Sale transactions via general power of attorney not legal
The Supreme Court has ruled that sale transactions carried through general power of attorney will have no legal sanctity.
Do you own a property with disputed title or in restricted areas? Are you exploring the option of buying a house or land with unclear title? Transaction in such properties face new hurdle.
The Supreme Court has ruled that sale transactions carried through general power of attorney will have no legal sanctity.
"A transfer of immovable property by way of sale can only be by a deed of conveyance (sale deed). In the absence of a deed of conveyance (duly stamped and registered as required by law), no right, title or interest in an immovable property can be transferred," it said.
The court also asked the states to reduce stamp duty rates to prevent undervaluation of property and stashing of black money. "A high rate of stamp duty acts as a damper for execution of deeds of conveyance for full value, and encourages sale agreement/general power of attorney/Will (SA/GPA/Will) transfers? When high stamp duty is prevalent, there is a tendency to undervalue documents, even where sale deeds are executed," the court said in its order.
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In several part of the country, particularly Delhi, sale of properties was often done through an irrevocable power of attorney or a more elaborate route of a sale agreement followed by power of attorney and then bequeathing the property to the buyer via a Will.
In a property transaction carried through the three-step SA/GPA/Will route, the seller executes a sale agreement in favour of the buyer confirming the terms of sale, receipt of payment and delivery of possession and gives an undertaking to execute any document whenever required.
The seller then executes an irrevocable power of attorney in favour of the buyer authorising him to manage and dispose of the property. In the last step, the seller bequeaths the property to the buyer through a Will as a safeguard against any dispute arising after the death of the seller.
"These kinds of transactions were evolved to avoid prohibitions/conditions regarding certain transfers, to avoid payment of stamp duty and registration charges, to avoid payment of capital gains on transfers, to invest unaccounted money and to avoid payment of 'unearned increases' due to development authorities on transfer," the court said.
The Supreme Court has ruled that sale transactions carried through general power of attorney will have no legal sanctity.
"A transfer of immovable property by way of sale can only be by a deed of conveyance (sale deed). In the absence of a deed of conveyance (duly stamped and registered as required by law), no right, title or interest in an immovable property can be transferred," it said.
The court also asked the states to reduce stamp duty rates to prevent undervaluation of property and stashing of black money. "A high rate of stamp duty acts as a damper for execution of deeds of conveyance for full value, and encourages sale agreement/general power of attorney/Will (SA/GPA/Will) transfers? When high stamp duty is prevalent, there is a tendency to undervalue documents, even where sale deeds are executed," the court said in its order.
SPECIAL: Buying a house? Here's how to steer clear of land troubles
| A copy of the full judgment is at www.businesstoday.in/gpa |
In a property transaction carried through the three-step SA/GPA/Will route, the seller executes a sale agreement in favour of the buyer confirming the terms of sale, receipt of payment and delivery of possession and gives an undertaking to execute any document whenever required.
The seller then executes an irrevocable power of attorney in favour of the buyer authorising him to manage and dispose of the property. In the last step, the seller bequeaths the property to the buyer through a Will as a safeguard against any dispute arising after the death of the seller.
"These kinds of transactions were evolved to avoid prohibitions/conditions regarding certain transfers, to avoid payment of stamp duty and registration charges, to avoid payment of capital gains on transfers, to invest unaccounted money and to avoid payment of 'unearned increases' due to development authorities on transfer," the court said.
