Buying house via Power of Attorney? Read this - What is a PoA? (2024)

Table of Contents
What is a PoA? Does not give ownership rights More chances of fraud PoAs being misused in buying/selling property Getting clear title on property will be difficult No finance from bank Irrevocable PoA can still be revoked

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What is a PoA?

A Power of Attorney (PoA) is a legal document through which a person nominates another person to act on his behalf. As against a Special Power of Attorney (SPA), in a GPA (General Power of Attorney) the principal grants a more comprehensive power of attorney to his/her agent. Such a GPA empowers the agent to carry out a large variety of jobs/transactions and not just a specific job. For instance, this may include payment of utility bills, collecting rent or carrying out all bank-related work while acting as the representative. For transfer of title through PoA, buyers generally insist on GPA.However, due to the financial benefits it provides to both the buyer and the seller, selling a property through a PoA has become a common practice in Indian cities.

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Does not give ownership rights

If one buys property through the PoA then mutation will not take place in municipal and revenue records as a PoA doesn't give ownership rights to the agent in whose favour the instrument has been made. In other words, any person who buys a property through a PoA may have the 'possession' of the property but in the absence of a genuine registered sale deed he would not be considered as the rightful legal owner of the said property.

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There have been many cases in Delhi and neighbouring cities where buyers entered into a transaction with the sellers through PoA but later found many others claiming a stake in the property, thus, leading to protracted court battles. This mostly happens when the property transacted via PoA is not registered. When we give power of attorney to someone, it's like giving your locker keys to that person. If one wants to look for past transactions of a particular property at a registrar's office, the ownership of only those properties is reflected on which stamp duty and registration has been paid.

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PoAs being misused in buying/selling property

Under the notion that a PoA gives them proprietorship rights, many people replaced sale deeds with these. Buyers complete a property transaction after signing an agreement to sell, get a PoA from the seller and a get a Will made. This all is done without the payment of stamp duty or registration as per law. Thus, PoAs are commonly exploited in the real estate sector, especially to park black money, brokers say.

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Getting clear title on property will be difficult

There have been instances where people have bought properties through PoA butat a later stage when they tried to register their property by paying the full stamp duty, the original seller charged a hefty amount to come to the registrar's office and sign the sale deed.

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No finance from bank

A potential buyer would also find it extremely difficult to get finance from a bank or a non-banking finance company to buy a property via a PoA. This is because banks do not finance property transactions performed through PoAs.

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Irrevocable PoA can still be revoked

Section 202 of the Contract Act states that if the agent in a principal-agent relationship has an interest in the agency then, the power of attorney cannot be revoked without the consent of the agent. If the agent has a financial interest in the property, say commission to get the job done, then the PoA is irrevocable because then it comes under the Contract Act. But if the principal finds that there is a gross mismanagement on the agent's part, including the agent breaching the contract terms, or acting beyond the scope of powers then the irrevocable POA can be revoked through a revocation notice.

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Buying house via Power of Attorney? Read this - What is a PoA? (2024)
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