Last Updated on 3 months by ChennaiRealties
What is a Power of Attorney?
A Power of Attorney (POA) is a legal document that grants designated individuals the authority to act on behalf of someone else in various matters. In the realm of real estate, POA holds immense significance, allowing individuals to appoint trusted agents to manage their property affairs.
This article provides an overview of the Power of Attorney in real estate, including its types, registration process, legal implications, and its relevance for NRIs and OCI cardholders. By understanding the potential of POA in real estate transactions, individuals can navigate property matters more effectively.
Power of Attorney in Real Estate
When a person is unable to maintain the property due to being away, residing abroad, or being sick and old, appointing a reliable individual as their POA becomes essential. This appointed person can be a relative, known acquaintance, or even a lawyer. Generally, granting POA does not involve monetary consideration, except in cases of Joint Ventures where property development and sales by a promoter are involved. We will delve deeper into this aspect later in the article..
Types of Power of Attorney
Types of Power of Attorney can be broadly categorized into two: general power of attorney and special power of attorney.
In a general power of attorney, the agent is granted broad authority to make decisions regarding the principal’s property. This includes the ability to negotiate, sell, mortgage, enter into contracts, and apply for approvals with government agencies, among other actions.
On the other hand, a special power of attorney is limited to specific purposes outlined in the POA document. The agent’s authority is restricted to these specified tasks.
The agent is empowered by the POA document and must exercise their authority within the defined scope and limitations. All transactions carried out by the agent within their authorized powers, as stated in the POA, are considered valid and legally binding on the principal.
Where and how to register the Power of Attorney?
To register a Power of Attorney (POA), it should be presented at the Sub-Registrar’s Office (SRO) located within the jurisdictional area where the property, either in whole or in part, is situated. Alternatively, it can be registered at the SRO where the principal resides.
The fees for registering a POA vary depending on whether it is given for consideration. For a non-consideration POA, the Stamp Duty is ₹100/- and the Registration fee is ₹10,000/-. However, if the POA is given for consideration, the Stamp Duty payable is 4% of the consideration amount, and the Registration Fee is 1% of the consideration amount.
Validity of Power of Attorney
The validity of a Power of Attorney (POA) depends on several factors. It can be valid for a specified period, the lifetime of the principal or agent, or until it is revoked by the principal.
In Tamil Nadu, all POA documents must be registered after 1.12.2012. Cancellation of a POA must also be registered. A POA can only be cancelled through a Deed of Cancellation in the concerned Registration Office.
The Registration Department clarified that a Power of Attorney relating to immovable property executed outside India does not require compulsory registration. However, it must be attested by the Consulate Office. Consequently, further documents presented (based on such an unregistered power of attorney executed outside India) can be accepted for registration.
In Tamil Nadu, a Life Certificate of the principal is insisted upon to ensure that the principal is alive.
POA holders should submit proof to the sub-registrar that the principal is alive. For this, a registered medical practitioner or gazetted officer can issue a life certificate. These certificates are valid for 30 days only. The new rules are applicable to all POAs registered since February 4, 2013. By law, POA is not valid once the principal dies.
No Life Certificate needed for UDS registrations or for registration of plots after promotion
However, the Tamil Nadu Real Estate Regulatory Authority (TNRERA) has ruled that a life certificate is not required to execute a deed if a power of attorney (POA) has been given. The TNRERA cited the Madras High Court Judgment in support of this ruling. The TNRERA believes that the POA itself is proof that the principal is alive. Additionally, the TNRERA is concerned that if promoters are required to approach the land owner each time a plot or flat is sold, the land owner may start making demands that may not be in the best interests of the promotion.
Revoking a Power of Attorney
A general POA can be revoked by the principal at any time without prior notice to the agent. This is according to a circular issued by the registration department and upheld by the Madras High Court.
