Selling a Property through a General Power of Attorney – Is it even valid?

Selling-a-Property-through-a-General-Power-of-Attorney-–-Is-it-even-valid

Sale of property means transferring the title in the property for a sale consideration. The seller transfers the ownership rights in the property to the buyer. 

A sale deed is the primary legal document which evidences the sale of a property. The sale transaction is complete when the sale deed is executed and registered as per law. When the property is purchased through General Power of Attorney, the title over the property is not complete until the sale is duly registered.

What is a power of attorney? 

Power of Attorney is an authorization in writing given by a person (grantor/ donor/principal) to another person (attorney/agent) to act on his behalf. Principal confers authority on his agent to perform specified acts on his behalf. 

Read More: Checklist for selling property in India

PoA can be general or special. When power is granted for a particular task or limited purpose, it is special PoA. 

The General Power of Attorney is not specific. It contains broad authorization to perform a variety of tasks. It can be given to finalize the terms of the sale and to sign the deed on behalf of the buyer/seller.

Selling a property through GPA. 

In sale through GPA, the seller executes an agreement to sell vide which he confirms the receipt of payment and delivers the possession to the buyer.

  • Power of attorney is not a sale deed. It is merely an authorization. It is not a document conferring any title in the property. Nor any right or interest in the property is transferred to another person. 
  • If the property has been purchased through Power of Attorney, the title is not complete. The purchaser is not the owner legally. There has to be registered sale deed in existence for completing the transaction.

Read More: Selling property in India? Here are some reminders!

Sale of property by NRIs using General Power of Attorney

NRIs generally issue power of attorney to their Indian relatives, friends or family members. They cannot be present physically in India for all transactions.

In case of transfer of property by sale, an NRI must mention the reason for issuing the PoA. It must contain the relation of the NRI with the agent. The instrument authorizes the execution and registration of the sale deed to complete the sale transaction. The document itself is not a sale deed.

Why people use GPA to sell the property

  • People use it for sale of the property to evade stamp duty and registration fees.
  • General Power of Attorney is used to sell a property even if the title of the seller is not clear. 
  • In the case of agriculture land, if the property is to be sold for residential purpose, it has to be converted. The landowners sell this land using GPA without conversion.
  • To avoid payment of tax on capital gains earned on transfers.   
  • In the case of flats which are allotted on a leasehold basis, sale of flat is permissible only after the expiry of a specified period. Thus the transfer of unit through GPA is widespread as it is done before expiry of such period. 

Read More: Saving yourself from fraud while buying or selling a property

Do it the proper way:

All transactions through Power of Attorney holders are not wrong in law. Genuine transactions are permitted. POA is used to carry out the assigned tasks.   

In a sale transaction, the title gets transferred to the buyer only if the sale deed is executed and registered as per law. Registered sale deed ensures verification of the title and prevents dubious transactions.

General Power of Attorney is not a substitute for sale deed.

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How Power of Attorney Helps NRIs Manage Their Assets

How Power of Attorney Helps NRIs Manage Their Assets

NRIs cannot be physically present in India for each of their financial and legal transactions, and therefore, they need someone to act on their behalf in their absence to complete the formalities of the transactions. POA helps to achieve the same.

Power of Attorney is an authorisation in writing given by a person ( grantor/ donor/principal) to another person (attorney/agent) to act on his behalf. The person who can act on another’s behalf is called an attorney in -fact.

When POA is executed in favour of a person by NRI, he becomes the holder of the authority to act on his behalf. POA is required:

  • to do the necessary acts towards accomplishing any task in the absence of NRI
  • to complete certain transactions in time to avoid delay, e.g. taking possession of the flat, payment of taxes etc

The POA should be used when it is essential to use the same, and there is no other alternative.

Agency Relationship:        

POA creates a relationship of Principal-Agent between the parties. The acts of the agent bind Principal-Donor of the authority.  But an agent has to act within the scope of his authority. POA is given a strict interpretation, and no extra rights are construed. The acts which an agent is authorised to perform must be apparent in POA.

POA can be revoked once the task for which POA was executed has been accomplished or if the representative is misusing the power.

POA may cover any or all aspects of asset management. POA can be – General or Special Power of Attorney.

  • In General Power of Attorney, power is granted to do all the acts necessary concerning the subject matter.
  • In Special Power of Attorney, authority is assigned to perform specific tasks only.

POA can be used by NRIs to manage their assets in India in many ways like:

  • Collection of rent
  • Sale, Purchase, Mortgage, Lease, Settlement, Agreement or Registration of transfer deed
  • Banking transactions
  • Representation in Legal disputes
  • Managing affairs related to real estate – signing of contracts for renovation, taking possession from the builder etc.

Joint ownership:    

In case of joint ownership of property between NRI and Resident India, POA can be executed in favour of one owner to take important decisions and do the requisites concerning the subject matter of POA.

POA holder:    

POA can be given to relatives, blood relations and friends or even to a third party. In case of property matters, some states allow POA only in favour of blood relations.

Execution of POA:

If NRI is executing the POA   

  • While he is in India, POA is made on a non-judicial stamp paper and got notarized.
  • While he is abroad, then POA is made on plain paper (Indian Stamp paper not required) and got notarized there. It is sufficient for the countries signatory to the Hague Convention. But in India POA is given more weight if it is got attested through the Indian Embassy/ Consulate in the foreign country where NRI is residing.
  • If executed abroad, POA holder will have to get the POA registered in India in particular sub Registrar’s Office and stamp duty is to be paid.

