Property Sale Agreement 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.
In any property transaction, maximum risk is carried by the borrower. Even experts will agree that all property transactions carry certain degree of risk. From buyers perspective, It is very critical to safeguard your interests before signing below the dotted line. I am listing down 5 most critical clause, which should be incorporated in Property Sale Agreement to safeguard the Buyer’s Interest.
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
(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.
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.
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.
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.
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.
I have listed down 5 important clause which must be included in sale agreement. These are over and above the standard Sale Agreement clauses. It is always advisable to hire good property lawyer to draft Sale Agreement & Absolute Sale Deed. If you need any specific input from my end on these clauses then you may post your query through following comments section.
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Dear Sir,
A Real eye opener, although too technical to understand the nitty gritty of above but meaningful.
I feel the sale agreement/ sale deed should not be biased in anybody’s favour and there should be some regulatory body to check and control the malpractices builder are employing nowadays.
There should be a clearcut deadline for builder to deliver the promises he makes at the time of sale otherwise buyer should be compensated accordingly.
Your Openion Plz?
Regards,
Kamlesh
I am glad, you liked the post. In my personal opinion, it is difficult to control & regularize real estate sector in India. Builders have their own set of problems. Government is coming out with Real Estate (Regulation & Development) Bill 2013 which will bring much awaited reforms in Real Estate by setting up regulatory body and transparency from builders end. Hopefully this bill be passed during winter session of parliament. The problem is not with laws/regulations but with a mindset. Being a buyer, you have to take care and safeguard your interest otherwise there are lot of loopholes in the system. Even if the real estate bill 2013 will become law, builders will find a way to bypass the provisions of bill.
Hi Nitin,
Can you enlighten us on the Service tax which builders usually charge on the buyers?
Rules are different for different states. If you can share your city or state then only i will be able to help.
Thanks for the reply
city:bangalore
Firstly, VAT & ST is only paid for under construction property. If it is ready to move in then legally you are not liable to pay any VAT or ST but many builder charge VAT & ST for ready to move in property also.
Now to calculate VAT & ST, There are 3 costs of a property Land Cost (approx 35%), Material Cost (approx 40%) and Labour + Service (approx 25%). Cost break up may change slightly from project to project. You can get this break up from builder. Land cost is exempted from both VAT and ST.
VAT is applicable only on Material cost @ 14.5% and ST is applicable
only on Labour cost & services @ 12.36%.
Second method of calculation is VAT + ST = 8.59% of total cost (5.5% VAT + 3.09% ST). The 1st method is bit confusing for buyers therefore most builders calculate as per second method only as builder is not paying this from his pocket. 8.59% may go upto 9.5% as it depends how builder is calcualting his cost.
Hi Nitin,
Yes our property is ready to move and was constructed 3 years back.
Builder has charged us VAT & ST.
Can we go legally and get back the money?
Also thanks for the detailed explanation
Yes, you can ask for refund from vendor. Firstly, you can give a written request to builder that builder has charged VAT & ST for already constructed apartment (ready to move-in) whereas it is applicable only for under-construction property. Request him to respond within 7 days.
Wait for builders reply on this and then we will decide what to do next.
Meanwhile, i would like to check whether you received OC (occupancy certificate) or not. If yes, that what is the date of issue of OC and what is the date of your purchase.
If OC is not received then you may demand the same from builder.
sure.. will check and let you know..
Priya
Hi nitin,
can you provide your maild id.. will send the OC.
you can mail me at info@nitinbhatia.in
sent mail..
I have checked your OC. Now as a thumb rule if you bought house before date of issue of OC i.e. 27/03/2012 than you need to pay VAT & ST as builder can prove that builder was under construction or not ready for occupancy. If the flat is bought on or after 27/03/2012 than you may claim VAT & ST from builder as the flat was already constructed and ready to occupy.
Thanks Nitin.. Will speak to my builder…
FYI we bought it few months back only.. so need to getback our money..
Hello Nitin, I am in a process of buying a resale flat. However the owner is a lady – a divorcee. The property is in name of both her husband and herself. Later she has made a gift deed wherein her husband has transferred 50% of his shares to her.
My queries are:
1]. Her name in the original property document carries her husband surname. Gift deed also contains her surname of her husband.
2]. Now that she is a divorcee, my sale agreement with her should be on what name? her father surname or her husband surname.
3]. She doesn’t have proper marriage certificate or divorce certificate.
4]. what other precautions you suggest I should take while signing off the deal.
Thanks
You need to check whether she changed her name “Legally” after divorce. Moreover gift deed is executed by the person who is transferring not by person who is receiving the gift.
1. I am assuming she is still using her husband’s surname officially
2. Husband’s surname
3. If Divorce certificate is not available means she is not “legally” separated
4. Its a bit complicated case without going through all documents i can’t comment.
Hello nitin.
This is about our land in UP. We wanted to sell it and hence entered into ‘Agreement to Sell’ with a buyer in the year 2009. Please note that Agreement was not containing date by which sale was to be completed/registered, clear timelines on payments and mode/date of transfer of possession. Later few issues cropped up regarding title of land. So sale could not be done. Now the issues are about to be resolved. Now the buyer, with whom we had Agreement, wants us to do the deal according to earlier made Agreement. But we want to change terms and conditions of the Agreement. The Agreement (of 2009) was not registered. Please note the Agreement mentions a line – “this agreement cannot be restricted, cancelled or taken back by any means.”
