MEMORANDUM OF UNDERSTANDING FOR SALE OF PROPERTY
Place: __________
Date: __________
1. The parties
The Seller
- Name: __________
- Address: __________
- Signing as: __________
The Buyer
- Name: __________
- Address: __________
1.1 The Seller and the Buyer are together called "the parties".
1.2 Each person signing this MOU confirms that they are a major, of sound mind and competent to contract under Section 11 of the Indian Contract Act, 1872.
2. The Property
2.1 This MOU relates to the following property ("the Property"):
__________
2.2 The Seller's title to the Property comes from:
__________
2.3 The present state of the Property is: __________.
2.4 The parties confirm to each other, and each of them signs this MOU on the strength of the other's confirmation, that:
(a) the Property is not agricultural land;
(b) the Property is complete and, where it was bought from a builder or a development authority, has been handed over, so that the Seller holds a completed and titled interest in it — this sale is not a transfer, assignment or nomination of a builder-buyer agreement in respect of a unit still under construction;
(c) every owner of the Property is an individual, and not a company, limited liability partnership, partnership firm, Hindu Undivided Family, trust or society;
(d) the Property is not ancestral or coparcenary property, and no minor and no person under guardianship holds any interest in it; and
(e) neither the Seller nor the Buyer is a non-resident of India.
If any of these is not correct, this MOU is the wrong document for the transaction. The parties should stop, take advice, and use a document drafted for that case, because the rest of this MOU — the title documents in Clause 8, the payment structure in Clause 6, the confirmations in Clause 16 and the tax position in Clause 18 — is drafted on the footing that all five are true.
3. What this MOU is, and what it is not
3.1 This MOU records the main terms the parties have settled so far, and the steps each of them will take, so that a formal Agreement to Sell can be signed by the date in Clause 10.1. It is being signed at an early stage — usually because the Buyer needs time to arrange money and to check the title, and wants the Property held for them while that is done.
3.2 It does not transfer title. No right, title or interest in the Property passes to the Buyer under this MOU. Ownership will pass only under a Sale Deed (bainama) that is properly stamped and registered before the Sub-Registrar. Section 54 of the Transfer of Property Act, 1882 says in terms that a contract for the sale of immovable property does not, by itself, create any interest in or charge on that property.
3.3 It does not hand over possession. No kabza is given or agreed to be given. See Clause 15.
3.4 It is not the Agreement to Sell. The parties do not intend this MOU to be the agreement to sell, and do not intend it to be specifically enforceable as a contract to convey the Property. The obligation to sell and to buy is meant to arise only when the Agreement to Sell is signed. The commercial terms in Clauses 4 and 6 are recorded here so that they can be carried into that agreement, not so that either party can sue on them.
3.5 But both parties understand this. A court looks at what a document does, not at what it is called. If this MOU is later found to contain everything a contract needs — identified parties, an identified property, a settled price, and an intention to be bound — a court may hold it to be an enforceable agreement to sell in spite of Clause 3.4. Since the Specific Relief Act, 1963 was amended in 2018, specific performance is the normal remedy for breach of such a contract rather than a discretionary one. The parties sign this MOU knowing that. Anyone who is not ready to be held to this sale should not sign until they are.
3.6 Clause 20 sets out which clauses of this MOU the parties do intend to be binding on their own, whatever happens to the sale.
4. The price
4.1 The price agreed for the Property is __________ ("the Price").
4.2 The Price is for the Property as described in Clause 2.1, together with everything permanently fixed to it, and together with anything listed in Clause 10.
4.3 The Price is fixed. It will not be revised for a movement in the market, a revision of the circle rate, or a change in the rate of any tax, unless both parties agree in writing.
5. The token money (bayana) paid now
5.1 The Buyer has paid, and the Seller acknowledges having received, __________ as token money — bayana — on __________, by Bank transfer (NEFT, RTGS, IMPS or UPI).
5.2 The bayana is earnest money. It is paid to hold the Property for the Buyer for the exclusivity period in Clause 7, and as part payment of the Price. It is not a loan, and it is not a deposit held for safekeeping.
5.3 The bayana forms part of the Price. It will be shown as already paid in the Agreement to Sell and again in the Sale Deed, and the Seller will not ask for it a second time at any stage.
