Is Using A General Power Of Attorney To Purchase Property Safe?

Is Using A General Power Of Attorney To Purchase Property Safe?

Is it secure to purchase real estate solely on the basis of a general power of attorney (GPA)?

Can the transaction be cancelled by this instrument in a court of law and declared invalid?

In Indian real estate, using a general power of attorney to purchase a property is a regular practice. However, transferring property through GPA is illegal, according to a 2011 Supreme Court of India ruling. Despite this, the lucrative offer that goes along with this method of buying a home draws purchasers because in most situations, sellers are in a desperate need to sell their possessions.

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Thus, before signing the dotted line, it is necessary that purchasers grasp all the complexities of buying a property through the General Power of Attorney (GPA) & carefully evaluate the safety of such transactions.

A general power of attorney is what?

It is the authority granted by a person to a friend to do certain financial or legal transactions on his or her behalf. In situations where the original owner cannot physically be present, such as in the case of non-resident Indians (NRIs) and incapacitated proprietors, it is a regular practice. In this instance, they give the GPA to a reliable individual who is authorised to transact business on their behalf.

Special Power of Attorney (SPA): What is it?

The SPA is used when someone is given explicit permission to carry out a particular task.

For instance, the person you authorize to act as your legal representative in a certain matter will only be able to represent you in that particular case.

A special power of attorney limits the options available to the agent while a general power of attorney grants the agent broad authority.

Is a GPA required to get registered?

To be legally legitimate, a GPA must be registered with the sub-office. Registrars additionally, the GPA is not valid indefinitely. It is valid for the duration of the principal's or the GPA's lifetime. It may also be revoked at any time throughout the owner's lifetime. On the other hand, the SPA is revoked after the particular duty that was given to it is finished.

Can a GPA holder who has registered sell a house?

No. The GPA holder is not permitted to sell the property on behalf of the owner, even if the GPA is registered with the sub-office. Registrar’s the sale of a property through GPA is completely invalidated by even the most recent ruling by the Supreme Court of India. The only tasks that a GPA holder can complete are those that the owner assigns them to do; selling property is not one of those tasks.

Real estate sector GPA Going through the GPA method for a land acquisition is typically not advised given the legal complexities involved. However, it was common in India because it gave both the buyer and the seller financial advantages.

The buyer is required by law to pay stamp duty & registration fees to the government if the title to a land parcel is transferred. The transaction's capital gains tax will also fall on the seller. These fees are avoided when property is transferred through a GPA, which results in a significant loss to the government coffers.

What draws people to GPA transactions?

From the standpoint of a seller, the GPA method enables them to sell a property even if they do not possess clear titles to it. On the other hand, a buyer can be seduced by property deals that seem too good to be true.

Other legislative provisions function as a catalyst for GPA transactions. There is frequently a lengthy gestation period before a property can be sold lawfully in urban development authorities' programmes when leasehold properties are allocated. The GPA approach is routinely used to avoid such requirements.

GPA is another shady approach to invest unreported funds in the real estate market.

It is generally not advised to purchase a property through the holder of a power of attorney, when questioned about the repercussions of a GPA transaction. There is one exception, though. One may deal with the power holder if they have received an irrevocable power without payment. Even in that scenario, it is still necessary to make sure that the holder has a legal claim to the property through a purchase agreement or other comparable legal instrument. Such power ought to be registered, ideally. Even after the grantor's passing, an irreversible authority with interest is still in effect.

Any additional form of authority is dangerous; made even more so if it is not even registered. Even if an authority is made irrevocable, it can still be repealed at any point.

Additionally, it expires after the grantor's passing. Any irrevocable power must be accompanied with an interest in order for the law to recognize it. The risk of unanticipated issues is expected to rise if property is purchased with such a power. Therefore, it must be prevented.

2011 decision of the Supreme Court The GPA is categorically not a transferable instrument when it comes to right, title, and interest in real estate, according to the Supreme Court of India's 2011 ruling. The Court further ruled that a power of attorney is solely a legal arrangement made in favour of the grantee (also known as the person to whom it is granted) by the grantor. Even an irrevocable power of attorney does not transfer ownership to the recipient, though. GPA is therefore invalid for the sale or acquisition of real estate. According to the appropriate State government Act, only stamped & registered conveyance deeds may be used for transactions involving immovable property.

Following the aforementioned ruling, the Apex Court instructed the municipal agencies to stop registering properties using the GPA documents. Genuine GPA transactions, however, would continue to be valid.

The Supreme Court observed that GPA facilitates widespread tax evasion of all kinds, including income tax, wealth tax, stamp duty, and registration fees. Additionally, GPA transactions make it easier to keep black money and make unlawful gains.

Delhi High Court's GPA ruling The Delhi High Court held that property registration through GPA will not be prohibited in real circumstances, as specified in the Supreme Court's ruling, which stated that GPA could not be utilised as an instrument of transfer when it comes to immovable property. The Delhi High Court further cited the Supreme Court's ruling and declared that as long as the transaction is valid, the sub-registrar will register the transfer. In order to develop a plot of land for the purpose of erecting a house, it was also stated that GPA might be used to execute sale agreements or development agreements where a developer and a plot owner are both involved.

The Delhi government legalized GPA property transfers for those illegal structures without sale deeds in light of the Delhi High Court's ruling on GPA.

What if you purchased a home through GPA? Even though you may have "purchased" the property, you won't be regarded as the owner of it legally if there isn't a registered sale document. You won't be able to sell the property without the sale deed. Additionally, banks have a policy of refusing to fund projects with a GPA.

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