My question – How legally bound are we to follow the same Agreement?
Please assist.
Even if the agreement is not registered still you are legally bound by the terms and conditions of the agreement as the agreement is legally “irrevocable”.
Hi Nitin. Thanks for your message. But it was an open-ended agreement with no specifications of timelines for sale deed and possession. It was made in 2009.
open ended agreement doesn’t mean that you will not honor..you may delay the execution but have to honor the same, may be after sometime.
Hi nitin,
i have booked a 2bhk flat under landlord share. After receiving 7 lakhs as advance, the landlord only gave me a plain receipt and no sale agreement. When asked about the sale agreement, the land lord is denying to give. I am not willing to buy the flat now. He is giving me two options, either to go for registration or take 50% refund of 7 lakhs what should I do ? what are my immediate options?
Just to check whether you paid 7 Lac through cheque or through cash.
thru DD
As no documents is in place except payment record therefore in my opinion, You may approach police to register FIR and may file case of cheating, forgery and breach of trust / contract in civil court. you may obtain injunction from court to restrain the seller from selling his property till he clear your dues.
Based on Police FIR, you may request bank to share details of account in which DD is credited.
Thank you nitin. it was really helpful. I got my money back. im happy.
Hi Nitin
I am planning to buy a commercial property in an under construction commercial project in Bhiwadi. Pls may I know what precautions should I take and what all documents to check before going for the property. Project is by a new builder but designed by Arcop.
I will write a post on commercial property shortly.
Hi,
I am selling my existing flat. (resale transaction, around 9 yrs old flat, I am the first buyer).
My flat has water leakage at two points in the house which I have already showed to a prospective buyer.
Is it compulsory to put the “as is where is” clause in the Agreement
for sale document and sale deed document ? Can he sue me later ?
Thanks.
“As is where is” clause is important to safeguard interest of seller. He might claim damages due to water leakage in future.
Nitin, have gone through your comments above. Very informative,You are a genius
Thanks for liking the blog !!
Hi Nitin,
Your blog is very informative and an eye opener.
I have paid an advance for booking an under construction Apartment in Bangalore. I am about to go for an Sale agreement with the Builder. I had asked the builder to add a Clause that he will provide the OC and A-Khata in a specified period of time. But he is hesitating to add that clause and taking sometime to decide. He has given me an option, telling he can give this in writing on their Company Letter Head, but not in the agreement.
So my question is – Is this letter head writing has any legal value and should be enough? Or shall I go for this property only if he provides this on the Sale Agreement. What are my options now? I have paid 1L as booking amount for which I only have a receipt from him.
I would need your suggestion urgently. Thank you a lot in advance.
Regards,
Saurav.
OC and CC are legal / regulatory / statutory requirements which should be mentioned in sale deed. If you are paying specific charges towards Khata A to builder then it should also be mentioned in the sale deed.
Hellow Mr. Nitin,
I booked an under constuction Flat in Vadodara, Gujarat.The flat costs me 34lac.
I took home loan from a nationalized bank.To avail home loan 2 Nos. of documents (BANAHAT) were prepared named Agreement to sell and Agreement to construction on 100 rupee stamp paper.
Amount in Sell agreement was 12lac (Cost of land). and Amount in Construction agreement was 22lac.
Possession will be given around 2015 dec.
I wanted to know how much i have to pay over 34lac on service tax, stamp duty, registration.
I read your previous blogs in which you mentioned stamp duty charge in gujarat as 4.9%.
I wanted to know on which amount this 4.9% will be charged i.e it will charge on 12 lac (cost of land or Total cost of flat 34 lac.) also please let me know about service tax on under construction property.
Lastly, Please let me know the which property is more advantagous to buy, An underconstruction property or a ready possesion property.
Thanks and regards
Rahul
You have an option to register property at 12 lac (amount in agreement to sell) to save stamp duty and registration charges.
Now to calculate VAT & Service Tax or ST, There are 3 costs of a property i.e. Land Cost (approx 35%), Material Cost (approx 40%) and Labour + Service (approx 25%). Cost break up may change slightly from project to project. You can get this break up from builder. Land cost is exempted from both VAT and ST.
VAT is applicable only on Material cost @ 14.5% and ST is applicable only on Labour cost & services @ 12.36%.
Second method of calculation is VAT + ST = 8.59% of total cost (5.5% VAT + 3.09% ST). The 1st method is bit confusing for buyers therefore most builders calculate as per second method only as builder is not paying this from his pocket. 8.59% may go upto 9.5% as it depends how builder is calculating his cost.
You may take break up of project cost from builder to calculate your Service tax component.
I will suggest ready to move in flat over under construction property. For ready to move in flat you need not to pay VAT and ST. It is applicable only for under construction property
Hi Nitin,
I have paid 1lac as booking amount to a ready to move in apartment in Bangalore (2monthsfrom now is possesion timeline). However, when i asked the Builder OC, he said he does not have it and mentions that there is a deviation in the plan as he constructed the GYM on top floor. What will be the imapct of this later? If builder doesnt get this, how impactful can it be for the owners. Will it create any hassles when i re sell my flat later?
