A contract is an agreement that is enforceable.  And to enforce a contract in today’s world, you need documents. The law recognises oral promises and their performance in contracts, but with commercial and financial transactions growing increasingly complex, the written form of a contract and its record is the norm.

It is for this reason that a property purchase or sale transaction requires a sale deed as one of the many documents that record every aspect of the transaction. A sale deed is a record of the sale or purchase of a property between the homebuyer and former homeowner or property developer. It records aspects of the sale or purchase of the property and the transfer of the ownership rights in the property from the seller to the buyer. The sale deed can also be called a conveyance deed.

It serves as a very important document that confers the title of the property on the buyer. To make a sale deed and get it stamped and registered, certain fees, charges and other expenses may be incurred which have to be paid by the buyer (the payment of some expenses is subject to agreement between buyer and seller). This article seeks to explain certain facts and address questions on the sale deed and expenses that are incurred during a property sale.

[lwptoc numerationSuffix=”dot” title=”Table of Contents” width=”full” titleFontSize=”16px” itemsFontSize=”16px” colorScheme=”light”]

What is the value of the sale deed in India?

The sale deed is a document that serves as valid proof of the title of a residential property. 

  • The sale deed is prepared on a non-judicial stamp paper, the value of which is set by the State Government and thus differs from state to state.
  • The sale deed has to be prepared on this specific type of paper for record and registration purposes, where it will later be stamped at the sub-registrar office denoting that stamp duty has been paid on the property transaction.
  • The stamp paper contains a predetermined value that is decided by the State Government and the buyer has to purchase stamp paper for getting the sale deed drafted. A sale deed is determined valid if made on a stamp paper of a specified value.
  • The selling of stamp papers is another source of revenue for the Government.
  • An advocate or legal expert drafts the sale deed, incorporating all the necessary terms, conditions and clauses and charges a drafting fee from the buyer. 

How much is the advocate’s fee for the deed of sale?

A sale deed is drafted by an advocate or legal expert who carefully incorporates the clauses, terms and conditions of the sale that are agreed upon by the seller and buyer.

  • Details like:
  1. The full names of the buyers and sellers
  2. The address, size, features of the property
  3. The payment details
  4. Encumbrance certificate stating that the property is free from encumbrance
  5. The date of transfer of ownership of property
  6. Indemnity provisions etc.

are included in a sale deed drafted by an attorney.

  • There are no predetermined rules that fix the quantum of fees charged by an advocate for drafting a sale deed. Usually, the services of an advocate are availed for the complete registration of the property process from the drafting of the sale deed to getting the title of the property registered in the buyer’s name. 
  • For this, the advocate may charge a fee that ranges from 1% to 2% of the property value, but the percentage could be lower or higher depending on the advocate.

Are title fees negotiable?

Title fees are the fees charged by an advocate or a title company to verify the title of the property and detect any defects if present in such title. Title verification is an important part of the sale process and is undertaken to protect the buyer from any legal disputes on title of the property.

  • Title fees may include components like title insurance, title searches through previous property records and documents to detect defects if any, property inspection etc.
  • It may also include searches for any encumbrances on the property. 
  • Title fees are charged by private parties and are not Government taxes like stamp duty and registration fees that are pre-determined laws of the land.
  • As such, there are schemes and options available to you that you can select and put into motion for the verification of title. Thus, title fees to be paid are negotiable and should be carefully ascertained by the buyer. 
  • The buyer needs to be aware of the break up of costs to avoid surprises when it comes to making payments to the advocate or the title company.

Who pays the title settlement fee?

A settlement agent or professional is a party who helps the buyer acquire the title or ownership of the property from the seller by facilitating the transfer of the ownership stake in the property from the seller to the buyer and the transfer of monetary consideration from the buyer to the seller. This is done via a closing process for which the settlement agent charges a settlement fee.

  • In a property sale or transaction, a settlement agent helps the buyer and seller complete a complex transaction who may conduct title verification, prorate property fees and taxes that have to be paid by the parties and facilitate interaction between the authorities and the transaction parties. 
  • S/he may be an attorney, advocate, title company representative or an escrow agent. 
  • The settlement fee to be paid to the agent may be agreed to be paid by the buyer or seller or borne on a pro-rata basis subject to an agreement between them.

What are the requisites of a sale deed?

Section 54 of the Transfer of Property Act, defines sales as the transfer of immovable property for a consideration. The Registration of the sales deed is mandated under the Indian Registration Act. The essential conditions and critical elements of the sales deed are:

  1. The subject matter or conveyance of the property transaction
  2. Details of buyer and the seller such as the name, address, capcity to contract, etc.
  3. The details of the property
  4. The mutually settled terms
  5. The mode of payment
  6. Sale consideration clause
  7. Passing of the title
  8. Indemnity provision if any
  9. Testatum
  10. Default clause

Both the buyer and the seller needs to exercise due diligence and ensure that there is no damages on the property. The parties should also ensure that the property is free from encumbrances and legal disputes.  The parties are also required to make the payment of the registration charges and the stamp duty. The drafting of a sales agreement becomes necessary as it acts as a legal proof in case of dispute occurring before the registration of the sales deed. You may also require a sales agreement for availing bank loans, etc. 

Conclusion

A sale deed and other documents of a property transaction are valid records and proof of the transfer of ownership and title in a property from a seller to the buyer. These documents record aspects of the complex transaction and are approved by the stamping and registration process. This stamping and registration process is what certifies the documents as valid. There are several costs associated with preparing, stamping and registering a sale deed and other documents.

Some of these costs are to be paid to agents and professionals who facilitate the transfer of property between the parties while some are taxes that are levied by the Government on property transactions. These costs are expenses other than the monetary consideration paid by the buyer as consideration for the property and may be borne by the buyer, seller or on a pro-rata basis as agreed between the buyer and seller. A break up of these costs and careful examination of these expenses need to be conducted to determine their nature and effect on the transaction.