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Property

Safety in Buying Property Through General Power of Attorney (GPA)

Know A-Z information about buying or property via a general power of attorney, as mentioned here!

Using a general power of attorney to purchase real estate in India is a regular practice. However, the Indian Supreme Court ruled in 2011 that GPA transfers are invalid, so this is no longer an option.

Despite this, purchasers are drawn to this route of property buying because of the attractive deal that typically comes along with it, as sellers are often in urgent need to unload their assets.

Therefore, prospective buyers must be well-versed in purchasing real estate via General Power of Attorney (GPA) and ensure the security of such transactions before signing on the dotted line.

General Power of Attorney

It’s a formal document that authorizes one person to act on another’s behalf in various business transactions, usually involving money or legal matters. This is a typical procedure when the original owner cannot physically possess the property due to illness or disability, as is frequent with Non-Resident Indians (NRIs). For this reason, they delegate authority to conduct business on their behalf by transferring the GPA to a reliable third party.

The Special Power of Attorney is distinct from this. How? Find out by reading on!

What is Special Power of Attorney (SPA)?

The Special Powers Act (SPA) is what you get when you give someone blanket permission to do something. For illustration, if you choose someone to represent you in Court, that authorization will only apply to that specific matter.

A general Online Power of attorney gives the agent extensive authority, while an extraordinary power of attorney restricts the agent’s discretion.

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Is a GPA Registration Required?

Registration with the sub-office registrar grants a GPA to the force of law. The GPA also expires after a certain amount of time. The GPA lasts as long as the main or grantor does. Revocation is possible during the owner’s lifetime. However, the SPA is null and void after the agreed-upon objective has been finished.

Will A Registered GPA Holder Able To Sell Real Estate?

No. A GPA holder is not authorised to sell the property on behalf of the owner, even if the GPA is recorded with the sub-office. Registrar’s Even the most recent ruling from India’s highest Court explicitly nullifies property sales conducted through GPA. A general power of attorney (GPA) holder may only act by the owner’s instructions and may not sell the property.

GPA in the Real Estate Sector

Since the GPA route is fraught with potential legal complications, it is not recommended for land transactions. However, it was common in India because it was mutually beneficial for financial gain.

A purchaser is required by law to pay stamp duty and registration fees whenever the title of a parcel of land is transferred. The seller must also pay any applicable capital gains tax. If a property is transferred via a GPA, the transfer tax and other fees are not paid, resulting in a significant loss for the government coffers. You can get the Online Home Registration Services from our Experts.

Why Is GPA Transactions Is Popular?

If a seller does not have full legal title to a property but still wants to sell it, they can go the GPA route. However, a buyer can be fooled by seemingly fantastic real estate deals.

Other statutory measures bolster GPA transactions. When urban development agencies allocate properties on a leasehold basis, there is sometimes a lengthy waiting period before the property can be lawfully transferred. The GPA method is widely used as a means of evading such regulations. Similarly to GPA, investing in the real estate market with untraced funds is a criminal act.

In most cases, having a power of attorney holder make a real estate acquisition is not a good idea. However, there is an important caveat. One may negotiate with the holder of an irrevocable power when that power has been acquired in exchange for valuable payment.

Verifying that the holder has a Legal document in the property, such as a purchase agreement, is essential. Any such authority ought to be recorded if at all possible. Upon the grantor’s passing, the interest attached to an irreversible authority ceases to be effective.

All other forms of energy are risky, especially if they are not properly licensed. Even if such authority is irrevocable, it can be rescinded at any time. Furthermore, it is nullified upon the grantor’s passing. Unless it is tied to interest, the law will not recognize power as absolute and unchangeable. Using the power of sale to buy a house is risky and can lead to legal issues.

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Now that we know what a General Power of Attorney is and how it is created legally, we can proceed. No General Power of Attorney can be used to transfer property titles when making a purchase or sale. A sale deed must be executed to transfer real estate ownership officially, and the purchaser will be responsible for paying stamp duty and registration fees.

2011 Supreme Court Decision

In its judgment in 2011, India’s highest Court made it clear that a GPA cannot be used to transfer legal ownership of the real estate. In addition, the Court determined that a power of attorney is only an agency constituted in favor of the grantee on behalf of the grantor. Even an irreversible power of attorney doesn’t give the grantee legal property ownership. As a result, GPA cannot be used to buy or Sell Patta Chitta. Only a conveyance deed stamped and registered with the appropriate state authority can be used to transfer ownership of real property.

