A power of attorney is an instrument that is used by people to confer authority on somebody else to legally act on their behalf. They can be of two types — special power of attorney (SPA) and general power of attorney (GPA). While an SPA is used for transfer of a specific right to the person on whom it is conferred, the GPA authorizes the holder to do whatever is necessary. For example, in property 'sales' using this instrument, the buyer gets a GPA from the seller not only for his own use of the property, but for further 'sale' to someone else if he so desires. Of course, a GPA holder can only 'sell' the property through another GPA.
Many properties cannot technically be sold for a variety of reasons. For instance, the original owner may have got it from an institution like DDA at a below-market rate and DDA may have imposed a minimum period for which it must be held. Any sale before this period is not legally possible, so a GPA may be resorted to. Or, the property could be part of a housing society which has got the land on lease. In such cases, the 'owner' of the property actually has only a certificate from the society allowing him to use it, but not to sell it. It is only when the property is converted from lease-hold to free-hold that he gets the title to the property. That is when he actually becomes the owner and, hence, is entitled to sell it.
The person wanting to sell grants a GPA to the buyer. Typically, the buyer will insist that the GPA must be 'irrevocable', since he wants to ensure that the seller does not renege on the deal after the money has been paid. He will also insist on a will and perhaps even on all legal heirs of the seller submitting affidavits revoking their claim to the property. The GPA also specifies that he has the right to sell the property when it is saleable or transfer it to anybody else at his discretion. Typically, the right to get the property converted to free-hold is also specified in the GPA.
The government realized properties were being bought and sold through GPAs and no stamp duty was being paid on these transactions. To stop this and boost its revenues, in 2004, the Delhi government made it mandatory for GPAs to be registered at 90% of the stamp duty rate applicable to sale deeds. It made it clear the GPAs that are not registered will have no legal validity.
REGISTRATION OF POWER-OF-ATTORNEY * Registration of power of attorney is not compulsory. it is optional * In India, where the Registration Act, 1908, is in force, the Power of Attorney should be authenticated by a Sub Registrar only, (Whenever a person signs the document and his attorney presents/ admits execution). * In other areas, attestation should be by a Notary or diplomatic agents * In case an attorney under a valid Power of Attorney himself signs a document, he may, as an executing (signing) party present/admit execution of a document though it is attested by a Notary, unless the text of the power specifically excludes such powers * Foreign Power of Attorney should be got stamped by the Collector after its receipt in India within prescribed time of 3 months * Registration of power of attorney authenticates the deed of power of attorney * Power of Attorney shall be attested by two or more adult independent witnesses who are of sound mind * If a power of attorney is in respect of an immovable property of value more than Rs100 it must be registered.
What has the Supreme Court done?
In October, SC ordered that no further transfer of property should be allowed through GPAs. Most states banned the use of GPAs for this purpose soon thereafter. But the Delhi government passed an order to this effect only last week.
What effect will this have?
For the future, it means properties that cannot legally be sold will become truly immoveable. As for the past, transactions for properties in Delhi for which GPAs have been conferred since October 11, 2011, become null and void for legal purposes.
If someone has bought a property on a GPA which has been registered prior to October 2011 and now wants to sell it, can he sell it?
A sale will be possible only if the property has been converted to freehold and title for the property obtained. The GPA on its own will not suffice. If the conversion to freehold hasn't been done but is allowed, the GPA can be used to do the conversion.
Will property prices go up or down?
Properties which are freehold and to which title is clear will become more expensive as the supply of saleable properties will come down since those held on GPA cannot be sold.