An article about " Agreement for sale of Immovable Property "

Agreement for sale of Immovable Property

The pre-requirement for sale of immovable property isagreement to sell. The agreement to sell contains, terms of sale, consideration, time limit, description of property, terms of payment, handing over possession and rights of both the parties to enforce the agreement, and penalty for not performing the contract. Generally, the purchaser pays some amount as advance being earnest money to the seller, which is acknowledged by the seller in the agreement to sell.

The process of sale of immovable property is governed by theprovisions of Transfer of Property Act. The agreement to sell is a specialized document, which conceptualizes the terms of contract. The skill, knowledge, experience of the advocate is reflected in drafting the agreement to sell and invariably, the agreement to sell contains the clause which protects the interest of the purchaser, who has parted with his money.

There is a practice amongst many to avoid the saleagreements and to go directly for sale deeds. This is a very risky practice. Agreement to sell is required to avail the bank finance. The sale agreement binds the parties to perform their part of the contract.

In the absence of agreement to sell, though the purchaser had made all the arrangements for payment of sale consideration amount and to meet the stamp duty and registration expenses, the vendor may back out if he finds another purchaser with better sale consideration. Likewise, even the purchaser may also back out if the finds out similar property for lesser value. If there is any conditions in agreement to sell which vary from the rights and obligations of the seller, purchaser as detailed in Transfer of Property Act, the terms which are agreed in agreement to sell shall prevail over. If no conditions are mentioned in agreement, the rights and obligations of seller, purchaser as detailed in Transfer of Property Act comes into force.

Having paid the advance amount, (or) earnest money, will the purchaser has any charge or lien over the property for the amounts paid?

The Transfer of Property Act governs the rights and obligations of vendor and purchaser.

Rights of Agreement Holder:

In case of sale, the purchaser gets title and ownership to the property only if the transfer is affected in accordance with sec. 54 of T.P. Act, which deals with the sale of immovable property.

See 54 of T.P. Act states that "Sale how made such transfer in the case of tangible immovable property of the value of one hundred rupees and upwards can be made only by a registered instrument." So registration of sale deed is mandatory and only thereafter the purchaser gets title. It also states that the agreement to sell itself does not create any interest or a charge on such property. In this kind of situation if the seller refuses to transfer the property under agreement to sell then the questions which arise for consideration are:

Whether purchaser under agreement to sell is entitled to only damages or the immovable property as per agreement?

If the purchaser under agreement to sell is in possession of immovable property can he be disposed of immovable property?

So far as first question is concerned See 40 of Transfer of Property Act states that "Where a third person is entitled to the benefit of an obligation arising out of contract and annexed to the ownership of immovable property but not amounting to interest therein or easement thereon, such right or obligation may be enforced against a transferee with notice thereof.

Ex: "A" contracts to sell a house to 'B' while the contract is still in force he sells the same house to 'C' who has notice of the contract. 'B' may enforce the contract against 'C' to the same extent as was enforceable against 'A'. From this we find that, the purchaser with notice of a previous contract for sale of the same property is in the eye of the law is a trustee of the prospective purchaser of previous agreement of the property purchased. Even u/s 91 of the Trusts Act, the title of the subsequent purchaser with notice of the prior agreement is subject to the obligations created by the agreement to sell. So, the agreement holder may proceed against the purchaser of the property who had notice of the existing contract. See 27 (b) of the Specific Relief Act entitles the purchaser under agreement to sell to compel subsequent purchaser to execute a sale deed in his favor.

In order to have better hold on the property agreed to be purchaser the agreement to sell may be registered, and a paper notification may be taken to notify the general public about the agreement.

Purchaser in possession of the property:

For the second question as said earlier i.e., if the purchaser under agreement to sell is in possession of the property, can he be dispossessed of the immovable property?

In this regard Sec. 53-A of the T.P, Act 1882, is relevant which provides that when:-

a] The transferor i.e., seller has agreed to sell for consideration any immovable property;

b] Such agreement is in writing and signed by him;

c] The contract provides for taking possession of the property before execution and registration of sale deed;

d] In part performance of the contract, the seller has put the purchaser in possession of the property agreed to be sold;

e] The purchaser under agreement being already in possession continues in possession in part performance of the contract; provided that the purchaser has done some act in furtherance of contract.

f] the purchaser under agreement has performed or is willing to perform his part of the contract, then purchaser under agreement is entitled to protect his possession of immovable property. When the agreement of sell is subsisting, if someone who purchases the property with notice of prior agreement of sell his right is subject to such prior agreement to sell.

It is to be noted that this benefit can be availed only by those who were put in possession by virtue of a legal document. A person seeking protection of doctrine of part performance has to prove that he has in part performance of the contract has taken possession of the property and in case he was already in possession he continues to be in such possession in part performance of the contract and had done some act in furtherance of the contract.

In addition, the purchaser under agreement has to show that he is willing to perform his part of the contract. The only course for seller in such cases is to seek for payment of balance of sale consideration.