Are you an NRI looking to buy/sell a property in India through Power of Attorney?
In an increasing phase of property crimes in the country particularly involving NRI’s and Power of Attorney, it is solemnly your responsibility to be aware of such fraudulent attempts.
From an NRI to a victim of property fraud is a very unfortunate journey and you are supposed to spend years in the legal fight, loss of money, and peace of mind, so it’s much better to be precautious while making such executions. Here are the little known important facts that you should know about a Power of attorney for NRI to buy/sell the property to avoid being a victim.
Most of the property fraud happening around the nation happens with a forged document of Power of Attorney that can be created by someone with little knowledge.
A General Power of attorney provides complete substantial authority to replace the grantor by the holder. In most of the cases, a General Power of attorney is not preferable due to the vulnerability of fraudulent attempt by the holder of Power. (A sample of General power of attorney is available to download for free)
General procedure and Rules for Power of Attorney
You can give Power of attorney to one or multiple persons like blood-relatives i.e., father, mother, brother, and etc, and also to any third person apart from your close family members whom you believe to be trustworthy like a friend or neighbour.
Step 1: You have to create two copies (two original copies) of Power of attorney in a plain white paper with detailed terms and conditions. Do not sign the copies by yourself in your home. You should only sign the deed in the presence of an Indian Embassy Consulate.
Step 2: The Power of attorney must be signed by two witnesses belonging to your local residence. The witnesses also must sign the Power of Attorney in the presence of the Indian Embassy Consulate. If the witnesses cannot be present in the embassy to sign in the presence of the Consulate, then their signatures need to be notarized additionally.
Documents required to attest the Power of Attorney by the Indian Consulate
You will be asked for certain documents for verification while notarising the Power of attorney by an Indian Consulate. To avoid surprises in the Embassy we made a checklist of the documents to carry along.
- Two copies of the POWER OF ATTORNEY document
- Original passport
- Address proof in the country of your residence. For example; driving license, bank statement, etc.
- Two passport size photo
- Applicable fee at the time of attestation, if any.
- Witnesses if going to consulate should have any identity proof documents for verification.
Registration of POWER OF ATTORNEY received in India from the NRI
One copy of the power of attorney deed signed by you and notarized by the Indian Embassy Consulate should be registered in India in a Registrar office by the holder who is receiving the power of attorney. Registering the Power of Attorney is a simple process.
Step 1: The Power Of Attorney needs to be registered within 90 days of receipt by the holder in India.
Step 2: The holder needs to provide the identity proof in the registration office along with two witnesses and their respective identity proofs for verification.
Note: However a recent update from the office of Inspector General of Registration said in a clarification notice that, the power of attorney related to any immovable property executed outside of India does not require compulsory registration provided the necessary details of the property in the deed.
Precautious points to remember while executing the Power of Attorney deed
“Every traitor is once a patriot”. You won’t know who would turn their back on you until they do. Thus being precautious about the future by looking back at the past is really important. We will see some of the key points to keep in mind while executing a power of attorney.
- Always avoid a General Power Of Attorney and prefer a Special Power Of Attorney.
- You should mention the details of the property concerned in the deed if the power of attorney is specifically for sale of the property.
- Mention a time frame until when the Power Of Attorney is valid. Do not provide a Power Of Attorney without any time limit. Nobody knows how the human mind can change.
- Double check with the wording used in the Power Of Attorney documents and their consequences.
- A life certificate may be required by the registrar in India, even though it is not mandatory. If the Power Of Attorney is dated or signed before 30 days, a registrar can demand a life certificate of the grantor. But it is dependent upon the chairperson in the Sub-Registrar or Registrar office.
- An indemnity clause can be preferably indulged in the terms as a precaution to avoid issues arising after the execution. An indemnity clause is a contractual understanding and transfer of risk between the two contractual parties generally to prevent loss or compensate for a loss which may occur as a result of a specified event by any one of the party.
- Most of the fraudulent attempts made in the property sale by Power of Attorney are with regards to the money. I have given a brief about the payment procedure for NRI’s.
Payment procedure to NRI seller
There are cases where the buyer or seller is very easily cheated by the Power of Attorney holder of an NRI. The opportunity to make such fraudulent acts happen due to lack of knowledge regarding the payment procedure.
Recently, an adjudication came to result in Himachal Pradesh where the buyer made the initial payment of Rs 18 lakhs directly to the grantor through Real-Time Gross Settlement (RTGS) and then the remaining amount of Rs 68 lakhs is made in hard cash to the power of attorney holder. The holder of power of attorney (accused) after receiving the payment from the buyer failed to transfer the power of attorney to the buyer and also failed to transfer the money to the NRI grantor. The case was filed in 2015 and came to a settlement very recently in 2019.
To avoid these kinds of issues, payments shall be preferably done to the NRE/NRO (Non-Resident External) / (Non-Resident Ordinary) accounts only.
An NRI (grantor) seller can only authorize the holder to accept the direct payment on his behalf but cannot authorize the payment to the holder itself. But even if the NRI authorizes the holder to receive payment on his behalf, the buyer should avoid such kind of transactions, because it can bring taxation problems to the buyer in the future.
In case of multiple NRI sellers i.e. for property owned by more than one person, payments must always be made in the proportion of ownership of the property.
Revoking the Power of Attorney
Cancelling a Power of attorney is simple, based on the revoking preference, as mentioned in the document, categorized as,
- Revocable Power of Attorney
- Irrevocable Power of Attorney
A revocable Power of Attorney can be revoked by public notification of revocation in any two reputed newspapers in the locality of residence of the holder and sending a copy of the revocation document to the Power of Attorney holder.
An irrevocable Power of Attorney can only be revoked by a Judiciary court through approaching a lawyer and applying for adjudication against the Power of Attorney holder. Public notification of revocation/cancellation of power of attorney in two newspapers in the locality of residence of the holder is also required.
A Power of Attorney eventually comes to an end if the grantor is deceased. But this is not the case in an irrevocable power of attorney.
If the Power of Attorney holder is the spouse of the grantor and gets a divorce then the Power of Attorney is not valid after the date of divorce. But a formal revocation notice may be sent to the holder to avoid unwanted conflicts.
All things considered, a power of attorney is a crucial will that may backfire at you if you make a wrong move. The critical places where you need to be more conscious are while
- choosing the right holder,
- creating the terms and conditions (nature of power of attorney) of the deed,
- notarising the deed, and
It is not necessary to create the deed under a lawyer’s supervision, but if you are doing it by yourself just make sure to do it right with the precautious points to remember and you can make use of our free downloadable Power of attorney sample template while doing.
**A sample document of General Power of Attorney is available – download it for free from here.