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 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 indentifies 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.
Right to Call off the deal

As a buyer you should reserve the right to call off the deal under certain circumstances without being penalized financially. Some of these circumstances are as follows
(a) If Seller fails to provide legal/statuatory property documents required by the Buyer
(b) If the Buyer find out any legal defect in property before execution of sale deed
(c) If Buyer home loan is rejected by bank due to some legal/statutory issue in property/property documents
(d) If the seller fail to provide all original documents at the time of execution of sale deed.
(e) If the seller fail to provide vacant possession of property at the time of execution of sale deed

Outstanding Dues
It is critical to mention in Sale Agreement that Seller will clear all the dues accrued in respect of the property prior to the date of registration
Transfer of Deposits / Membership of Owner Association
The clause should clearly mention that scope of agreement also include transfer of all deposits paid by seller for Electricity connection, Water connection, to apartment owners association, Club house membership, Gym Membership, contribution towards sinking fund of association etc . In the absence of this clause, the seller might demand extra money at the time of sale deed against all the deposits paid by him.

Key Points for Drafting an Agreement to Sell.
Following are the major key points from a Seller and a Buyer's perspective that should be included while drafting the 'Agreement to Sell' (ATS) for selling/ buying residential premises. The general guidelines mentioned below are merely indicative and vary from case to case depending on the commercial arrangement, agreement between the parties and the local laws that may apply.
A. Key Points for the Seller
Property Description The exact description with the areas and location of the premises being sold should be mentioned in the ATS.
Consideration a The entire consideration/ amount payable by the Buyer should be mentioned. Further, the amount paid by the Buyer at the time of the ATS as advance, should be mentioned and also the manner in which the payment was made (including the details of the cheque, if payment made by cheque). The time period and the manner for payment of the balance consideration should be mentioned too.
Forfeiture a The Seller should ensure that the ATS provides for forfeiture of the consideration paid as advance by the Buyer, in case of default/ breach by the Buyer of the ATS including for failure to pay the balance consideration within the stipulated timelines.
Rights a The Seller should ensure that the ATS clearly specifies that the Seller shall be entitled to all rents/ monies/ profits, if any, arising out of the premises until the same is actually conveyed to the Buyer.
Termination a The Seller should ensure that the ATS clearly specifies that time is of the essence, and in the event the Buyer does not perform any of its obligations, including payment of the balance consideration, the Seller shall be entitled to terminate the ATS and forfeit the amounts paid under the ATS. Further, the notice period for termination should also be specified.
Indemnities a The Seller should typically obtain indemnity in relation to any damage/ loss suffered by the Seller due to any act, error or omission on account of the Buyer or any breach of any of the terms of the ATS by the Buyer.
Stamp Duty & Registration a ATS should be appropriately stamped and registered in accordance with the applicable stamp duty in the state in which the property is located. The ATS should also specify whose obligation it is to bear the stamp duty and the registration charges.
Jurisdiction a�� The court which will have jurisdiction in case of any dispute arising between the Buyer and the Seller, should be mentioned.
Dispute Resolution a�� The ATS should clearly specify the mechanism for resolution of disputes, including whether such dispute shall be resolved through court process or arbitration.

Key Points for the Buyer.
Property Description a�� The exact description with the areas and location of the premises being sold, should be mentioned in the ATS.
Title Verification a The Buyer should ensure that the Seller has complete control and valid title over the premises being purchased by the Buyer and that the Seller furnishes adequate proof so as to establish beyond doubt, his title over the premises being purchased by the Buyer. Buyer should ensure that the property is free from all kinds of encumbrances, such as prior sale, gift, mortgage, disputes, attachment in the decree of any Court notices, lien, injunction, lease etc.
Consideration a� The entire consideration/ amount payable by the Buyer should be mentioned. Further, the amount paid by the Buyer at the time of the ATS as advance, should be mentioned and also the manner in which the payment was made (including the details of the cheque, if payment made by cheque). The time period and the manner for payment of the balance consideration should be mentioned. If the consideration is to be paid in instalments, then the timelines pertaining to such instalments must be clearly spelled out.
Refund a The ATS should specify that the amount of the consideration paid as advance shall be refundable in the event of any breach of ATS by the Seller including for any breach of any representations and warranties, defect in title of the property and such other reasons commercially agreed.
Conditions Precedent a�� The ATS should clearly specify the pre-conditions that need to be fulfilled by the Seller, for receiving the balance consideration, such as release of any encumbrances over the property (for e.g. release of charge on the property by a bank from whom a loan was obtained by the Seller, etc.), all representations and warranties with respect to title to the property being true and such other conditions commercially agreed.
Representations & Warranties a�� The Buyer should take appropriate representations and warranties with respect to the title of the property and that the property should be free from all encumbrances.
Due Care a The Seller should be expected to exercise due care and diligence in relation to the premises, between the period of execution of the ATS and the actual conveyance of the premises.
Indemnities a�� The Buyer should typically obtain the following indemnities, among other things, from the Seller:
- Damage/ loss suffered by the Buyer due to a defect in title of the Seller;
- Damage/ loss in relation to the property because of the Seller's fault; and
- Any breach of the terms of the ATS by the Seller.

Execution of Sale Deed a There should be an obligation in the ATS on the Seller to execute a Sale Deed in favour of the Buyer simultaneously upon payment by the Buyer of the entire consideration.
Handover of Possession a There should be an obligation in the ATS on the Seller to hand over of possession of the property to the Buyer simultaneously with the execution of the Sale Deed.
Stamp Duty & Registrationa ATS should be appropriately stamped and registered in accordance with the applicable stamp duty in the state in which the property is located. The ATS should also specify whose obligation it is to bear the stamp duty and the registration charges.
Taxes a The Seller should be expected to pay the property tax and all other outgoing charges, taxes, levies etc. in respect of the property under sale up to the date of registration of sale deed and transfer of possession of land.
Jurisdiction a The court which will have jurisdiction in case of any dispute arising between the Buyer and the Seller, should be mentioned.
Dispute Resolution a The ATS should clearly specify the mechanism for resolution of disputes, including whether such dispute shall be resolved through court process or arbitration.