand over by the seller to the purchaser. All the statutory rights along with ownership, possession, title, interest will get vested in favour of the purchaser.
- Default clause: An agreement for sale of immovable property should include the clause stating if there is any default by the vendor or the purchaser then the party who rescinds the contract need to pay damages to the other party for the breach of contract so that it will not affect to the execution of the sale deed.
Since drafting of sale deed requires abundant caution and presence of mind with sufficient knowledge of property and other allied laws, it would be better if services of advocates who have vast experience in property transactions are utilized to avoid unexpected and uncalled for litigations which may arise in a poorly drafted sale deed.