2.
Getting a A Khata approval he said may charge me upto rs 50 psft later some time, as currently land is in A khata but building is in B Khata.
I didnt understand much. Could you pls guide if im being deceived.?
Since the balance amt is to be paid this week. Early response will be much appreicated.
Thanks
SM
1. Recent judgement of Honorable supreme court to demolish Campa Cola society in Mumbai is related to OC only. Some floors of campa cola society were not issued OC by BMC therefore were declared illegal by supreme court of india. You need to check % deviation. Though i have not seen property documents but in future banks may not approve Home Loan for this project, you might not get water/electricity connection etc.
2. You need Khata A for building. Now banks and other govt authorities are very strict on Khata A requirement. There is nothing called Khata B its just a register maintained for the purpose of paying property tax. You should insist on Khata A.
Thansk Nitin for your valuable advise.
The Building is G+3 floors and on top floor i.e 4th Floor builder has constructed 3 apartments for self use and party hall. Further above to that floor he has built a GYM. Thats the only deviation which he confirmed for.
Though this property is BBMP approved, and has borewell connection and provision for Cauvery water will this still be an issue.
2. What is the psft charge for converting a Khata B to Khata A? If builder makes tantrums , what steps ca be taken? Can the CHS get this converted?
Can i take any legal steps against builder if Khata A and OC is not given?
In case of deviation, he will not receive OC and CC which he himself is admitting. Which is cause of concern.
Without OC you will not get Khata A. Charges for converting Khata B to Khata A is 2% of Stamp Duty paid at the time of registration and 125 Rs for Khata Certificate.
Hello Nitin,
I recently sold my flat to one buyer. The property value is 48 Lacs full white. We had done the ‘Agreement to Sale (MoU)’ and party had paid me the 15Lacs by cheque. In agreement we had not mentioned any penalty clause or any clause which mention to repay the 15 Lacs if buyer cancle the deal.
My question is if buyer stop the deal and ask for refund of 15 Lacs than can i able to charge the bank interest on my waiting period if its not mention in ‘Agreement to sale MoU’.
Please Advise.
Thanks & Regards,
Manindersingh
The property transaction will be strictly guided by the terms and conditions mentioned in the agreement. If there is no mention of penalty clause in sale agreement or clause pertaining to interest for waiting period then you cannot impose them unilateraly on buyer.
Sir, I have one agriculture land. I get done one Deal in some amount. And all Deal will complite by buyer with in 3 months. Buyer is ready to rgiving 1% amount of Deal as token and buyer is demanding to make MOU for this Deal and do notary. So my question is can we go for this , and which precortion we has to tack in this MOU
Normally token money is 2% of sale value or 5 lakh whichever is lower. You can execute sale agreement / MOU and get it notarized. It is perfectly fine.
The sale agreement should clearly mention terms of payment i.e. total payment, who will bear misc charges like stamp duty etc, validity of agreement, is the agreement extendable and most important what will happen if either buyer or a seller walk out of deal.
hello nitin sir,
I have purchased a flat for 42 lakhs and we have shown 28 lakhs in registry .agreement was done in april end and now its august due to delay of getting noc from builder and other docs i submitted docs for loan on 25 june and still it is under processing.Now seller is asking for interest for month of july & august stating he is getting charged interest by bank as the property has some loan going on.
I want to ask Can he ask this money and i am liable to pay that money.If not how can i make him stop it.
And counter can i ask him compensation if he asks his intrest as i am also staying in rental apartment and other micellenaeous expenses.
There is no clause for penalty or interest related conditions.
Please advise what can be done.
Thanks
Gagan
If there is no such clause in your agreement with seller then both of you are not liable to claim any interest or penalty from other party. Even if one party claim, the other party is not liable to pay.
what can be done if buyer is adamant that he wants interest money
You have to decide in this case. I have shared legal stand on same.
sir just wanted to confirm wether can i do a legal case against him since he is not ready to agree ,if i can what are my chances of winning plus will it take longer time like every other case in courts….
As i have not seen your documents therefore cannot suggest how strong is your case. I suggest you to hire a lawyer who can help in this regard. Property related legal cases take time in courts.
Hi Nitin sir,
I hope you are doing well.
I have Purchased a new flat in ready possesion for 37.5 Lakhs. I have done Agreement to sale on 11 august 2014.
In loan agreement, builder mentioned only one initial cheque amount.
Loan disbrustment will be done after 7-8 days. i ask to builder for Sale deed. he said no need to do that..I will provide you possession letter.
I shocked.
Is it ok to me or not..
Or what should i do to make me safe and tension free deal.
Please let me know.
Don’t worry. In some cases only 1 agreement is signed between builder and a buyer i.e. Agreement to Sale. The same agreement is registered in sub-registrar office by the builder in favor of buyer. If this is the case then Agreement to Sale will be your sale deed & you should not worry.
In case, builder is not willing to register agreement to sale / sale deed in sub-registrar office then you should speak to builder because in this scenario, ownership & property rights will not be transferred in your name.