 Registration of POA:    

POA concerning an immovable property which can confer title needs to be registered compulsorily, although, it is prudent to register any POA. In case of legal disputes, courts give more weight to registered documents.

Consulting a lawyer for the drafting of POA and for processing the same is always better to avoid future hassles.

Embezzlement of Power: A True Story

Embezzlement of Power

In today’s world of commerce and industry, the need to enter into legal relations, form agreements or even initiate transactions, is an everyday business. It is not surprising to see hundreds of people delegating these functions and powers to another person, through a legal process known as granting of Power of Attorney (POA). This legal document may be a blessing or a curse, depending on how well the donor/principal (one who grants such power) is aware about it. Being General or Specific in nature, the power granted is either general or for a specific purpose, time etc respectively. Any person competent to enter into a contract may execute a POA; whereas, it also applies to married women even if they are minors. But not minor boys, because, well, we believe in gender equality.

However, this too has loopholes. Granting a Power of Attorney or POA equals making an individual your legal representative, thus, making you liable for their every act. Researches focused on Elder abuse due to the grant of Financial POA, show that children don’t usually shy away from proving their parents to be senile and steal their homes, money, and property. Another study focuses on land grabbing, especially by loan sharks, since making dubious POA’s is inordinately easy in India. However, the Supreme Court passed a judgment on October 13th, 2011, the disparaging sale of immovable properties through agreement, will transfer or even general power of attorney and declared such sales to be void. Thus, the swindlers would now have to get registered ‘Deeds of Conveyance’ to complete their title and this would even restrict unscrupulous owners from selling the same property to various people under a spurious POA.

Nonetheless, no mountain of evil was ever left unconquered. While granting a power of attorney, make sure that your agent is not the conniving little wolf of little red riding hood, and is not given unconditional powers under the POA. Restrict to using a specific POA, with specific terms and periods, to ensure that the reins of your business are always in your hands. Register the POA so revocation becomes easier when you feel so to do.

It is imperative to seek legal help if you have been bamboozled, because unlike New York City, we yet don’t have a Spider-man to protect us. It will be the courts and attorneys for now. Sorry.

HOW CAN AN NRI GET A POWER OF ATTORNEY?

get power of attorney

A Power of Attorney is a document that demarcates and lists out the powers that are shared with the Power of Attorney Holder. There can be several types of POA’s such as General POA’s and Special POA. Minor and disqualified individuals by the law cannot provide for a POA. POA’s are used mainly by NRIs to administer and manage their property in India. The method of getting a power of attorney in India by an NRI (holding an Indian passport and not being present in India) is as follows –

  • The important points should be written by the NRI on a piece of paper in plain and understandable English. The main reason behind this is that all that as to be shared with a POA holder can be done easily. The wordings of the POA should be checked and done carefully and should also be given to an individual who genuinely wishes to perform the services mentioned for you. In case the NRI is not in India during that time the step of having it on a legal paper can be avoided and the same can be done on an A4 size paper.
  • This NRI should get the POA attested by the Indian Embassy/Consulate in the country where they are residing. This has to be done alongside two witnesses.
  • This Indian Embassy/Consulate signed/attested POA has to sent to India through the postal services available. These POA’s have to be stamped and adjudicated within three months of receipt in India.
  • Whoever the person in India is, has to make this legal and valid and thus, the same should be registered. Under the Registration Act, however, it is not necessary for a POA to be registered (in cases of general POA’s) however it is normal practice to register the same when dealing with immovable property.
  • The government office is figured out through the address of the POA holder and not the NRI’s address.
  • Documents usually required would be the – affidavit, the envelop in which the POA was mailed (has been asked for as proof in certain cases), passport photocopies of the ones who have written/created the POA/executants, address and ID proof of the one holding the POA, document regarding the relationship between the POA executor and POA holder, original POA etc.

Usually, the POA is registered and can be obtained in 15 days.

Why is General Power of Attorney a pain in the butt?

General power of attorney

People are very proactive in life today. So many have already taken the time out to prepare a ‘Will’ or a ‘Trust’ to handle their personal and financial matters after their death. However, the appointment of someone to take medical, financial or even personal decisions for you, while you are alive, and yet incapacitated, disabled or outrightly more interested in dwelling over your mid-life crisis, is acutely significant. This may be done with the help of a legal process known as granting the ‘Power of Attorney’, a legal document that may change your life. There are two of these- a General or a Specific POA (Power of Attorney)- both achieving diverse objectives. A General POA was a popular choice amongst the citizens until they realised how easily they could be hornswoggled by this tool.

General Power of Attorney

A General power of attorney grants an agent (to whom the POA is granted) virtually unfettered powers of decision making, from tax payment to entering contracts, from settling claims to buying a new toaster, everything. Since the subject matter is not listed in this case, the agent becomes the master of your fate and the captain of your soul. The duration of such a POA may also be arbitrary, depending on how it is drafted. Signing such a document makes you liable for the myriad acts your agent is legally allowed to perform (you could end up in jail, yes).

Specific or special power of attorney

An easy fix is the adoption of a Specific POA, that not only states the specific purpose which the agent is allowed to perform, it also acknowledges the limited duration of the POA. Rather than granting a singular General POA to one agent, one can grant several Specific POA’s to more than one agent, as regards to financial transactions, business interests, real estate etc, which would ensure no abuse of power. This should definitely save one from endless trips to the court, in case one’s agent turns out to be like a country’s parliamentarians- a rapacious perjurer.

It may not be wise to keep an absolute restraint on the power granted, nonetheless, it is imperative to ensure that the reigns are tight enough to keep your horse from freelance grazing as and when it makes up it’s mind.