Home Loan Benefits for Women
Buying a home remains one of the major financial goals of most families. The home loan tenure can…Read More
A power of attorney (POA) is a legal document that allows an individual to act on behalf of other person legally to manage his/her various affairs, if he is unable to do so effectively and bona fide. The person appointed becomes the agent, or attorney-in-fact, and the person who appoints is known as the principal.
There are two types of Power of Attorney
A General Power of Attorney (GPA) gives broad authorizations to the individual. The individual may be able to make medical decisions, legal choices, or financial or business decisions.
Special Power of Attorney (SPA) is used for transfer of a specific right to the person on whom it is conferred.
Both the Power of Attorneys require either notarisation or registration as per the rights being given under the authority. All the power of attorneys which authorise the attorney holder to sell, transfer, assign or receive consideration from the buyer in respect of any immovable property, requires compulsory registration
Courts view on the sale of the immovable property through GPA, ATS and Will
The High Courts and Supreme Court in numerous occasions have stated that sale on the basis of GPA in not valid. The Supreme Court in Suraj Lamp Case, in 2011 had once again categorically stated that the GPA is not an instrument of transfer when it comes to right, title and interest in an immovable property. The Court further held that power of attorney is only an agency created in favour of the recipient, also known as grantee, on behalf of the grantor. Moreover, even an irrevocable power of attorney does not have the effect of transferring title to the recipient. Therefore, GPA is not valid for the sale/purchase of property. However, it has been mentioned clearly in the judgement that this judgement shall not come in the way of a genuine/bona fide transactions. Here, every person has his own interpretation of the word “genuine. Transactions related to an immovable property can only be done by way of stamped and registered conveyance deed, as applicable under the respective State government Act.
In case a property has been bought with GPA
If a property has been bought by an execution of GPA and not by way of a registered sale deed, the buyer will not be considered the legal owner of the property. Without the sale deed, he will not be able to sell the property either. The Indian Registration Act 1908 provides that sale of immovable property of over Rs 100 can be made only by a registered instrument of transfer. Hence, rights in immovable property are vested only when a sale deed or deed of conveyance is registered between the parties.
Why is GPA so popular?
Buying property through General Power of Attorney is still popular in many parts of Delhi-NCR due to the purported benefits it provides. From a seller’s perspective, the GPA route allows them to sell a property even if they do not hold clear titles of the property. Since the property was never sold and the seller continued to be the owner thereof, he was never levied the capital gains tax. Also many schemes of urban development authorities, where the properties are allotted on a leasehold basis, come with a significant gestation period before the property can be sold legally. To sidestep such provisions, the GPA route is employed frequently by sellers.
The buyers too stands to be in an advantageous position as he could undertake all acts with respect to the property as the owner, including selling the property without paying stamp duty on the document of transfer.
Home Loan or Loan against on a GPA Property
Now that we have seen what is General Power of Attorney and the legal process behind it. When it comes to buying or selling a property General Power of Attorney is not a valid instrument to transfer property titles. A sale deed must be carried out for transferring property titles, following which the buyer has to pay stamp duty and registration charges. The seller will also have to bear the burden of capital gains tax on the transaction.
However, there are NBFCs that extends financial assistance against GPA specially in the Home Loans, with specific terms and conditions (i.e., Subject to sale deed)