Hi Sir, Thanks for the reply,
In our case 1 agreement is signed between builder and a buyer i.e. Agreement to Sale. The same agreement is registered in sub-registrar office by the builder.
so should i check in agreement so i can clear the ownershilp and property rights will transferred on my name.
Please give me heading of topic is available in agreement copy.
Should i show this agreement to lawyer?
As the agreement is now registered therefore you cannot make any changes. Still you can show to lawyer.
Hi Nitin,
I had sale agreement to purchase a flat from seller in bangalore.The owner says he has lost original sale deed and he has filed a police complaint to that effect.Know owner has executed gift deed of the flat to his wife.Is it ok to buy such property?.what precautions should i take before buying?
If he has followed the steps as i mentioned in following post then you may go ahead. Also take unconditional financial indemnity bond from seller
https://www.nitinbhatia.in/home-loan/original-property-documents-lost-by-bank/
Thanks Nitin, One more clarification on indemnity bond,should I take indemnity bond only from the seller or from both husband and seller.
Only from seller/s
Hi Nitin,
Thanks for such an informative blog. I recently decided to purchase a property in Bangalore. The property cost is Rs.60lakhs including registration. Out of the 60 lakhs, my in-laws are providing 50 lakhs to my wife as a cash deposit in her savings account and my wife is taking remaining 10 lakh as housing loan as the property will be registered on my wife’s name. We agreed to make payments as per the payment schedule to the builder in the mode of bank DDs. Does this qualify as a gift deed? and is it fine to buy the property without interference/presence of my in-laws?
The property transaction does not qualify as gift deed but amount paid by your in-laws to your wife is gift from parents to daughter which is tax free. You don’t need presence of your in-laws for this transaction as your wife is buying the property.
Hello Nitin,
I have purchased 1 BHK flat in Dec 2010 at Pune. At the time of registration builder had not mentioned the ‘Covered Parking’ clause in agreement/ Index II. He has just given me allotment letter and charged as infrastructure charges. Is only allotment letter of cover parking with number and location is enough on his letter head ? He has done signature and stamp. I tried to ask few flat holders of same society. Some of them like me and few of them forced builder to add ‘Cover parking’ clause on index II while agreement.
I am just worried that, this might not become issue at the time of selling the flat in future.
As per ruling of honorable supreme court of india, a builder cannot sell car park therefore allotment letter from builder is sufficient provided builder has not allocated same car park to someone else. I don’t foresee any issue in your case
Hello Nitin,
I have booked flat in bangalore which comes under gram panchayat. Apartment is constructed by builder under JD and GPA agreements with land owners. The agreement was setup in June 2011 for 22 months, agreement clearly mentions the time starts after builder gets necessary approvals from everyone to carry on construction work.
Construction work right now is 60% complete. We came to know the JD/GPA was cancelled in first week of August and landowners issued public notice in Times of India on 9th August. None of the flat owners has got possession and brick work is completed until 2nd floor (out of 4 floors). In the agreement between landowners and builder it was mentioned – if builder fails to complete the project owners have rights to cancel the agreements with 3 months notice. But we, flat owners came to know after they are cancelled.
Now, I’m clueless on how can I proceed. I have already paid 20,500,00/- to the builder.
Also, another problem is that the Agreement of Sale is ready (signed by both parties in June this yr.) but it has not been registered yet. Will that lead me into a mess? Can I get it stamped in the registrar’s office on my own?
In the public notice issued by land owner there must be address of their lawyer or attorney for objections. You may hire a competant property lawyer and send legal notice raising objection to public notice as you are also party to whole dispute. You may file a affidavit in court regarding same.
Secondly, you may obtain injunction from court against cancellation of JD and request court to include all owners as a party to dispute. A seperate notice can be issued to builder for refund of amount paid.
You cannot register agreement to sale on your own but don’t worry any agreement even on plain paper is also valid provided it is signed by both the parties. I hope entire amount is paid through cheque.
Hello Nithin,
I have been following your blog/website in recent times, they are very very informative and provide a good insight to all the details involved in all topics of real estate. Hats off to the crisp information being presented in topics and upto to the point answers to the queries. Through your articles I have gathered a lot of information regarding the documents required for purchase of a property, this is helping me in understanding the steps involved and importance of the property titles. It definitely makes one cautious while buying if you know what we’re dealing with. Thanks again for the all informative website/blog.
Thanks for liking my blog !!! Keep Reading.
Hello nitin,
Thank you for your time and effort to put such vital information on the internet.
I have decided to purchase a commercial unit with a seller who has done a agreement of sale with the builder. The builder constructed the building on lease land provided by the government for 150 years. The lease agreement between builder and the govt states that the builder is free to sale commercial units in the future. Building has been complete since 3 years and registered association for maintenance has been created since 5 months.
The builder has not done sale deed with my seller as some unit owners have not yet cleared the dues to the builder and so this could take some time. Builder charges a transfer fee to transfer agreement between seller and buyer.
What are my options?
A. Should I make a agreement for sale with seller.
B. sale deed with seller and in the future the builder will do conveyance with me. Will doing conveyance twice cost me more aka stamp duty and registration fee?
