Is it safe to buy property through General Power of Attorney?

By Investoxpert | 22 Jan 2024 | Real Estate

Is It Safe To Buy Property Through General Power Of Attorney?

A General Power of Attorney (GPA) gives someone the authority to manage property and make financial and legal decisions on behalf of another person. But is purchasing the home with a GPA safe? Is it possible to get the document canceled in court if needed? Prospective purchasers of GPA properties need to take all the subtleties into account. In this blog, let's examine what GPA in property signifies.

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In Indian real estate transactions, purchasing a property using a General Power of Attorney (GPA) is a frequently used method. But according to a 2011 ruling by the Indian Supreme Court, property transfers made through GPA are void.

Nevertheless, the allure of this avenue of property acquisition for homebuyers is the rich offer that comes with it, as most sellers are desperate to get rid of their possessions. Homebuyers must so thoroughly verify the safety of such transactions and understand all the complexities of purchasing a house through the GPA before signing on the dotted line.

What Is Meaning Of General Power Of Attorney?

General Power of Attorney is the whole version of the term. It is the authority that an individual grants to a friend to handle particular financial or legal matters on the individual's behalf. When the original owner is unable to be present in person, as is the case with Non-Resident Indians (NRIs) or owners who are incapacitated, this is a regular practice. In this instance, they transfer the GPA to a reliable individual who is authorized to act on their behalf.

What Is A Special Power Of Attorney (SPA)?

A Special Power of Attorney is what you give someone to do a specified activity in an absolute manner. (SPA). For example, if you give someone permission to represent you in court, that person's ability to represent you will only apply to that particular case.

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A special power of attorney restricts the options available to the agent, whereas a general power of attorney grants the agent full authorization.

Do you need to register a GPA?

A GPA needs to be registered with the Sub-Registrar Office (SRO) in order for it to be accepted by law. The GPA also has a limited shelf life. It is valid for the term of the principal and is revocable at any moment throughout the owner's lifetime. The Special Power of Attorney (SPA), on the other hand, expires when the specific task assigned to it is finished.

How To Register A General Power Of Attorney (GPA)?

A General Power of Attorney (GPA) for real estate can be registered in a straightforward manner. The procedures listed below can be followed to register GPA for a property:

Create the GPA on a postage-paid sheet.
Go to the Office of the Sub-Registrar (SRO)
For the appointment at the SRO, both the principle owner and the GPA holder need to be present.
Provide the required paperwork, such as verification of both parties' identities and residences, and property ownership documentation.
The parties should be accompanied by two witnesses who have their identity documents.
Two passport-sized photos must be submitted by each individual in attendance at the SRO.

GPA in the realty sector

Given the legal ramifications of the GPA method, it is usually not recommended to proceed with a property purchase through this approach. However, because it benefited both the seller and the buyer financially, it was common in India.

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As per the legal requirements, the buyer must pay stamp duty and registration fees to the government whenever the title of a property piece is transferred. The capital gains tax associated with the sale will also fall on the seller. These costs are avoided when property is transferred through a GPA, which results in a significant loss for the exchequer.

Can A Registered GPA Holder Sell A Property?

Even when a GPA has been registered with the SRO, the holder of the GPA is not permitted to sell the property on behalf of the owner. In a 2011 ruling, the Indian Supreme Court emphasized this point and declared the sale of a property through GPA to be wholly void. With the exception of selling a property?, a GPA holder is only authorized to complete tasks as delegated by the owner.

Why Do GPA Transactions Attract People?

From the seller's point of view, the GPA method enables them to sell a property even in cases when their titles are unclear. However, a buyer is drawn in by attractive real estate offers.

Other legislative provisions serve as a catalyst for GPA transactions. A substantial gestation period sometimes precedes the property's official sale in many urban development authority developments when homes are distributed on a leasehold basis. Often, the GPA approach is used to get around such requirements. GPA is another shady method of making unreported real estate investments.

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Generally speaking, using the person holding a power of attorney to acquire real estate is not advised. There is one exception, though. One may deal with an irreversible power bearer who has gained it against consideration. Even in that scenario, it is still necessary to confirm, by means of a sale agreement or other comparable instrument, that the holder also has some substantive right in the property. Such a power ought to be recorded as an irreversible power with an interest that endures after the grantor's death.

All other forms of power are dangerous, and even more so when they are unregistered. Even if a GPA is declared irrevocable, it can still be withdrawn at any moment. Additionally, it expires at the grantor's passing. Any irreversible authority is not recognized by the law unless it is combined with an interest. Purchasing property with such authority is risky and will probably lead to further unanticipated issues. It must thus be avoided.

Conclusion

Even while buying a home through GPA might appear like a good deal, there can be hidden costs involved that the buyer is unaware of. Therefore, before signing any property agreements, it is essential to have a legal professional go over the fine print of a GPA.

Is it safe to buy property through General Power of Attorney?