5.4 The Seller confirms that the bayana has been received by the Seller personally, or into the Seller's own bank account, and not by any broker or agent on the Seller's behalf.
5.5 What happens to the bayana if the sale does not proceed is set out in Clauses 11 to 14. Those clauses bind the parties whatever becomes of the sale itself.
6. How the rest of the Price will be paid
6.1 The balance of the Price, after the bayana and after any amount paid on the signing of the Agreement to Sell, will be paid as the Agreement to Sell provides. The parties intend this structure and will write it into that agreement: the bayana in Clause 5 is already paid, any amount payable on the signing of the Agreement to Sell is paid at that time, and the whole of the remaining balance is payable at the time the Sale Deed is presented for registration before the Sub-Registrar — against handover of possession and of the original title documents, on the same day and at the same place.
6.2 Every payment of ₹20,000 or more will be made by bank transfer, account payee cheque or demand draft, and not in cash. Clause 18 explains why.
6.3 Money paid by the Buyer's lender directly to the Seller, or directly to the Seller's existing lender to close an outstanding loan, counts as payment by the Buyer.
6.4 Tax deducted at source and deposited with the Government under Clause 18 counts as payment of that much of the Price.
7. Exclusivity — the Property comes off the market
7.1 From the date of this MOU until the date in Clause 10.1, the Seller will not, whether directly or through any agent, broker or family member:
(a) market, advertise, list or offer the Property for sale to anyone else;
(b) accept bayana, an advance, a booking amount or an option fee from anyone else;
(c) sign any memorandum, agreement to sell, sale deed, gift deed, exchange deed, lease, licence, collaboration or development agreement in respect of the Property with anyone else;
(d) create any fresh mortgage, charge or lien on the Property, or let any person into possession of it;
(e) do anything that makes it harder to convey a clear and marketable title to the Buyer.
7.2 This exclusivity is what the bayana buys. If the Seller breaks it, Clause 12 applies.
7.3 The Seller will tell the Buyer in writing within three days if anything happens that affects the Property or the Seller's ability to sell it — a notice from any authority, a court order, a claim by any person, an attachment, or the death of an owner.
8. What the Seller will do before the Agreement to Sell
8.1 The Seller will give the Buyer, for inspection and for taking copies, as soon as possible and in any case at least seven days before the date in Clause 10.1:
(a) the original title deeds — the registered sale deed, allotment letter, conveyance deed, lease deed, gift deed or partition deed through which the Seller holds the Property — together with the chain of title for the last thirty years so far as the Seller has it;
(b) the approved building plan, and the completion or occupancy certificate, where the Property is a building;
(c) the latest property tax receipt, and the latest electricity, water and maintenance bills, all paid;
(d) the share certificate, membership record and no-objection certificate of the society or apartment owners' association, where there is one;
(e) an encumbrance certificate for the last thirteen years, or the equivalent search record for the state where the Property is;
(f) the mutation record, and for land the latest jamabandi, khasra or record of rights;
(g) PAN and identity documents of every owner, and the Aadhaar of every person who will appear before the Sub-Registrar.
8.2 The Seller will obtain the written consent of every co-owner, and of any other person whose consent is needed, and will produce it before the Agreement to Sell is signed.
8.3 The Seller will clear all property tax, maintenance charges, society dues, electricity, water and other outgoings on the Property up to the date possession is handed over.
8.4 The Seller will keep the Property in its present condition and will not remove any fixture or fitting that the Price covers.
8.5 The Seller will sign the Agreement to Sell in the form the parties settle, and will attend the Sub-Registrar's office to execute and register the Sale Deed once the Buyer is ready with the balance.
9. What the Buyer will do before the Agreement to Sell
9.1 The Buyer will carry out their own title search and due diligence at their own cost, and may engage a lawyer to do it. The Seller will co-operate with that exercise.
9.2 The Buyer will tell the Seller in writing, at least seven days before the date in Clause 10.1, of any defect in title or any objection the Buyer wants cured, so that the Seller has a fair chance to cure it before that date.
9.3 The Buyer will arrange the money for the balance of the Price and for the stamp duty and registration charges.
9.4 The Buyer will sign the Agreement to Sell in the form the parties settle, and will pay the balance and take registration in accordance with it.
