The sale agreement is perhaps the first and most important step towards property ownership. Whether you are buying a plot of land from an individual or a property (villa, bungalow or flat) in a gated community from a developer, the sale agreement is not only the document that is a prove of the transaction, but also an important document that will ensure that you are protected from all legal tangles and that your investment is safe.
Today we will discuss some of the clauses that need to be included in the sale agreement.
Indemnity clause: From time to time many questions are asked by buyers if the inclusion of the indemnity clause weakens the sale agreement. Or is this clause a must in the agreement? As a buyer how am I benefited, etc?
Almost all sale agreements have an indemnity clause, wherein one party agrees to indemnify the other from the losses/ damages caused by its own acts. Such clauses are inevitable and need to be capped. Indemnity clause is purely legal and required to be inserted in all sale deeds to avoid future complications. Further, amount of risk involved in the indemnification needs to be compared with the benefits to be derived out of this agreement. However, having said that, indemnification for exemplary, consequential, indirect and incidental damages should be avoided. In view of the risk involved, these clauses need careful drafting. The Indemnity clause is inserted in the sale deed as a matter of precaution by the buyer against the seller in order to safeguard his interest in respect of any future claims by a third party against the said property.
For buyers who are still not convinced let me put it this way: In case of you find that the ownership of the seller is fraudulent and a third party claim arises on the property, the right to approach the court for compensation or to safeguard your investment, is given under the indemnity clause. In a nutshell, the indemnity clause in the agreement will take care of unknown liabilities and it strengthens the sale agreement as you know your liability limitation.
Amount to be paid in case agreement to sell is overturned: The agreement to sell ideally is the written document between the buyer and seller indicating the amount of earnest money paid, a timeframe to make the entire payment and execute the final sale agreement and subsequent registration of the property in the name of the buyer. In this agreement to sell, two important clauses need to be clearly inserted:
(i) Amount to be paid by the seller in case there is breach of this agreement: State clearly, that in case the seller dishonors this agreement, he will refund the earnest amount with an interest of calculated on a daily basis. In many agreements, the seller has to pay twice the earnest money paid by the buyer. These terms must be agreed upon before signing to do away with any future ambiguity.
(ii) The timeframe when the entire transaction needs to be completed: Ideally this is three months unless mutually agreed upon for a different time period. If the seller is unable to provide you with all the documents or fails to make himself available for the registration of the property in your name, this equals to breach of the agreement and you can set claim to the compensation as stated in the earlier point.
Delay clause: Now if you have opted for an under construction property being sold by a developer, apart from the other terms and conditions, the delay clause needs to be given more importance. Ideally, the delay clause in the agreement prepared by the builder is heavily in his favor. Having said that, in case of delay, the buyer can ask for a daily damage for delayed possession from the builder. The buyer will have to approach the consumer court to get the compensation, if all dialogue with the builder fails. Very recently, the Maharashtra State Consumer Commission had directed a developer to shell out Rs 20 lakh at the rate of Rs 2,000 a day for a delay in giving possession. So if there is a delay in possession, don’t shy away from invoking the delay clause.
