The ABC of energy of legal professional
In real estate transactions, there are invariably many legal formalities – be it sale, purchase or leasing. And there are situations when one or more people cannot come in person and sign documents at the registry office. A power of attorney is available here to conclude the legal process.
What is PoA?
A PoA is a legal document that authorizes someone to act for you (the client). The conditions are subject to 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 designate one or more people (so-called “lawyers”) to manage the property – buying, selling, developing, renting, and obtaining licenses and permits as needed.
You can also limit the powers granted by specifying the purpose and / or a period of validity. This specific PoA can instead be used instead of the general PoA to authorize a specific transaction and / or a specific time frame.
An irrevocable PoA (also known as a permanent PoA) is similar to a general or specific PoA for its intended purpose. The difference, however, is that it cannot be unilaterally revoked by the client. All parties to the PoA must agree to terminate it.
How do you do a PoA?
A PoA for property-related actions must contain the brief confirmation of the title and the description of the property. The explanation of the intention and the reasons for the execution of the PoA must be given. The information on the identity of the client and the lawyer as well as their current address must be given. The PoA must be printed, signed and dated on non-judicial or electronic postage stamp paper. The stamp paper value is typically £ 100 but may vary depending on the country of execution.
To be legally valid, the document must be registered with a sub-registrar after it has been signed by two witnesses. The registration fee varies due to various factors. For example, in Tamil Nadu, the registration fee for general PoA is £ 1,000 if this is for family members and £ 10,000 for others.
If the PoA is running outside of India there are some additional requirements. The PoA should be printed on the correct stamp paper in India and mailed to the non-resident. This must be notarized 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 many rights and must therefore be used with caution. In the case of an NRI in particular, it may enable the attorney to carry out finance-related actions, not only in relation to real estate, but also in relation to debt collection, opening / maintaining bank accounts, handling legal matters and filing tax returns. Since there is a risk of abuse, you need to choose someone who can be trusted and the PoA needs to clearly state which actions are allowed and which are not.
PoA instead of the sales certificate?
A PoA is an instrument of convenience and not a way of transferring rights, titles, or interests in property. There have been many instances where the seller has granted an irrevocable PoA on the property for consideration (often cash) without registering a change of ownership – to avoid paying stamp duty and registration fees. This is not legal and the Supreme Court has ruled that the previous owner is considered the title holder. A generic PoA cannot be used as the basis for record mutations (name transfer) in communal or revenue records.
States like Maharashtra consider PoA in relation to real estate when it is assigned a non-relative equivalent of a sale. For example, while a small fee is incurred when assigning close relatives to the PoA, stamp duty for other cases is the same as for real estate sales.
The person holding the PoA is only acting as an agent on behalf of the original owner and the buyer must ensure that the owners are kept informed. For example, if there are multiple owners, there must be separate PoAs for each of them. The PoA holder cannot receive payment on their behalf (even if approved by the owner) and the amount of the sale must be paid to the owners in proportion to their property.
How do you revoke a PoA?
A PoA becomes invalid if the person who assigned the right dies or cancels it. The first step in revocation is to make a public notice and then register a deed of termination with the sub-registrar’s office. The registered cancellation certificate must be given to the person to whom the rights have been assigned, as well as lawyers or other persons with whom the PoA was previously shared.
The author is an independent financial advisor