10. Signing the Agreement to Sell
10.1 The parties will sign the Agreement to Sell on or before __________.
10.2 The Agreement to Sell will carry forward the Price in Clause 4, the bayana in Clause 5, the payment structure in Clause 6 and the confirmations in Clause 16, and will in addition fix the date for registration of the Sale Deed, the date for handover of possession, the consequences of delay by either side, and who bears each cost.
10.3 Time matters. The date in Clause 10.1 can be changed only in writing signed by both parties. An email sent from a party's own email address, or a WhatsApp message from a party's own phone number, confirming a new date, counts as writing for this purpose.
10.4 If the Agreement to Sell is not signed by the date in Clause 10.1 and neither party has by then given written notice of default, the exclusivity in Clause 7 comes to an end and either party may terminate this MOU by written notice. Whether the bayana is then kept or refunded is decided by Clauses 11 to 13, according to who was at fault.
11. If the Buyer does not go ahead
11.1 The Buyer is treated as not going ahead if the Buyer refuses or fails to sign the Agreement to Sell by the date in Clause 10.1, for any reason other than one falling within Clause 13 or a failure on the Seller's part.
11.2 In that event the parties have agreed: __________
11.3 Anything the Seller keeps under Clause 11.2 is agreed to be a genuine pre-estimate of the loss the Seller suffers from having taken the Property off the market and lost other buyers, and not a penalty.
11.4 On the Buyer not going ahead, the Buyer will return every original document the Seller handed over under Clause 8.1.
11.5 Once the Seller has kept or refunded the money as Clause 11.2 requires, the matter is closed. Neither party will have any further claim against the other about the Property or this MOU.
12. If the Seller does not go ahead
12.1 The Seller is treated as not going ahead if the Seller:
(a) refuses or fails to sign the Agreement to Sell by the date in Clause 10.1;
(b) breaks the exclusivity in Clause 7;
(c) fails to produce the documents in Clause 8.1, or to obtain a co-owner's consent, or to clear a mortgage or obtain a permission the Seller has undertaken to obtain;
(d) cannot show a clear and marketable title, or cannot give vacant possession where the Property is to be handed over vacant; or
(e) is found to have given a confirmation in Clause 16 that was untrue when it was given.
12.2 In that event the parties have agreed: __________
12.3 Until the bayana and any compensation due under Clause 12.2 is repaid in full, the Buyer has a charge on the Property for that amount, to the extent Section 55(6)(b) of the Transfer of Property Act, 1882 allows.
12.4 If the parties have by then already signed the Agreement to Sell, nothing in this clause prevents the Buyer from enforcing that agreement instead of taking the money back.
13. If neither side is at fault
13.1 If the sale does not proceed for a reason outside the control of both parties, the bayana and every other amount paid under this MOU is refunded in full under Clause 14, and neither party owes the other any compensation. Such reasons include: a required government, municipal, society or authority permission being refused; an order of a court or authority stopping the transaction; the Property being acquired or notified for acquisition; the Property being substantially damaged or destroyed; a defect in title coming to light that the Seller cannot cure despite reasonable effort; and the death of a party before the Agreement to Sell is signed.
13.2 A refusal of the Buyer's home loan falls within this clause only in the circumstances set out in Clause 9. Apart from that, the Buyer's inability to arrange money is not a reason outside the Buyer's control, and Clause 11 applies.
13.3 If a party dies before the Agreement to Sell is signed, that party's legal heirs may, within thirty days, elect in writing to continue with this MOU on the same terms. If they do not, Clause 13.1 applies.
14. How a refund is paid
14.1 Any refund due under this MOU will be paid within __________ days of the date on which the obligation to refund arises.
14.2 It will be paid by bank transfer or account payee cheque into the account the bayana came from, or into another account the Buyer confirms in writing. A refund of ₹20,000 or more will not be paid in cash, because Section 269T of the Income-tax Act, 1961 does not permit it.
14.3 If a refund is delayed beyond the period in Clause 14.1, the unpaid amount carries simple interest at 12% a year from the due date until it is actually paid.
14.4 On receiving the refund in full, the Buyer will return the original of this MOU and every document the Seller handed over, or give a written acknowledgement that nothing further is owed.
15. Possession (kabza)
15.1 No possession of the Property, or of any part of it, is given or agreed to be given under this MOU. The Property stays in the state described in Clause 2.3 until the Sale Deed is registered.
