An agreement to sell is the contract in which the seller promises to transfer property to the buyer in future, on terms set out in the document. It is not the sale itself. Under Section 54 of the Transfer of Property Act 1882 a sale of immovable property of value above the threshold the Act prescribes must be by a registered instrument, and the sale deed is that instrument; the agreement to sell only creates a right to enforce the sale. This page explains the clauses that protect a buyer and when specific performance is available.
Agreement to sell versus sale deed
- An agreement to sell creates a right in personam — a right against the seller; a sale deed transfers ownership in rem.
- Risk and ownership pass only on the sale deed; under the agreement the seller remains the owner.
- The agreement to sell may be registered or not; the sale deed must be registered to pass title.
- If the seller refuses, the buyer who has performed can sue for specific performance.
Clauses that protect the buyer
- Consideration and payment schedule. The total price, the advance, the balance, and the date by which each instalment is paid.
- Title warranty. A statement that the seller has a clear and marketable title and the right to convey.
- Encumbrance. A declaration that the property is free of mortgage, charge, lien, litigation or tenancy, with the buyers right to require proof.
- Possession. When possession is handed over — on the sale deed or earlier — and in what condition.
- Time is of the essence. A clause making the timelines enforceable, so a party who defaults can be made liable.
- Default and forfeiture. What happens if the buyer or seller breaches — refund, forfeiture of advance, or damages.
- Dispute resolution. Arbitration or the court that will decide disputes, and the notice mechanism.
Registration, stamp duty and specific performance
The stamp duty on an agreement to sell is charged as per the West Bengal schedule of the Indian Stamp Act, and the amount varies with the consideration, so it is computed at execution. Registration of the agreement is optional in many cases but is advisable, because an unregistered agreement can still be read as evidence of the contract, though it cannot by itself prove a completed transfer. If the seller backs out after the buyer has performed, the Specific Relief Act 1963 allows the buyer to seek specific performance, that is, a decree compelling the sale, unless a bar such as the buyers own default applies.
Grounds and timing for the buyer
A buyer who has paid the advance and is ready and willing to perform can insist on completion. But readiness and willingness must be proved, so the buyer must show that the funds were arranged and that a demand for performance was made. Where the seller defaults, the buyer may either sue for specific performance to compel the sale, or for refund of the advance with damages. A suit for specific performance is governed by the Specific Relief Act 1963 and, among other conditions, the buyer must approach the court within the period the Limitation Act 1963 prescribes, counted from the date the seller refuses to perform. Limitation is strict, and a buyer who sits on the right may lose it.
Documents and annexures to attach
- Sellers title deed and the chain of documents.
- Current khatian and land record, or the flats municipal record.
- Encumbrance certificate and tax receipts.
- Identity and address proof of both parties.
- Payment receipts and the schedule of the property.
Common mistakes
- Treating the agreement to sell as if it transferred ownership.
- Not making time of the essence, so delays carry no consequence.
- Failing to check the sellers title before paying the advance.
- Leaving the encumbrance warranty vague.
- Not stating what happens to the advance if either side defaults.
FAQs
Is an agreement to sell the same as a sale deed?
No. An agreement to sell is a promise to sell in future and creates a right to enforce the sale. A sale deed under Section 54 of the Transfer of Property Act 1882 is the registered instrument that actually transfers ownership.
Can I get specific performance of an agreement to sell?
Yes, in appropriate cases. If the buyer has performed and the seller refuses to complete, the Specific Relief Act 1963 allows a suit for specific performance to compel the transfer, subject to the defences the Act recognises.
What is the stamp duty on an agreement to sell in West Bengal?
It is charged as per the West Bengal schedule of the Indian Stamp Act and depends on the consideration and the property. Since the amount varies, it is calculated from the schedule when the agreement is executed.
What if the seller has a mortgage on the property?
The agreement should require the seller to clear the mortgage and produce proof before the sale deed. If the encumbrance is not discharged, the buyer can refuse to complete and seek the remedies the contract provides.
How long do I have to sue for specific performance?
A suit must be brought within the period the Limitation Act 1963 prescribes for such a suit, counted from the date fixed for performance or the date of refusal. Because the period is limited and the facts decide the starting point, a buyer should seek advice as soon as the seller defaults.
FileX Advocates & Legal Consultants, Kolkata, drafts and registers agreements to sell and sale deeds for property across West Bengal and appears before the Calcutta High Court, the City Civil courts and the registration and tribunal forums. Call +91 7439811422 or WhatsApp us for a free first consultation. See our property registration and specific performance services, browse property registration formats, or contact us.