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Power of Attorney for property in India – The Definitive Guide

Power of Attorney is an important legal document in property and real estate matters and yet is not well understood and given importance by most people. This ignorance sometimes leads to big legal troubles. This comprehensive guide will answer most of your questions related to power of attorney for property in India. Yet, if you have more questions please leave your comments below. If a point is worth covering, we will update this guide.

What is a Power of Attorney?

A power of attorney is a legal document that authorizes another person, called an agent, to act on behalf of the person who created the power of attorney, known as the principal, in the event that the principal cannot make those decisions himself or herself. Depending on the requirement, the principal can decide the level of authority given to the agent. The power of attorney may cover any or all aspects of money management, property and asset management, personal care and managing company matters etc. Hence, the power of attorney can be classified as general or special, depending on the authority given to the agent by the principal. Types of Power of Attorney are covered in more detail below. In this guide, we are focusing on power of attorney for property in India. Any signed Power of Attorney document is governed by “Power of Attorney Act, 1882”.  The act, passed on 1st May 1882, applies to the whole of India except the state of Jammu & Kashmir.

Why Power of Attorney is important?

In the modern world, businesses and transactions have grown to proportions beyond what our forefathers had ever imagined. As businessmen, professionals and leaders have become busier than ever, it has become necessary for them to delegate more and more functions. Power of Attorney serves the purpose of delegating important functions which require legal authorization. Principal should be careful while authorizing an agent and the powers to be delegated to avoid inconvenience and expense of any legal proceedings in the future.

Difference between Power of Attorney and Will

Power of Attorney is an extremely important document in property and real estate matters yet is the most misunderstood. People often confuse the Power of Attorney (PoA) with a Will (Probate) though both are two very different legal documents and serve different purposes. A will comes into effect on the day a person dies. A Power of Attorney applies during a person’s lifetime and ceases to apply when he dies. A Will and a POA do not overlap but complement each other. They deal with different areas of your life and are both required for an effective estate planning.

Power-of-Attorney-for-Property-India
Power of Attorney

Types of Power of Attorney

  1. General Power of Attorney

In this type of Power of Attorney, the principal authorizes the agent to do certain acts in general related to the subject matter. It grants broad powers to the agent to make decisions. For example, in many states in India, property sales were being executed using this instrument till Supreme Court banned such transactions in 2011. In a property sale transaction using General Power of Attorney, the buyer gets a GPA from seller granting rights not only for the use of the property but also for further sale to someone else. The buyer can further sell the property to another buyer through another GPA. You must be really careful in signing a General Power of Attorney for Property in India to avoid legal troubles later with respect to the ownership of your own property.

  1. Special Power of Attorney

In a special power of attorney, the agent is appointed by the principal to do specific act or acts as mentioned in the document. It narrows the choices the agent can make. In order to reduce or diversify risk, you can even make several different special POAs, with different agents for each instead of signing one General PoA authorizing one agent to carry out all tasks.

  1. Durable Power of Attorney

Generally, under a Power of Attorney an agent’s power ends if the principal becomes mentally incapacitated, unless specified otherwise in the document. A Power of Attorney that specifies to be in effect in the event of future incapacity of the principal is called as durable power of attorney.

Powers under Power of Attorney for Property

An agent may be authorized to execute any or all of these powers under a Power of Attorney for Property in India:

  • Lease, bargain, sell, collect rents, borrow, mortgage
  • Manage, compromise, settle and adjust all matters pertaining to real estate
  • Execute contracts, deeds, bonds, mortgages, notes, cheques, drafts, money orders
  • Sue on behalf of the principal

Validity and Duration of Power of Attorney

Power of Attorney shall remain in force until:

  • Expressly revoked by the principal or agent by giving a written notice, or
  • The principal becomes mentally incapacitated, or declares bankruptcy or dies, or
  • The specified act is completed under the PoA, or
  • The end of the fixed period of power granted by the principal as mentioned in the deed, or
  • The event of divorce or legal separation in case a principal has named his spouse as his agent.

Execution of Power of Attorney

  • Eligibility – A power of attorney can be executed by any person who is competent to enter into a contract. A company while executing power of attorney must make conformity with the “Articles of Association” and its common seal.
  • Legal Document – As per Indian Law, Power of Attorney is a legal and binding document on both principal and the agent. It must therefore be framed carefully using legal terms and clearly defining the scope, objectives and responsibilities.
  • Notarisation – A Power of Attorney must be signed and notarized by a certified notary advocate. You will need to show your ID to the notary so that he can certify the document. It must then be executed and authenticated by the registrar or sub-registrar of assurances as per the ‘Registration Act, 1908’.
  • Registration – A power of attorney is not required to be registered unless it creates an interest in an immovable property i.e. charge in favor of the donee or the agent.
  • Stamp Duty – A power of attorney is chargeable under ‘Indian Stamp Act, 1899’. A stamp duty has to be paid compulsorily by the principal or donor in the jurisdictional registrar’s office.

Conclusion

A Power of Attorney is an extremely important legal document which can be admitted as an evidence in the court of law in case of any violation. Therefore, the principal must carefully select an agent who is trustworthy, someone who will act in the interest of the principal and not use his property for personal gains. Hope you enjoyed this post on “Power of Attorney for property in India – The Definitive Guide

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