Thank you again for your time
Remy
1. Its a transfer case. Tri-party agreement will be executed between you, seller and builder. You should not sign any bilateral agreement only with seller.
2. After transfer agreement is signed, only one sale deed will be executed i.e. sale deed will be signed only by the builder. Current seller will be out of this transaction as property is not registered yet.
Thank you Mr Nitin for taking time to reply to me.
kind regards,
remy
Hello Nitin,
Need your opinion on one of my property detail as my home loan application got rejected.
This land was allotted to Mr. X from one of the society in shimoga, karnataka. After his death, the same was registered in his wifes name. And this lady sold it to Mr .Y and in the sale deed which is registered, its mentioned that she has 2 children one son and daughter who are studying some where else and as they cannot be present at the time of registration their mutual acceptance is taken on a notary and the same is being provided. Now Mr, Y sold this property to my Father in 2003. And in 2013 my father gave the same to me in the form of gift deed.
Bank rejected the home load giving the reason that Mr X’s children acceptance has to be on the registry but not on the notary.
Please suggest me some options on how to proceed ahead ?
When we enquired about the recent whereabouts of the Mr x’s family, we came to know that his wife who sold the property was no more and her son was also no more. And whereabouts about her daughter is unknown.
Thanks
anirudh
I agree with bank as property was not transferred in accordance with applicable succession law to wife & children of Mr X. In the absence of WILL, the property is transferred to Class I heirs which include children of deceased. In future, the children of Mr X can stake claim on the property.
As i have not seen documents therefore cannot comment on possible solution. I suggest you to hire a competent property lawyer who can suggest a solution.
Hi nitin,
We are buying a flat from mr.A who in turn has bought the flat from builder but didn’t register it on his name. So now we hav to pay money to A but builder has to register it onto our name. We reside in telangana state. Can we make a legal agreement while giving token amt such that A has to return us token amt in case builder doesn’t register the flat on our name within a stipulated period? What value of stamp paper shud be used for this purpose?
Yours is a transfer case as the property is not registered yet. You need to sign a tri-party between you, Mr A and the builder. I will not suggest you to execute any bi-party agreement with Mr A i.e. direct agreement between you and Mr A to avoid any cheating or fraud.
Thanks for the quick reply nitin.
Hi Nitin,
I am planning to buy a builder floor which as per company sales person are in resale through the company only, Company had launched these flats two years back and then held few units which they are selling now. As per company sales person I will be the first owner of that flat
Please suggest what documents should be checked and what is the procedure for token amount to be given for booking- What receipt I should ask from builder for my token amount payment any precautions to be taken
The query raised by you is personalized consultation as it vary from case to case which require study of property documents/agreement. If you wish to avail my personalized consultation, you can mail me at info@nitinbhatia.in
Hi nitin,
I am buying an unfinished house by applying for home loan from my Bank.
Im about to make a deal with the party by doing an unconditional token payment which states that incase my bank doesnt sanction my loan within the given period of 1 month the deal is called off and the amount has to be returned to me. Are there any more important clauses that i must include in the agreement?
You need to add sub clause under this clause that if Home Loan against property is not approved/rejected by the Bank for any reason with regard to the title of the Property or due to non compliance of any statutory obligation the above clause shall not be applicable and the seller will refund the amount paid by the purchaser within 7 days from date of
intimation to the seller in this regard
i am selling a commercial property to the tenant . he is asking a time of 1 year for the payment . what clause should be added in the agreement so that he should not sell the same property to 3rd party .. please suggest
You should consult a lawyer regrading the same.
I am selling a residentai property. If I receive advance / token amount for it in Dec’14 but sales deed is executed in April’14, when is advance tax payable ? In Dec’14 or in Sept’15? Also, which year’s indexation can I take? FY 13-14 or FY 14-15? Please help.
If the income tax liability during FY is more than Rs 10,000 then tax payer is liable to pay such tax in installments during the Financial Year only instead of paying at the end of Financial Year. You need to calculate your tax liability and pay tax accordingly.
For indexation purpose, you should consider FY 14-15 because the property is transferred in April’14 i.e. FY 2014-15.
Dear Nitin,
I am planing to buy a flat from an investor in Pune , flat is ready possession but he has not registered the flat on his name and he is selling to me. In my case I want to make agreement in June 2015 and I am planning to give 20% now and make a MOU (i.e. in December 2014 ) with him that he is selling at so and so rate and I will be doing agreement in June 2015 and pay rest of the amount by LOAN after the agreement.
My questions…
1) Once MOU is made ,can he sell the flat to some other customer also without taking my concern?
2) In MOU do I need to take sign of builder also as he has not registered the flat on his name?
3) What are some important clauses should I mention in MOU which will safe gurd my interest of not loosing the flat because of any cheating done by the seller?
Thanks Nitin
1. Its a transfer case. You need to execute transfer agreement between you, seller and the builder.
2. Builder will be party to your transfer agreement
3. For any personalized consultation on chargeable basis, you can call me at +91 94800 21000 or mail me at info@nitinbhatia.in
I have heard that stamp duty is going to increase from 6% to 7% from 1st January 2015? is it true?
