Tag: Power of Attorney

There is invariably a lot of legal paperwork in property transactions – be it selling, buying or leasing. And there are situations wherein one or more persons are unable to come in person and sign documents at the registrar’s office. This is where a Power of Attorney (PoA) comes in handy to complete the legal process.

What is PoA?

A PoA is a legal document that authorises someone designed to act on behalf of you (principal). The terms are governed by the Contract Act and the Power of Attorney Act.

There are three types of PoA that are useful for property-related actions. A general PoA is used to nominate one or more persons (called “attorneys”) to manage the property – buying, selling, developing, renting as well as obtaining licences and permissions as needed.

You can also limit the powers granted by specifying the purpose and/or a period of validity. This special PoA can be instead in place of general PoA to authorise for a particular transaction and/or time-frame.

An irrevocable PoA (also known as durable PoA) is similar to a general or specific PoA for the purpose intended. But the difference is that it cannot be unilaterally revoked by the principal. All the parties to the PoA must agree to terminate it.

How do you execute a PoA?

A PoA for property-related actions must state the brief acknowledgment of title and description of the property. The declaration of the intention and reasons for executing the PoA must be given. The details of identities of the principal and the attorney and their present addresses must be provided. The PoA must be printed on non-judicial or e-stamp paper, signed and dated. The stamp paper value is typically ₹100, but may vary based on the State in which it is executed.

To be legally valid, the document must be registered with a sub-registrar after being signed by two witness. The registration fee varies, based on different factors. For instance, in Tamil Nadu, the registration fee for general PoA is ₹1,000 if it is in favour of family members and ₹10,000 for others.

If the PoA is executed outside India, there are some additional requirements. The PoA should be printed on the right stamp paper in India and sent to the non-resident. This needs to be notarised by the Indian Consulate with witness signatures. The PoA must be registered in India within three months of execution.

What are the risks with PoA?

A general PoA grants lots of rights and hence must be used with caution. Especially in case of an NRI, it can permit the attorney to perform finance-related actions, not just relating to property but also others such as recover debts, open/operate bank accounts, attend to legal matters, file tax returns. As there is potential for misuse, you must choose someone trustworthy and the PoA must clearly mention what actions are allowed and what must not be done.

PoA in place of sale deed ?

A PoA is instrument for convenience and not a way of transferring any right, title or interest in property. There have been many cases where the seller granted an irrevocable PoA on the property for a consideration (often cash), without registering change of ownership – to avoid paying stamp duty and registration charges. This is not legal and the Supreme Court has held that the earlier owner will be considered the title holder. A general PoA cannot be held as a basis for record mutations (name transfer) in municipal or revenue records.

States such as Maharashtra consider PoA related to property when assigned to non-relative equivalent to a sale. For example, while there is a nominal fee if the PoA is assigned to close relatives, the stamp duty for other cases is the same as that on the sale of property.

The person holding the PoA only acts as an agent on behalf of the original property owner and the buyer must ensure that owners are kept in the loop. For example, in case there are multiple owners, there must be separate PoAs for each of them. The PoA holder cannot receive payment in their name (even if authorised by the owner) and sale amount must be paid to the owners in proportion to their ownership.

How do you revoke a PoA?

A PoA becomes void if the person who assigned the right passes away or annuls it. The first step to revoking is to issue a public notice and then register a cancellation deed at the sub-registrar’s office. The registered cancellation deed must be given to the person assigned the rights, as well as lawyers or other with whom the PoA was earlier shared.

The author is an independent financial consultant