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.
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:
Ø
Whether
purchaser under agreement to sale is entitled to only damages or else immovable
property as per agreement?
Ø
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.
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:-
- The
transferor i.e., seller has agreed to sell for consideration any immovable
property.
- Such
agreement is in writing and signed by him.
- The
contract provides for taking possession of the property before execution
and registration of sale deed.
- In part
performance of the contract, the seller has put the purchaser in
possession of the property agreed to be sold.
- 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.
- 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/-.
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