The sale and purchase of property through the General Power of Attorney route has been a common menace in the Indian realty sector. Transferring property through a General Power of Attorney allows the seller to avoid stamp duty and registration charges that go along with a sale deed and similarly buyers are often offered better deals under a sale through General Power of Attorney, making it a lucrative proposition for both parties. However, as a buyer it is not advised to purchase a property through a General Power of Attorney for reasons explained further in this article.
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What is a General Power of Attorney?
A General Power of Attorney is a legal document whereby one person authorises another to act on his/her behalf. The person authorising is referred to as the ‘principal’ and the person being authorised under the power of attorney is called an ‘agent’. A General Power of Attorney, as is evident by its name, is not drafted for a specific purpose and the agent can act on behalf of the principal on varied matters. The acts of an agent acting on the behest of a General Power of Attorney bind the principal.
A General Power of Attorney is often utilised to provide for situations wherein a person is unable to act for himself and may require another to act on his behalf. Common situations wherein a General Power of Attorney may be required are when the principal is suffering from some legal/physical disability, illness or is incapacitated to act for himself. It may also be used to cover for the principal’s absence in situations wherein he/she is required to take decisions or carry out specific tasks etc.
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Why are property transactions based on General Power of Attorney prevalent
Sale of property through a General Power of Attorney allows sellers as well as buyers to maximise their financial gain from the transaction which would otherwise not be possible through conveyance of the property under a sale deed. Since a sale deed requires the payment of stamp duty as well as registration charges, the parties are able to avoid this financial liability by transfer through a General Power of Attorney. Further, the seller also bears the liability of the capital gains tax on a transaction through a sale deed which is avoided by a General Power of Attorney transfer.
Apart from the financial benefits, a General Power of Attorney also allows a seller without a clear title to enter into a transaction with a buyer to transfer the said property, which would otherwise be tough through a sale deed.
Further, it also allows for the transfer of numerous properties which could otherwise not be sold legally, such as the sale of agricultural land for residential use without converting the land use. Similarly, it allows for transactions with respect to properties allotted on a leasehold basis which are not allowed to be sold within a specified gestation period.
Consult: Top Property Lawyers in India
Buying property under a General Power of Attorney
There are numerous disadvantages in buying a property through a General Power of Attorney since there are many uncertainties and risks associated with it. Having understood what a General Power of Attorney is and why it is executed, it is evident that it is not an instrument intended to transfer property titles and ownership. Under no circumstance can a General Power of Attorney be used in place of a sale deed which is a valid legal instrument that transfers title and ownership in property between a seller and buyer.
Even the Hon’ble Supreme Court through an order in 2011 has clearly stated that, “a power of attorney is not an instrument of transfer in regard to any right, title or interest in an immovable property”. The court further directed municipal bodies across the nation to not register or mutate properties based on General Power of Attorney documents, except for valid cases. Thus, even upon successfully obtaining possession of a property after a transaction based on a General Power of Attorney, there might be problems in the future while selling the property. Therefore, it is against your interests as a buyer to buy a property through a General Power of Attorney.
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Revocability of General Power of Attorney
A General Power of Attorney in most cases is revocable by nature. A General Power of Attorney is instantly revoked upon the death of the principal. Similarly, a General Power of Attorney can also be revoked by the principal anytime during his lifetime. A General Power of Attorney is irrevocable only where the holder has obtained an irrevocable power coupled with interest, which remains valid even after the death of the principal. In any other situation, a General Power of Attorney may be revoked as the law does not recognise any other form of irrevocable General Power of Attorney. Therefore, a transaction based solely on a General Power of Attorney may lead to numerous impediments in the future.
Why do you need a lawyer?
Given the dubious nature of a transaction based on a General Power of Attorney, it is highly advised to engage the services of a property lawyer when faced with such an offer. Only a lawyer can help guide you through the technicalities and intricacies of the legality of such a transaction given its surrounding circumstances. A trained legal expert can best protect your interests and ensure a hassle-free purchase which does not lead to legal problems for you in the future.
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