When selling or buying a property, the transaction will be completed by executing and registering an agreement to sell. This document is essential as it sets out the terms and conditions of the sale. It is also crucial that this document is correctly drawn up, as it can protect the rights of the seller/buyer and help ensure the transaction goes through smoothly. This blog post will discuss what an agreement to sell is, its importance, and the stamp duty that may be payable on it. So, if you’re planning on selling or buying a property, read on!
What is an Agreement to Sell?
An agreement to sell is a contract between a seller and a buyer where the seller agrees to sell an asset or property to the buyer at a specified price. The agreement to sell is also known as a sale agreement. It is generally used to sell immovable property such as land or buildings. The Agreement to Sell includes all the terms and conditions agreed upon by both parties. Generally, in India, sale agreements are made before registering the sale deed so that all conditions can be negotiated and finalized between the parties before making it legally binding.
Importance of Agreement to Sell
An Agreement to Sell a contract is crucial because it legally binds the parties involved in the sale of a property. This contract outlines the terms and conditions of the sale, including the price, date of sale, and any contingencies that must be met before the sale is finalized. The agreement also protects both buyers and sellers from fraud or misrepresentation by clearly stating all material facts about the property. Lastly, this contract can be used as evidence in court if there are any disputes between the parties after the sale has been completed and the Agreement is registered.
The Maharashtra Stamp Act of 1958 governs the stamp duty payable on an Agreement to Sell property in India. Under this Act, any document which transfers or assigns an interest in immovable property for consideration must pay stamp duty and registration fees as prescribed therein and also register the Agreement to Sell with the relevant Office of the Sub-Registrar of Assurances. The registration fee for an Agreement to Sell is calculated as a percentage of the sale price/market value of the property.
Agreement to Sell: Rights of the Seller
The seller has certain rights under an agreement to sell, which are as follows:
- The right to receive the sale consideration from the buyer.
- The right to deliver possession of the property to the buyer.
- The right to sue the buyer for specific performance of the contract in case of breach by the buyer.
- The right to terminate the contract in case of breach by the buyer.
- The right to withdraw from the sale completely if there is no agreement between the parties, or if either party cancels or backs out of the sale, etc.
Stamp Duty on an Agreement to Sell
In India, the buyer is liable to pay stamp duty whenever any immovable property is transferred. The amount of stamp duty payable depends on the state in which the property is situated as well as the value of the property.
Similarly, when an agreement to sell is executed, stamp duty is also payable on it. The amount of stamp duty payable on an agreement to sell depends on various factors such as the property’s value, the nature of the transaction (sale/purchase/exchange/lease), etc.
The party who executes the agreement to sell is liable to pay stamp duty. In most cases, the buyer pays stamp duty on an Agreement to Sell. However, there are some instances where the seller may also be liable to pay stamp duty.
It is important to note that the amount of stamp duty payable on an Agreement to Sell is generally lower than the stamp duty payable on a sale deed. This is because an “Agreement to Sell” is only a preliminary contract and does not transfer property ownership.
The Bottom Line
A sale and agreement to sell is a contract between a buyer and seller that outlines the terms of sale for a property. This contract is important because it delineates the buyer’s and seller’s rights and obligations and the purchase price. The sale agreement should also be registered with the local government office to ensure its legality. Lastly, the agreement to sell may be subject to stamp duty, a tax levied by the government on certain legal documents.
Disclaimer- This article is based on the information publicly available for general use. We do not claim any responsibility regarding the genuineness of the same. The information provided herein does not, and is not intended to, constitute legal advice; instead, it is for general informational purposes only. We expressly disclaim/disown any liability, which may arise due to any decision taken by any person/s basis the article hereof. Readers should obtain separate advice with respect to any particular information provided herein.