After the initial ruling, the Supreme Court issued an order prohibiting local governments from registering properties using GPA paperwork. Genuine GPA transactions, however, would not be invalidated.

The Supreme Court: https://main.sci.gov.in/ has recognized that GPA enables widespread tax evasion, including stamp duty, income tax, wealth tax, and registration fees. In addition, GPA deals make it simpler to store untraceable cash and rake in illicit gains.

General Power of Attorney (GPA): Uses, Registration, and Precautions

Uses of a General Power of Attorney

A General Power of Attorney (GPA) grants broad authority to a trusted agent (the attorney-in-fact) to act on your behalf in various matters. Common uses include:

  • Managing finances: Pay bills, deposit cheques, operate bank accounts, invest funds, etc.
  • Handling property: Buy, sell, lease, or manage real estate.
  • Making legal decisions: File lawsuits, represent you in court, execute contracts, etc.
  • Taking care of personal affairs: Sign documents, file taxes, make travel arrangements, etc.

How to register a General Power of Attorney

Registration of a GPA is not mandatory in all Indian states. However, it’s strongly recommended for:

  • Properties: To give legal validity to transactions like selling or buying land.
  • Financial matters: To protect against misuse of authority regarding accounts or investments.

Here’s the general process for registration

  1. Draft and notarize the GPA document: Clearly specify the scope of authority granted to the agent.
  2. Pay registration fees: Varies depending on state and property value.
  3. Present the documents: Submit the GPA and supporting documents to the Sub-Registrar office.
  4. Verification and registration: The Sub-Registrar verifies the documents and witnesses’ signatures and registers the GPA.

Delhi High Court order on GPA

A 2009 Delhi High Court order mandated registration of all GPAs related to immovable property transactions within two months of execution. This aims to protect against fraud and ensure transparency.

What to do if you bought a property through GPA

Buying property through a GPA can be risky as it doesn’t transfer actual ownership. Your steps should be:

  • Ensure a registered GPA: Verify the GPA is registered within the legal timeframe.
  • Get the property registered in your name: Ask the original owner to execute a sale deed and get it registered.
  • Consult a lawyer: Get in touch with Vakilsearch.

Why you should avoid purchasing a property through GPA

Here are some reasons to avoid buying property through a GPA:

  • Limited ownership rights: You don’t become the legal owner until a sale deed is registered.
  • Revocation risk: The original owner can revoke the GPA anytime, rendering the purchase invalid.
  • Dispute potential: Legal disputes with the original owner or agent can arise.

Conclusion

Even though you paid cash for the property and signed a contract of sale, without a registered sale deed, you do not legally own the property. You cannot sell the property without the sale deed. Not only do banks not like to fund GPA initiatives, but they actively discourage anyone from doing so.

To know further details about property’s general power of attorney, the professionals at VakilSearch can be of good help. 

FAQs on General Power of Attorney

Is it safe to buy property through a GPA?

No, it is generally not considered safe to buy property through a General Power of Attorney (GPA). While legally permissible in some instances, it comes with significant risks due to limited ownership rights and potential for misuse.

What is the latest Supreme Court Judgement on GPA?

The landmark judgement by the Supreme Court in 2011 clarified that property cannot be transferred solely through a GPA. Only a registered sale deed can confer legal ownership of immovable property.

Can a general power of attorney holder sell property to himself?

No, a GPA holder cannot generally sell the property to themselves. Their power is to act on behalf of the grantor, not for their own benefit. Such self-dealing transactions raise conflict of interest concerns and are likely to be invalidated.

What are the rights of a power of attorney in property?

The rights of a GPA holder depend on the specific terms of the document. They cannot unilaterally transfer ownership but can manage aspects like collecting rent, executing contracts, or filing for registration under the original owner's instructions.

Is it safe to buy property on a GPA?

It is highly advisable to avoid buying property on a GPA alone. Doing so could lead to:
Limited ownership: You remain dependent on the original owner's cooperation to complete a sale deed and secure rightful ownership.
Revocation risk: The original owner can revoke the GPA anytime, rendering the purchase invalid.
Dispute potential: Legal disputes with the original owner or agent can arise.
Difficulties in resale: Selling the property later might be challenging due to lack of clear ownership title.

What are the limitations of a General Power of Attorney?

A GPA has several limitations:
Scope of authority: The power granted is limited to what's explicitly stated in the document.
Duration: It can be valid for a specified period or indefinitely but can be revoked anytime.
Misuse risk: The agent can potentially misuse the authority for personal gain.
Not ideal for property transfer: It doesn't guarantee legal ownership transfer.

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