Friday, 24 January 2020

Banning All Power Of Attorney Property Deals

Updated: May 26, 2012 4:18 pm

At the outset, I would like to mention that it was in October 2011 that the Supreme Court ordered that no further transfer of property should be allowed through general power of attorney (GPA). It also merits mention here that most of the states opted to ban the use of GPAs for any future transfer of property immediately following the Supreme Court order. But Delhi was one among the exception but just recently it too opted in favour of banning all power of attorney property deals.

It simply means that as far as future is concerned, the property that cannot be sold will become truly immovable. Regarding the past, it can be said that transactions for properties in Delhi for which GPAs have been conferred since October 11, 2011, become null and void for all legal purposes. It also needs to be highlighted here that if someone has bought a property on GPA and registered it prior to October 2011 and wishes to sell it now, a sale under such circumstances would be possible only if the property has been converted to freehold and clear title for the property obtained. The GPA on its own will not suffice. If conversion to freehold hasn’t been done, but is allowed, the GPA can be used to do the conversion.

In an order of far-reaching consequence that clearly puts thousands of property transactions in Delhi under a cloud, the revenue department has taken the radical step of making all realty sales through transfer of general power of attorney null and void with retrospective effect from October 2011. The order, dated April 27, 2012, directs all thirteen sub-registrar offices, DDA and NDMC to follow the Supreme Court’s order last October that no sale deed will be registered if it is through a GPA transfer. This clearly means that transactions that have been carried out since October 2011 on GPA transactions will have to be again registered afresh with complete documents.

First and foremost, it is imperative here to understand what a power of attorney is actually. A power of attorney is an instrument that is used by people to vest authority on any other person to act legally on their behalf for all necessary legal purposes. They can be of two types special power of attorney (SPA) and general power of attorney (GPA). What basically differentiates SPA and GPA is that while an SPA is used for transfer of a specific right to the person on whom it is conferred, the GPA, on the other hand, authorises the holder to do whatever is necessary. As for instance, 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/she so wishes. Obviously, it merits no reiteration here that a GPA holder can only sell the property to anyone else through another GPA.

Around 20 per cent of registries are done through GPA transfers which is a common way of selling leasehold properties and those that don’t have a clear title. For example, in Delhi’s northwest district, of 5,300 documents registered across three sub-registrar offices in March it was found that 1,157 were GPA transfer registries. There is a great deal of worry among the property dealers that though the ban will regularise deals, the chaos and confusion over converting property held under GPA into freehold will cause a stalemate at least for a while. It is widely speculated by commercial property owners that conversion will be cumbersome in some big business districts like Nehru Place, Bhikaji Cama and Connaught Place. All said and done, the properties which are freehold and to which title is clear will become more expensive as the supply of saleable properties will come down significantly since those held on GPA cannot be sold.

 By Sanjeev Sirohi

Leave a Reply

Your email address will not be published. Required fields are marked *

Archives

Categories