Please let me know, you are referring to which state.
Maharasthra , Pune , knodhwa
Stamp Duty is revised every year on 1st Jan in Maharashtra. Now, new govt in maharshtra has to decided whether they would like to increase or not. Its just a rumor wait for Govt notification.
Dear Nitin,
We are selling a house and narrowed down on a buyer, he has taken our papers and started searching. Now he has agreed to pay us around 35% of the total amount as token money and make sale agreement.
My question is do he have to give us NOC for searching documents, that my property is free from legal dispute before the commencement of sale agreement??
I live in Kolkata.
NOC is not required.
Dear Nitin,
I have read “5 must have clauses in property sale agreement”. The points mentioned are important for the buyer’s perspective.
I am a seller, what are the important points I should keep in mind so that the transaction is clean and won’t drag longer than the date fixed for final registration.
I am selling to a builder/agent. They have their own tricks to drag and make me wait till they get any other party. I want to terminate/cancel the transaction if it does not complete in the time frame specified.
Please advice.
Thanks,
Rakesh
To answer your query, i need to go through your agreement.
Hello Nitin,
I have few questions about clauses mentioned it the agreement as below.
1.Agreement says if for any reason allotment of parking space gets canclled purchaser shall not be able to claim any reduction in price agreed. Please suggest if I can ask builder to change or delete this clause? and what if he will not agree to alter or delete this clause.
2. Purchaser gives explicit no objection yi developer to prepare new/revised layout and building plans even by shifting location of buildings, open spaces, internal roads etc. Please suggest.
3. All open spsces , parking spaces, lobbies, stair cases, terraces, recreation space, common area etc. will remain property of present developer who shall be free to allot such restricted area, parking space, terraces etc to the person of its choice and purchaser shall not have any objection for the same.
For any personalized consultation. Please check following link
https://www.nitinbhatia.in/advisory-service/
Hello Nitin,
Thanks for the great article about sales agreement. I am a home owner in the process selling a villa in Bangalore to a potential buyer who is ready to pay a token advance and close the deal contingent upon loan approval from SBI.
I have couple of questions…
1) Do you think it is a good idea to register the sale agreement from seller perspective?
2) Since loan processing times varies on a individual basis, shall we state in general term in the sale agreement something like deal will be closed after loan approval?
3) I recently changed my name but the registration document is under previous name. Will this cause any issue? If so, what are the remedial action that i can take?
Is there anything else i need to consider from seller point of view?
1. I don’t think so. You may execute on stamp paper of 0.1% of transaction value.
2. Closure should not be linked to loan approval. Broadly you can mention that deal should be closed within 45 days of signing the sale agreement.
3. I am assuming that you got your name changed through proper legal process which is notified in Govt’s Gazette. In this case, you need not to worry, you can attach copy of Gazette with all the documents in future.
Legal and other requirements vary from case to case therefore i cannot comment if anything missed out without going through property documents
Hello Nitin,
Thank you very much for the super fast response. Coulple of follow up questions.. Thanks in advance.
What if loan process takes more than 45 days, will it lead to termination of the deal?
On the name change, i am an Indian born US citizen changed my name in US. I have a US court ordered proof for the name change. Not sure whether it will be accepted as valid document in india. Any insights?
You can include clause related to delay in loan process which can be mutually agreed upon.
My apologies but i am not aware of rules related to name change of US citizen.
I have a taken a place for rent, it is almost 4.5 years now in Maharashtra Pune, We run an institute there. Now we are planning to vacant but owner is not cooperating:
1. First he said, that notice period is 3 months, however on agreement it is for 1 month
2. Then he said I did not give formal notice period yet, however it was given in a face to face meeting as well as via email, although he has not given any confirmation on the same.
3. Then he said that rent period is from 1st to 30th however it is 16th to 15th, also proved from agreement
4. Now he stopped responding my calls, messages and emails
please suggest what shall I do?
Thanks,
Shyam
You may send fresh termination notice through Registered Post with acknowledgement. Also send email in this regard. Secondly meet him and handover agreement termination notice and take his signature as acknowledgement.
I am close to finalizing a high rise from a reputed builder in Bangalore. It is A katha and will get Oc.
I am buing from Landowner, and he says there will be only 1 agreement with him. Builder/Developer will not be involved.
50% will be shown for Undived Land share and remaining for cost of apartment.
It will take 3 years before building is ready. I am consused if I should proceed?
– Confused New buyer
You need to sign tri-party agreement with land owner and builder being 2nd and 3rd party to agreement.
Hi
Thats what I thought, but landowner says that it is not necessary, as he already has JD agreement with the builder, and that their agreement clearly states that Landowner can sell his shares to anyone.
He is not willing to enter into 3 party agreement
As builder is constructing landowner’s flat therefore he has to be party in your agreement with landowner.
Hi,
Landowner says he can do the Tri party agreement(me, landowner and builder), but it will not be registered agreement.
Is it ok to proceed
To answer this query, i need to check JDA between builder and landowner.
