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5 Must Have Clauses in Property Sale Agreement

Property Sale Agreement is most important document. It is different from Sale Deed though in some cases Sale Agreement is registered as Sale Deed. Sale agreement contain agreed upon Terms & Conditions between Seller & Buyer for the sale of property. It is legally binding on both the parties. It also specifies the date by which the transaction will be completed. In laymen terms, Sale agreement is a road map how the property transaction will be completed. On the other hand Sale deed is executed at the time of actual transfer of property i.e. transfer of ownership from seller to buyer.



In any property transaction, maximum risk is carried by the borrower. Even experts will agree that all property transactions carry certain degree of risk. From buyers perspective, It is very critical to safeguard your interests before signing below the dotted line. I am listing down 5 most critical clause, which should be incorporated in Property Sale Agreement to safeguard the Buyer’s Interest.

Indemnity Clause in Sale Agreement

Due to sudden rise in property/land prices specially in metro cities, lot of properties are under legal litigation. These legal cases go on for decades. Some of the most common reasons for legal disputes are

(a) Property was transferred under force/influence/coercion

(b) Legal heirs of Seller claim their right on property.

Almost 40% properties in bangalore are under legal dispute. The indemnity clause in Sale Agreement indemnifies the buyer against any legal dispute / legal defect in the property. Also mention that in case of any legal dispute in future, the seller will compensate the buyer for any loss incurred by the buyer at the then prevailing market rate. This clause should be drafted carefully & should include all possible scenarios.

Penalty Clause

At the time of signing Sale Agreement, Buyer pay X amount as token money. Standard clause is put in agreement that if buyer will back out from the deal then entire token amount will be forfeited by seller. I would suggest to add another line in this clause that in case seller will back out from deal then Seller will return the token amount paid by buyer along with equivalent amount as penalty. If this clause is not put then seller will keep searching for new buyer who can pay extra. He will call off the deal, if he gets new buyer at higher rate before execution of Sale Deed.