Power of Attorney

Know Your Jargon: Power of Attorney

Power of Attorney or PoA, in short, is a frequently heard term in the real estate parlance. This term has earned a bad reputation because of its wrong utilisation in the past. All of us have heard accounts where the innocent and gullible have been duped by many real estate transactions carried out under the garb of Power of Attorney.

However, when used rightly, Power of Attorney gives flexibility to either party for carrying out financial and business-related responsibilities, especially when any of them is living away or is incapacitated and cannot be physically present for the signing of papers.

Through this post, we aim to bring to you all that you should be aware of the Power of Attorney and the ways it could be used in a real estate transaction.

Power of Attorney

A Power of Attorney is a legal document which grants a person the right to act on behalf of someone else in a legally binding transaction. It could be used in the circumstances like facilitating banking transactions, entering into a contract with someone, real estate transactions, etc.

A power of attorney is granted to simplify and ease various transactions. In real estate, it is mainly used when one of the parties involved in the transaction is an NRI and cannot make trips to be a party to the transaction.

In legal terms, the person who grants the PoA is called the Principal, and the person who is allowed power to act is referred to as the Agent.

Power of Attorney

There are two types of PoA. Either of them can be used to facilitate a transaction depending upon the need of the hour.

General Power of Attorney (GPA):  A general power of attorney allows greater control to the agent to carry out various tasks or discharge multiple responsibilities of the Principal. The general rights that are conferred on the Agent are mentioned in the document. A General Power of Attorney allows the Agent to represent the Principal in some transactions and is an ongoing agreement between the Principal and the Agent until revoked by the Principal.

Specific Power of Attorney: As against a GPA which allows the Agent to carry out a wide range of transactions on behalf of the Principal, a Specific Power of Attorney allows only one particular transaction or a specific set of actions involved in a transaction.

Power of Attorney

There are various ways of authenticating a PoA

Notarisation of PoA

Though it is not mandatory, PoA can be notarised. Experts advise that PoA document is notarised in the best interests of the parties involved.

PoA executed abroad

As it is widely used in real estate transactions involving individuals residing outside of India, there have been certain instances where notaries of other countries have been allowed to notarise the PoA. However, to avoid ambiguities, it is recommended that a representative of the Indian Government / Indian Vice-Consul or the Indian Consul certifies the document instead of other notaries. 

Registration of PoA

Indian Law requires that if both the Principal and the Agent are residents of India, then the PoA must be registered at the Sub-Registrar’s office. This clause is done away with if the Principal is residing abroad, is physically infirmed, in Jail or exempted by law for personal appearance.

Power of Attorney

Following the rampant misuse of Power of Attorney, the Supreme Court banned registration of property sold under PoA. This instrument that allows an agent right to carry out transactions for business / financial transactions was not a valid document for transfer of property. As it involved lesser payment of duties and taxes, this became a widely used practice in real estate transactions.

However, later in the year 2012, the Delhi Government allowed GPA transactions involving certain categories like GPAs in favour of children, siblings, spouse, relatives or person of trust by registered owners.

This is a very relevant point to be kept in mind while doing a real estate transaction. Also, it will be difficult for you to manage loan for your property if the sale has been made under GPA, as it doesn’t give you a clear title to the property.

However, GPA can be used by an agent to manage the estate of his/her principal,  collect rent, pay utility bills and act on the principal’s behalf for home loan related transactions.

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