Sir,
I have finalized a Flat in Ravet Pune And have made a payment of 1 lac INR as allotment fee in Mar 14.Since the NA papers were pending from the Builder , we decided not to go for Agreement immediately with builder in last year march. Now the Non Agri. (NA )Certificate has arrived in Jan and builder is following up for agreement along with 20% down payment before agreement. Since the Builder is new and does not have strong credentials for verification i am thinking to do the agreement with builder only after APF number has been received from the bank by builder for verification purpose. Kindly guide, if we proceed to do the Agreement before APF comes from bank?
APF number will not make any difference as such. Even in the absence of APF number bank will scrutinize all the project related documents therefore in my opinion it will not make much difference.
To safeguard your interest, you may insist on following clause in your agreement
“it is understood by the builder that the Purchaser is availing Bank Loan for purchase of the property and if the property is not approved/rejected by the Bank for any reason with regard to the title of the Property or due to non compliance of any statutory obligation the above clause shall not be applicable and the builder will refund the amount paid by the purchaser within 7 days from date of intimation to the builder in this regard”
Hi,
I am buying a ready to move in flat from a builder, I plan to make complete payment to builder and he will issue “No dues” and “Possession letter” for the flat but I will do registration (sale deed) of flat 6 months later.
Interest benefit can be claimed from the time ‘When construction is completed’ so in this case the construction is completed, all payments are made and I will also have ‘Possession letter’ for the flat but no registration (sale deed).
1. Will this qualify for home loan Interest rebate?
2. Is Sale Deed (Registration) is must or ‘Possession Letter’ from builder is sufficient to start claiming Interest rebate?
1. Only possession letter is not a sufficient proof to certify that construction is completed. Sale deed should be registered and builder should handover occupancy certificate / completion certificate then only it is deemed to be fully constructed. In my opinion, you cannot claim tax deduction.
2. Sale deed is must. Possession Letter from builder is not sufficient.
Hi Nitin,
I have planned to purchase a property in Chennai for 44 Lakhs & have paid 22 Lakhs as advance( 10 Lakhs by Cash + 12 Lakhs by Loan advance). Property is still not registered & since there is a undue delay of 1 year in construction, I have lost trust in the builder & asked him to repay the entire amount paid.
He had verbally agreed to pay back the amount as & when the said flat is sold to another party. But the Loan authority is demanding to pay the loan availed without registration immediately. Is there any provision to buy some time from Loan Authorities?
Also, please help me to understand whether there will be any legal complications while getting the money back from the builder?
1. You have not mentioned the reason why Home Loan provider is insisting on loan closure.
2. To be honest, 12 lakh paid through cheque can be recovered but cash component depends on builder as there is no proof of payment.
Hi Nitin,
At the outset I sincerely appreciate you for taking time and writing this blog educating the commons on legal aspects of Property purchase and sale process. Thanks a ton!
We have narrowed down to purchase a ready to occupy flat in Bangalore and are in the process of reviewing the Land Agreement & Construction Agreement before inking them. Would be great if you could share the Standard Clauses to be incorporated in the agreement for the following scenarios:
1. Indemnity clause
2. Clause on ‘Transfer of Deposits / Membership of Owner’s association’
3. ‘Penalty clause’ stating the Developer will borne all penalty charges in full levied by the government owing to legal violations in the property ( Land / Construction), if any.
4. Clause to Safeguard us from Defects in construction
Awaiting your reply! Thanks in advance!
Each clause depend on case to case basis i.e. background of property transaction. If you want me to through your agreement and advice you on same then you may call me at +91 94800 21000.
Hi, within how much time, sale deed needs to be executed from the time of Agreement to sale. Is there any rule
There is no rule in this regard. Ideally you should mention the same in sale agreement. Standard period is 45 days but if you are availing Home Loan then mention 90 days.
Hi Nitin,
Can you please help me out on below points:
1. Build has not mention parking on Agreement (at the time of agreement he said, we don’t have parking approval yet) (before agreement amount quoted 1.5 lacs)
2. Now he is selling parking at 2 lacs and giving parking allocation later (on his later head) and he is asking for the amount to pay without receipt.
Can you please suggest what can I do in such situation?
Thanks,
Devendra
As the car parking can be sold as per ruling of Supreme Court of India therefore you will get only allotment letter from builder. It will not be mentioned in agreement. Oral commitments have no legal standing therefore it seems you don’t have any other option but to pay and buy car parking, if you need car parking.
Dear Shri Nitin, I would seek your kind views regarding execution of construction agreement before the execution of Sale Deed. It may be mentioned that along with construction agreement, agreement for sale is also going to be executed. Rgds.
You may sign construction agreement and sale agreement. Sale deed can be signed at the time of possession.
Thanks Bhatia Saab !
Hello Nitin,We had executed a sale agreement with a builder which had a non refundable clause and also specifying a rate of interest of 18% from 45 days.They offered to process the home loan themselves which after 3 months they said it was rejected by the bank.we took over and got the loan sanctioned. Now they are demanding a penalty amount of 1.3 lakes for registration. We are under great stress.Kindly advise.Thanks.
To answer this query, i need to check your agreement with the builder. All terms and conditions is governed by the agreement. If there is any deviation then we can approach builder to correct the same.
Hi,
Just for my info. what is your consulting fee?
It depend on scope of work. You may call me at +91 94800 21000 to discus the same.
