AGREEMENTS FOR SELLING OF IMMOVABLE PROPERTY

The pre requirement of sale of immovable property is agreement to sell. The

agreement to sell contains, terms of sale, consideration, time limit, the complete
description of property agreed to be sold, 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 amount, earnest money to seller, which is acknowledged by the seller in
the agreement.

Importance of Sale Agreement:

The sale deed is a document, which contains general terms, which are similar in
most of the deeds.

But the agreement to sell is a specialised document, which conceptualises the

terms of contract. The skill, knowledge, experience of the advocate is reflected in
drafting the agreement to sell and the clauses inserted to protect the interest of
the purchaser, who has parted with his money.

There is a practise among many to avoid the sale agreements and to go directly
for sale deeds. This is very risky. Agreement to sell is required to avail the bank
finance. Apart from availing finance without a sale agreement nobody is bound to
execute sale deed and convey the property, who may back out at the last
moment. Though the purchaser had made all the arrangements for the
consideration amount and stamp duty the vendor may back out if he finds
another purchaser for better consideration. Likewise, even the purchaser may
also back out if he finds similar property for lesser consideration. The sale
agreements bind all the parties to perform the contract.

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 the law u/s 54 of T.P. Act, dealing with sale
of immovable property. Sec 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 be registered instrument.So
registration of the sale deed is mandatory and only thereafter the purchaser gets
title. It also states that the agreement to sale itself does not create any interest
in or charge on such property. In this kind of situation if the seller refuses to
transfer the property under agreement to sale then the questions that arise for
consideration are:

Whether purchaser under agreement to sale is entitled to only damages

or else immovable property as per agreement?

If the purchaser under agreement to sale is in possession of immovable

property can he be disposed of immovable property?

So far as first question is concerned Sec 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 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 so 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 a purchaser of the property who had notice of contract
prevailing. Sec 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
favour.

Purchaser in possession of the property:

For the second question as said earlier i.e., if the purchaser under agreement to
sale 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, provides that:1. The transferor i.e., seller has agreed to sell for consideration any
immovable property.
2. Such agreement is in writing and signed by him.
3. The contract provides for taking possession of the property before
execution and registration of sale deed.
4. In part performance of the contract, the seller has put the purchaser in
possession of the property agreed to be sold.
5. 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.
6. The purchaser under agreement has performed or is wiling to perform his
part of the contract.

Then purchaser under agreement is entitled to protect his possession of

immovable property.

While agreement of sale is subsisting; some one who

purchases the property with notice of prior agreement of sale his right; is
subject to such prior agreement to sale.

The maximum stamp duty payable on agreement to sell without possession in

Karnataka is Rs.200/- and registration charges are Rs.1,000/-.