15.2 Letting the Buyer, or the Buyer's lender, valuer, lawyer, architect or contractor, inspect or measure the Property is not possession, and does not become possession however often it happens.
15.3 This MOU is not a contract of the kind referred to in Section 53A of the Transfer of Property Act, 1882, and the Buyer will not claim part performance under it.
15.4 The parties have kept possession out of this MOU deliberately. Handing over kabza at this stage changes the stamp duty payable in most states, can make the document compulsorily registrable, and creates rights that are hard to unwind if the sale falls through.
16. What the Seller confirms
The Seller confirms the following, and the Buyer is paying the bayana on the strength of them:
16.1 The Seller is the absolute owner of the Property, or is duly authorised to sell it, and has full right and authority to sell it and to receive the Price.
16.2 The Property is free from any mortgage, charge, lien, court attachment, injunction, acquisition notice, family or partition dispute, tenancy, licence, unauthorised occupation, agreement to sell, will or other claim — except anything recorded in Clause 2.3 or otherwise disclosed by the Seller to the Buyer in writing on or before the date of this MOU, and except any mortgage dealt with in Clause 8.
16.3 No suit, appeal, arbitration or other proceeding about the Property is pending or, so far as the Seller knows, threatened.
16.4 Property tax, maintenance charges, society dues, electricity and water charges relating to the Property are paid up to date.
16.5 The Property has not been built or altered in breach of the approved plan, and no notice of demolition, sealing, unauthorised construction or misuse is outstanding against it.
16.6 The Seller has not given, and will not give, any subsisting bayana, booking, option or agreement in respect of the Property to any other person.
16.7 Everything stated in Clause 2 is true, and the Seller will tell the Buyer at once if any of these confirmations stops being true before the Sale Deed is registered. A matter recorded in Clause 2 — including the present state of the Property recorded in Clause 2.3, and any tenancy or occupation so recorded — is a disclosure and not a breach of any confirmation in this Clause 16.
17. Costs, stamp duty and brokerage
17.1 The stamp duty and registration charges on the Agreement to Sell and on the Sale Deed will be borne by: The Buyer, as is usual.
17.2 The stamp duty on this MOU, where the state it is signed in charges any, will be borne by the Buyer.
17.3 Each party bears its own lawyer's fees and its own taxes.
17.4 Any transfer fee, no-objection charge or membership fee levied by a society, builder or authority is borne by the Seller, unless the parties agree otherwise in writing.
18. Tax and cash rules
18.1 TDS. The position for this transaction is: __________. Where Section 194-IA of the Income-tax Act, 1961 applies, the Buyer will deduct 1% of the consideration or of the stamp duty value of the Property, whichever is higher, deposit it within the time allowed, file Form 26QB and give the Seller Form 16B. The exemption in Section 194-IA(2) applies only where the consideration and the stamp duty value are both below ₹50 lakh, so a Price below ₹50 lakh does not by itself take the transaction out of the section where the circle-rate value of the Property is ₹50 lakh or more. Where there is more than one Buyer or more than one Seller, that ₹50 lakh is tested against the total consideration for the Property and not against any one person's share, and each Buyer files a separate Form 26QB for each Seller. This MOU is drafted for a Seller who is resident in India, as Clause 2.4(e) confirms; where a party is in fact a non-resident, Section 195 applies instead of Section 194-IA, the rate is considerably higher, the Buyer must hold a TAN before making any payment, and the parties must take advice on a certificate under Section 197 before going further.
18.2 No cash. Section 269SS of the Income-tax Act, 1961 forbids taking ₹20,000 or more in cash as an advance in relation to the transfer of immovable property, whether or not the transfer eventually happens, and the penalty under Section 271D is the whole of that amount, imposed on the person who took it. Section 269ST forbids receiving ₹2,00,000 or more in cash in respect of a single transaction, with the same consequence. The parties have chosen the payment method in Clause 5 with these rules in mind.
18.3 Circle rate. If the Price is below the circle rate — the state's stamp duty ready reckoner value for the Property — stamp duty is charged on the circle rate anyway, and income tax treats the shortfall as income in the hands of both sides, under Section 50C for the Seller and Section 56(2)(x) for the Buyer, subject to the tolerance band the law allows. The parties have checked the circle rate before fixing the Price in Clause 4.