Hi Nitin,
We recently paid token advance for a property in Bangalore worth 83 lakhs. We gave token advance of 13 lakhs (1 lakh cheque & 12 lakhs in cash) with an acceptance receipt from the seller. The seller is not agreeing to sign the sale agreement and refuse to give us time till the bank loan is approved. He now claims he doesn’t want to sell the property to us and has given us a postdated cheque of 13 lakhs for 10th May 2015. We are really concerned if we will get the money back. Please advice what action we can take to get the money back.
Regards,
Rashmi
Hi Nitin,
We recently paid token advance for a property in Bangalore. We gave token advance of 13 lakhs (1 lakh cheque & 12 lakhs in cash) with an acceptance receipt from the seller. The seller is not agreeing to sign the sale agreement and refuse to give us time till the bank loan is approved. He now claims he doesn’t want to sell the property to us and has given us a postdated cheque of 13 lakhs for 10th May 2015. We are really concerned if we will get the money back. Please advice how we can get the money back.
Thanks.
Hi Nitin,
We recently paid token advance for a property in Bangalore. We gave 13 lakhs (1 lakh cheque & 12 lakhs in cash) with an
acceptance receipt from the seller. The seller is not agreeing to sign
the sale agreement and refuse to give us time till the bank loan is
approved. He now claims he doesn’t want to sell the property to us and
has given us a postdated cheque of 13 lakhs for 10th May 2015. We are
really concerned if we will get the token advance back. Kindly advice on what steps to take to get the money back.
Thanks.
To be honest with you, 12 lakh cash can only be claimed in good faith from builder as there are NO Records of this transaction. A cheque is valid instrument but in case it bounce then you can only claim only 1 lakh not 13 lakh. Reason you will not be able to prove that why builder should pay 12 lakh extra to you against payment of 1 lakh from your end in legal terms.
Based on my experience, i anticipate that cheque will bounce as builder is only buying a time from you and he will STOP cheque payment before 10th May, 2015.
Thanks Nitin. My father just confirmed that the token advance (both 1 lakh and 12 lakhs) are paid by cheques. The same is duly acknowledged by the seller by affixing the signature for having received the cheques. The transactions are reflected in the bank pass book.
I agree with you on possibility of he stopping the cheque payment before 10th May pleading on many defensive grounds.
Please advice what step we can take in this case.
Many thanks in advance.
The next steps depend on your agreement with the builder specially termination clause and legal clauses relevant to your case. If there is any breach of terms and conditions, you may file police FIR and send legal notice to recover your token advance on priority basis.
Thanks Nitin. That’s helpful.
Regards.
6 months back I got into an agreement of sale for purchase of flat by giving a token amount of 1 lac rupees. The builder said that he would arrange for home loan. I submitted all documents but the loan was rejected. The builder then said he would arrange for another home loan provider but with a higher rate of interest. I agreed to this. However, the builder did not do anything. After a month I asked him to return my token money. He said he will arrange for the loan to which I disagreed as it was more than 3 months.
He stopped taking my calls, I went to his office, he said he will give me back the money but even after 6 months he has not returned my money and still promising to get me a home loan.
Please advice !
Thanks in advance
Pooja B
Promise of Home Loan to buyer, if mentioned in the sale agreement i.e. builder will facilitate Home Loan then only it is legally enforceable ground to claim refund. Otherwise you need to check the termination clause of agreement. If the sale agreement is time bound then you can claim refund on expiry of sale agreement. I suggest you to check my following article on issues related to token money
https://www.nitinbhatia.in/real-estate/token-money/
My friend has 2 sons and a daughter. She purchased a plot with her own earnings and constructed a house for which her daughter took a home loan. The house is registered on her’s and her daughter’s name She wants to bequeath her half share of the house to her daughter. Can her sons claim for the property now or at a later date?
You have not mentioned the age of your friend. Her sons can very much claim their rights on her share and even on share of their sister if they prove that their mother contributed for their sisters share.
Best way is that she can gift her share to her daughter. Before executing gift deed, she can get a medical certificate from CMO that she is mentally and physically fit to execute gift deed / agreement. Besides this, she can also sign a bond in court that she is willingly transferring her share to her daughter without any force and coercion. Also include in bond that she paid for / gifted her daughter, half share in property out of natural love and affection & no one will have any claim on entire piece and parcel of property including her legal heirs.
My friend is aged 60 years. Great advise!!! Will surely work on that.
Thanks a million!
Dear Nitin,
1. I have made sale agreement and paid 0.1% as “stamp duty” at Sub registrar office. After paying the required amount they put a stamp of the agreement paper and signed – Is this process called “registration of sale agreement” ?
2. my sale agreement is not having any “agreement termination clause” . What happens in case of dispute.
Please suggest.
1. It seems that it was e-stamping / franking but not the registration of sale agreement. At the time of registration, both parties are photographed and it is affixed on the agreement. Registered agreement is signed by the sub-registrar.
2. In case of dispute, it will be resolved as per terms and conditions of the agreement.
Is this “Sale Agreement” with “e-stamping / franking” is a valid document and will be considered as a valid proof in court in case of dispute.
Its a valid legal document and admissible in the court.