However, a POA that is given for consideration, such as when a property owner gives a POA to a developer to sell their land, cannot be revoked without the agent’s consent. This is because the agent has an interest in the property and the POA cannot be revoked arbitrarily.
The principal can revoke a POA if the agent has breached the terms of the POA, acted beyond their authority, or has mismanaged the property. In these cases, the principal can issue a revocation notice to the agent.
The status of a POA can be checked by buyers from the encumbrance certificate. This certificate shows all encumbrances on a property, including any POAs that have been registered.
2011 Supreme Court Judgment
In 2011, the Supreme Court held that a POA is not a valid instrument of transfer of property and that such transactions will not give ownership title to the buyer.
The court’s ruling was made in response to a growing trend of people using POAs to avoid paying stamp duty and capital gains tax on property sales. The court said that the use of POAs for this purpose was “misusing” the power of attorney and that it would not be tolerated.
The court’s ruling does not mean that all transactions involving POAs are invalid. The court said that POAs can be used for genuine purposes, such as managing someone’s affairs or executing a deed of conveyance.
The court’s ruling is a significant development in the law of property sales. It will make it more difficult for people to avoid paying stamp duty and capital gains tax on property sales. It will also make it more difficult for people to sell property without the owner’s consent.
Here are some key takeaways from the Supreme Court’s ruling:
- A general POA holder can act on behalf of the principal to facilitate the transfer of property but cannot claim ownership of the property.
- Or, transactions involving POAs that are used to avoid paying stamp duty or capital gains tax will be invalid.
- POAs can be used for genuine purposes, such as managing someone’s affairs or executing a deed of conveyance.
POA Rules for NRIs and OCI card holders
Non-Resident Indians (NRIs) and Overseas Citizen of India (OCI) card holders can give a power of attorney (POA) to a person in India to buy, sell, or manage their property.
- NRIs are Indian citizens who live outside India for more than 183 days in a year.
- OCI card holders are persons of Indian origin who are citizens of another country.
NRIs and OCI card holders can give a special POA to a person in India for the purpose of buying a specific property. The special POA will expire once the property is bought or sold.
NRIs and OCI card holders can also give a general POA to a person in India for the purpose of buying or maintaining multiple properties. The general POA will remain in effect until it is revoked by the principal. OCI card holders cannot buy agricultural properties in India
If an NRI or OCI cardholder wants to sell a property, the details of the property should be mentioned in the POA.
How to Give POA from Abroad
To give a POA from abroad, you will need to follow these steps:
- Prepare the POA. You can use a model POA from the Tamil Nadu Registration Department’s website, REGINET. However, it is advisable to have the POA drafted by a lawyer. Take two copies of the POA in plain paper.
- Have the POA attested by the Indian Embassy. You will need to make an appointment with the Indian Embassy in your country. You will need to bring your passport-size photo, identity and address proofs, and two witnesses. The Embassy will attest the POA.
- Send the attested copies to the power agent in India.
- The power agent should take the POA to the Sub-Registrar’s Office (SRO) within three months and get it adjudicated. Adjudication is the process by which the POA is approved by the registrar. The power agent will need to pay the applicable charges at the SRO. The original postal cover should also be taken to the SRO. After paying the fee at the SRO, the legal process for the POA is complete.
The power agent can now execute any document
Other Points to Remember
A company, partnership firm, or LLP can be appointed as POA.
A power agent cannot appoint a sub-agent for the registration of documents. Consequently, such documents will not be accepted for registration.
In conclusion, a power of attorney (POA) is a powerful tool that can be used to manage property, buy or sell property, or execute other legal documents related to property. When choosing a POA, it is important to select someone you trust who is knowledgeable about real estate matters. To ensure that the POA is valid and enforceable, it should be drafted by an attorney.
Disclaimer: The information contained in this article is for educational and informational purposes only. It is not intended to be legal or financial advice. Readers are advised to do their own independent research and consult with professionals before making any decisions based on the information in this article-Edit