18.4 Each party is responsible for its own income tax, including the Seller's capital gains tax. Nothing in this MOU makes one party liable for the other's tax.
18.5 GST. No GST is payable on the sale of a completed property, which under Clause 2.4(b) is what this MOU deals with. GST arises on the sale of a unit that is still under construction, and this MOU is not to be used for such a unit.
19. Confidentiality
19.1 Each party will keep the terms of this MOU, and the documents and information the other party gives them, confidential.
19.2 A party may disclose them to its own lawyer, chartered accountant, banker or lender, to a family member, and where the law or a court requires it.
19.3 If the sale does not proceed, the Buyer will return or destroy the Seller's title documents and copies, except one copy the Buyer may keep for its own records.
20. Which clauses are binding
20.1 The parties intend the following clauses to be legally binding from the date of this MOU, and to be enforceable on their own whether or not the Agreement to Sell is ever signed: Clause 5 (the bayana), Clause 7 (exclusivity), Clause 8 and Clause 9 (what each side will do before the Agreement to Sell), Clauses 11 to 14 (what happens to the money), Clause 15 (possession), Clause 16 (the Seller's confirmations), Clause 17 (costs), Clause 18 (tax), Clause 19 (confidentiality) and Clauses 21 to 23.
20.2 Clauses 4, 6 and 10 record what the parties have settled and intend to write into the Agreement to Sell. They are not intended by themselves to create an obligation to convey the Property or an obligation to buy it.
20.3 Clause 3.5 applies to Clause 20.2, and both parties have read it. What the parties intend is strong evidence of the effect of this MOU, but it is not the last word — the court decides.
21. Notices
21.1 A notice under this MOU must be in writing and sent to the other party at the address in Clause 1, by registered post with acknowledgement due or by a reputed courier. It may also be sent by email or WhatsApp in addition, and where this MOU expressly allows notice by email or WhatsApp, that alone is enough.
21.2 A notice sent by registered post is treated as delivered on the seventh day after posting, even if it is refused or comes back unclaimed.
21.3 A party who changes address must tell the other party in writing within seven days.
22. Governing law and courts
22.1 This MOU is governed by the law of India.
22.2 The parties will first try to settle any dispute by discussion, within fifteen days of one of them writing to the other about it.
22.3 If that fails, the courts at __________ will have jurisdiction. For any suit concerning the Property itself, the court within whose local limits the Property is situated will have jurisdiction, as Section 16 of the Code of Civil Procedure, 1908 requires.
22.4 A suit for specific performance of a contract for sale must be brought within three years of the date fixed for performance, under Article 54 of the Limitation Act, 1963. Neither party should delay in the belief that there is more time than that.
23. General
23.1 This MOU records everything the parties have agreed so far about this transaction. Anything discussed earlier and not written here is not part of it.
23.2 A change to this MOU is valid only if it is in writing and signed by both parties.
23.3 If any clause of this MOU is found to be unenforceable, the rest of it continues to apply.
23.4 A delay by either party in enforcing a right under this MOU is not a waiver of that right.
23.5 This MOU binds the parties' legal heirs, executors and administrators. Neither party may assign or nominate its rights under it to anyone else without the other's written consent.
23.6 This MOU is signed in two copies, each an original. The Buyer keeps one and the Seller keeps the other.
SIGNATURES
The parties have read and understood this MOU, including Clause 3 and Clause 20, and sign it on __________ at __________.
SELLER — and acknowledges receiving the bayana of __________
Signature: ______________________________
Name: __________
[Affix a Re 1 revenue stamp here and sign across it. A receipt for ₹5,000 or more is chargeable under Article 53 of Schedule I to the Indian Stamp Act, 1899, and the Seller's signature must run across the stamp for it to count.]
BUYER
Signature: ______________________________
Name: __________
WITNESS 1
Signature: ______________________________
Name: ______________________________
Address: ______________________________
Phone: ______________________________
WITNESS 2
Signature: ______________________________
Name: ______________________________
Address: ______________________________
Phone: ______________________________
Both parties should sign every page of this MOU. Keep the bank transfer proof or the cheque counterfoil with it. If the bayana is ever disputed, this document and that proof are the whole of your evidence.