SECURITY DEPOSIT TRANSFER LETTER
(On the sale of a tenanted commercial property)
Between
__________, __________, of __________ ("the Seller")
PAN: __________
And
__________, __________, of __________ ("the Buyer")
PAN: __________
(the Seller and the Buyer are referred to together as "the Parties", and each as a "Party")
RECITALS
D. The Parties wish to record, as between themselves, the Deposit Amount, how it is dealt with on the sale, and the Buyer's assumption of the obligation to account for it to the Tenant, on the terms of this Letter.
E. This Letter is between the Seller and the Buyer alone. The Tenant is not a Party to it — see clause 5.
NOW THIS LETTER RECORDS as follows.
1. INTERPRETATION
1.1 "The Parties" means the Seller and the Buyer together, and "Party" means either of them. A term defined in the Recitals has the same meaning where used in this Letter.
1.2 This Letter deals only with the Deposit Amount. It does not restate, and is not a substitute for, the Sale Instrument, the Lease, or any other document executed in connection with the sale of the Premises.
2. TRANSFER OF THE DEPOSIT AMOUNT
3. PAYMENT PARTICULARS
3.1 This clause 3 applies only where clause 2.1 records that the Seller pays the Buyer a sum equal to the Deposit Amount.
4. ASSUMPTION OF LIABILITY BY THE BUYER
4.1 With effect from the Completion Date, the Buyer assumes, as between the Seller and the Buyer, the obligation to account for the Deposit Amount to the Tenant under the Lease — including the obligation to refund it, adjust it against sums due from the Tenant, or apply it, in each case as and when the Lease provides — in place of the Seller, and this is so whichever of the mechanisms in clause 2.1 applies.
4.2 As between the Seller and the Buyer only, the Seller is released from the obligation assumed by the Buyer under clause 4.1 with effect from the Completion Date. This clause 4.2 does not by itself release the Seller from any claim the Tenant may have against the Seller — that is a question of the Tenant's own rights, addressed in clause 5, and not one the Seller and the Buyer can settle between themselves alone.
4.3 Section 109 of the Transfer of Property Act, 1882 provides that, on a transfer of leased property, the transferee is, in the absence of a contract to the contrary, entitled to the rights and subject to the liabilities of the lessor as to the property transferred, from the date of the transfer. The Parties record clause 4.1 as consistent with, and not as a contracting out of, that section.
5. THE TENANT AND THE ATTORNMENT LETTER
5.1 The Tenant is not a Party to this Letter, has not signed it, and is not bound by it. Nothing in this Letter is, or operates as, a notice to the Tenant of the sale of the Premises, of the assumption recorded in clause 4, or of any change in the person to whom the Tenant should look for the Deposit Amount.
5.2 The Seller and the Buyer shall ensure that the Tenant is given a Tenant Attornment Letter, or such other written notice as the Lease requires, informing the Tenant of the sale, confirming that the Deposit Amount now stands with the Buyer, and directing the Tenant to look to the Buyer, and not the Seller, for it at the end of the Lease. It is that notice — not this Letter — that is intended to tell the Tenant that the Deposit Amount is safe with the new landlord, and to be effective as between the Seller, the Buyer and the Tenant.
5.3 Until the Tenant has been given that notice, the Seller and the Buyer shall each act consistently with this Letter and shall not represent to the Tenant that the position is otherwise.
6. SELLER'S CONFIRMATION AND WARRANTY
6.2 The Seller further confirms and warrants that, as at the date of this Letter, no part of the Deposit Amount has been refunded to the Tenant, adjusted against rent or any other sum, set off, or forfeited, whether under the Lease or otherwise, and that the Deposit Amount is free from any charge, lien, attachment or claim of a third party.
6.3 The Seller shall indemnify the Buyer against any loss the Buyer suffers as a direct result of a breach of clause 6.1 or clause 6.2 — in particular, where the Deposit Amount the Seller actually held was less than the figure confirmed above, or was subject to a claim not disclosed to the Buyer before this Letter was signed.
7. BUYER'S ACKNOWLEDGEMENT
7.1 The Buyer acknowledges receipt of the confirmation and warranty in clause 6 and confirms that it has relied on them in agreeing to this Letter and to the mechanism chosen in clause 2.1.
7.2 The Buyer acknowledges and confirms that, with effect from the Completion Date, it holds the Deposit Amount, and is answerable to the Tenant for it at the end of the Lease, as clause 4 records — and that this is so whether or not any sum is paid or adjusted between the Seller and the Buyer under clause 2 or clause 3.
8. TAXES
8.1 The Deposit Amount is a refundable security deposit held for the performance of the Tenant's obligations under the Lease. It is not rent, premium or consideration for any supply, and its payment or adjustment as between the Seller and the Buyer under clause 2 is not, of itself, treated by the Parties as consideration for a supply by either of them to the other, or as rent, for the purposes of the Central Goods and Services Tax Act, 2017 or of section 194-I of the Income-tax Act, 1961.
8.2 Where the Deposit Amount is adjusted against the Sale Consideration under clause 2, the Parties confirm that the Sale Consideration on which the Buyer deducts tax at source under section 194-IA of the Income-tax Act, 1961, where that section applies, is the Sale Consideration stated in the Sale Instrument before that adjustment, and not any reduced figure arrived at after it.
8.3 Nothing in this Letter affects the goods and services tax treatment of the rent payable under the Lease, which continues to be governed by the Lease itself and by the registration status, from time to time, of whoever is the landlord under it.
9. NOTICES
9.1 A notice under this Letter shall be in writing and delivered by hand against acknowledgement, or sent by registered post, reputed courier or email, to the Seller at __________ and to the Buyer at __________, or such other address either Party notifies in writing.
10. GOVERNING LAW AND DISPUTE RESOLUTION
10.2 This Letter is governed by the laws of India and, so far as the law of a State or Union Territory applies, by the law of the place where the Premises are situated.
11. GENERAL
11.1 This Letter, together with the Recitals, is the entire agreement between the Seller and the Buyer about the Deposit Amount, and supersedes any earlier discussion or correspondence between them about it. It does not affect, and is not affected by, any other term of the Sale Instrument.
11.2 No amendment to this Letter is effective unless in writing and signed by both Parties.
11.3 This Letter may be signed in counterparts, including by electronic signature, each of which is an original and all of which together are one instrument.
11.4 If any provision of this Letter is held invalid or unenforceable, the rest continues in effect.
11.5 This Letter binds and benefits the Parties and their respective successors and permitted assigns — including, on a further sale of the Premises by the Buyer, a subsequent buyer to whom the obligation in clause 4 is in turn assigned or assumed by a letter of this kind.
11.6 Clauses 3, 4, 5, 6, 7 and 10 survive the Completion Date and remain in effect for as long as the Deposit Amount, or the obligation to account for it to the Tenant, remains outstanding.
SCHEDULE — PARTICULARS
SIGNED by the SELLER
__________
PAN: __________
Signature: ______________________________
Date: ______________________________
SIGNED by the BUYER
__________
PAN: __________
Signature: ______________________________ (also the Buyer's acknowledgement under clause 3.3, where clause 3 applies)
Date: ______________________________
WITNESSES
- 1. Name: ______________________________ Address: ______________________________ Signature: ______________________________