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What is an Agreement to Sell on Mortgaged Property

Agreement to Sell definition: Everything you need to know

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An Agreement to Sell is a legal document that outlines the terms of a real estate transaction. It lists the price and other details of the transaction and is signed by both the seller and the buyer. An agreement to Sell constitutes the Terms and Conditions of the sale of a property. These Terms and Conditions include the amount at which it is to be sold and the future date of full payment. An Agreement to Sell is the base document on which the Sales Deed is drafted.

This agreement also contains the Terms and Conditions agreed upon between the parties and binds them. This agreement is signed and executed by the seller and buyer on a non-judicial stamp paper, on which the Sales Deed is drafted. With these Terms and Conditions, it also includes the amount at which it is to be sold and the future date of full payment.

An Agreement to Sell converts into a sale when the time elapses or the conditions are fulfilled, subject to which the property is to be transferred.

The Agreement to Sell can be cancelled, when the purchaser fails to comply with the Terms and Conditions of the agreement, by issuing a legal notice to him through your lawyer. However, the amount has to be refunded by the purchaser for booking the flat, at the time of the agreement.

Important clauses in an Agreement to Sell:

Every legal document consists of clauses that carry significant meaning. A clause can be a sentence, paragraph or a part of a document that identifies a situation that may arise in the future and directs a lawful course of action.

The buyer of a property is always at more risk than the seller. Having the following clauses in the Agreement to Sell is a must, to ensure there is no issue in the future for all parties concerned.

1.Indemnity Clause:

It is highly possible that a property may come under dispute for varied reasons. About 40 percent of the properties in Bengaluru City are under dispute, many of them spanning over a few decades. An indemnity clause secures the interests of the buyer, which must be drafted with diligent foresight to avoid any dispute in the future.

An Indemnity Clause in an Agreement to Sell, designed to seek compensation from the seller, in case of any losses or expenses in the future. All possible scenarios must be taken into account before drafting an Indemnity Clause.

2. Penalty Clause:

A token amount is generally paid by the buyer to the seller to assure his interest in buying the property. Sometimes, the sale may not happen for a genuine reason or the seller might find a better deal and he may not return the token amount. To ensure that the seller does not make a business out of such transactions, a Penalty Clause is advised.

3. Transfer of memberships/advances/deposits:

This clause prescribes the seller to pass on all privileges and conveniences that he may have had during his ownership. Deposits made by the seller for club membership, electricity, gas, gym subscription are a few examples.

4. Right to call off the deal:

The right to refuse and call off the agreement helps the buyer or the seller to cancel the deal, without any implication. Reasons to call off the deal may range from personal disputes and financial constraints to loan refusal.

5. Outstanding dues:

It helps to have this clause in the Agreement to Sell as it prevents the seller from passing his outstanding dues to the buyer. Taxes, electricity/sewage/water bills etc. are covered in this clause.


An agreement to Sell is an important document required for the sale and purchase of a property. An agreement to sell protects the interests of both the parties and spells out clearly the Terms the Conditions under which the seller is intending to sell the property and those under which the buyer is intending to purchase it.

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