Important Clauses and their Execution in Sale Deed
01 February 2023
A Sale Deed is a legally enforceable document recording the transfer, sale and assignment of ownership in a property by the seller/ vendor in favour of the purchaser/ buyer, outlining the terms and conditions of the sale and serving as proof of ownership for the purchaser/ buyer of such property being transacted/ sold.
There are several important clauses included in a Sale Deed, that are important for both the buying and selling parties to consider to better understand their rights and obligations. Let's take a look at some of the most important clauses and their execution in a Sale Deed:
- Description of the property: The Sale Deed must include a detailed legal description of the property being sold, including its location/ situation, specific landed boundaries, and any improvements or additions made. It should also specify details of any super structures on such property and whether the same are being sold with or without any fixtures and fittings.
- Sale Consideration: The sale consideration clause outlines the total amount of money being paid by the purchaser/ buyer to the seller/ vendor for the purchase of such property. It should specify the sale consideration being paid by the purchaser/ buyer to the seller/ vendor of the such property (net of all applicable statutory deduction of taxes at source, if applicable) along the mode of payment (e.g., cash, cheque, bank transfer) and whether the payment if being made in one or more tranches.
- Title and ownership: The title and ownership clause should clearly state the seller/ vendor’s legal right and authority to sell the property and the purchaser/ buyer’s subsequent ownership of the property once the sale is completed. It shall be the duty of the real estate advocate to clearly trace devolution of title of the property unto the seller/ vendor and also specify any encumbrances or liens on the property the purchaser/ buyer needs to be aware of.
- Covenants: Covenants are promises made by the seller/ vendor to the purchaser/ buyer regarding the property being sold to him/ her. These may include promises to repair any major defect and/ or damage to the property or to pay any outstanding taxes or charges accruing upto the date of transfer of property.
- Restrictions: Restrictions are limitations placed on the end usage of the property. These may include building restrictions, zoning regulations or other local laws governing the ownership and use of the property that the purchaser/ buyer needs to be aware of.
- Representations and Warranties: Representations and warranties are undertakings/ guarantees made by the seller/ vendor to the buyer regarding the condition of the property. These may include assurances that the property is clear and marketable and free from any defects or encumbrances and that the seller/ vendor has the right/ authority to sell/ transfer/ alienate the property.
- Indemnity: The indemnity clause protects the purchaser/ buyer from any liabilities that may arise from the sale of the property. For example, if the seller/ vendor has falsely represented untrue details of the property being transacted, the purchaser/ buyer may claim indemnity to cover any losses or costs incurred as a result of such untrue and false representations.
- Termination: The termination clause outlines circumstances under which the sale can be terminated, such as if the purchaser/ buyer fails to pay the purchase price in accordance with the terms and conditions agreed between the parties or if the marketable title to the property is found to be defective or if any of the terms of the Agreement for Sale and/ or Sale Deed are breached by the seller/ vendor/ purchaser/ buyer.
The execution of a Sale Deed involves execution and registration of the sale document between the seller/ vendor and the purchaser/ buyer. The Sale Deed must be executed by both parties in the presence of witnesses and then registered with the jurisdictional registration authorities, which involves lodging/ submitting the document before the jurisdictional registration office after payment of requisite stamp duty/ registration fees on the same.
Both parties must carefully review the terms of the Sale Deed before signing it. If either party is unsure of the veracity or consequence any clause or their rights and obligations under the Sale Deed, it is advisable to seek legal counsel before proceeding. Both the purchaser/ buyer and seller/ vendor must carefully review the Sale Deed and seek legal counsel if they have any doubts or concerns.
M/s Augustus Law’s real estate team handles assignments ranging from conducting of title search due diligence exercise to transaction structuring, drafting and negotiating a wide variety of contracts such as conveyance deeds, gift deeds, power of attorneys, joint development agreement, leases & licenses, construction, operations & management contracts, wills, creation of trusts, etc. Should you have any queries or require any clarifications, please feel free to contact Arindam Mrinal Pal, Partner [E-Mail: firstname.lastname@example.org], Shaun Vaz, Associate [E-Mail: email@example.com] and Mohnish Solanki, Associate [E-Mail: firstname.lastname@example.org]