PROCEDURE FOR EXECUTION OF THE POWER OF ATTORNEY

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Power of Attorney is the must widely used document in property transactions.  This is because many acts, transactions have to be carried out simultaneously and the same persons cannot be present at different places at the same time.Moreover, timing is very important in property transactions.Power of Attorney in simple terms means a person authorizing another person to do acts or certain acts on his behalf.

The Power of Attorney Act 1882, defines power of attorney “includes any instrument empowering a specified person to act for and in the name of the person executing it”.The Karnataka Stamp Act 1957 defines power of Attorney as “includes any instrument (not chargeable with fee under the law relating to court fees for the time being in force) empowering a specified person to act for and in the name of the person executing it”.

The Power of Attorney Act 1882 has five sections only and provisions of Indian Contract Act Chapter X dealing with Agency are applicable to power of attorneys. Section 182 of Indian Contract Act defines agent as “a person employed to do any dealings with the third persons”.The person for whom such act is done or so represented is called principal.

The person who is executing the power of attorney is called principal or the executant and the person to whom power is granted is called GPA holder or beneficiary.Both the principal and agent should be of sound mind and majors.The relation between donor and donee is one of principal and agent, which has its genesis in a contract.

There are two kinds of Power of Attorney.

a)General Power of Attorney

b)Specific Power of Attorney

The general power of attorney gives wide powers to the agent to do various things on behalf of principal as detailed in deed and not confined to any specific act or acts relating to a specific subject.

Specific power of attorney is given in respect of single specified transaction like selling of particular property.Once the said particular act is completed, the special power of attorney naturally gets revoked or the powers of the holder get exhausted.

Though power of attorney is a contract of agency,there are certain differences between agency and power of attorney.Power of attorney creates special power of agency, which entitles the holder to use principal’s name in the transaction entered into.Whereas an agent who is not a power of attorney holder is not entitled to for such special powers, power of attorney holder acts in the name of his donor.

Stamp duty

Power of attorney attracts stamp duty which varies from state to state.  Article 41 of the Karnataka Stamp Act prescribes the stamp duty as follows:

Description of Instrument: Proper Stamp Duty

a)When executed for the sole purpose of procuring the registration of one or more documents in relation to a single transaction or for admitting execution of one or more such documents;  One hundred rupees.

b)When authorizing one person or more to act in a single transaction other than the case mentioned in clause (a) One hundred rupees.

c)When authorizing not more than five persons to act joint and severally in more than one transaction or generally; One hundred rupees.

d)When authorizing more than five persons but not more than 10 persons to act jointly and severally in more than one transaction or generally; Two hundred rupees.

e)When given for consideration and authorizing the attorney to sell any immovable property; The same duty as a conveyance for a market value equal to the amount of the consideration.

i)When given to a promoter or developer along with Joint Venture agreement, by whatever name called for construction, development on, or sale or transfer (in any manner whatsoever) of any immovable property situated in Karnataka State;  One thousand rupees.

ii)When given to person other than the father, mother, wife or husband, sons, daughters, brothers, sisters in relation to the executant authorizing such person to sell immovable property situated in Karnataka State;Eight rupees for every one hundred rupees or part thereof on the market value of the property which is the subject-matter of power of attorney; Provided that the duty paid on such instrument is adjustable towards the duty payable on the instrument of sale or transfer executed subsequently in favour of either the attorney holder or any other person.

f)In any other case, One hundred rupees.

NB: The terms “Registration” includes operation incidental to registration under the Registration Act, 1908.

Explanation

For the purposes of this Article more persons than one when belonging to the same firm, shall be deemed to be one person.

Attestation

The attestation of power of attorney is not compulsory but in order to avoid any disputes, and to establish the proof of genuineness it is advisable to get the document attested by two witnesses.

Registration

The registration of document is not compulsory, when it is to be registered it shall be presented at the sub registrar’s office who has jurisdiction over the immovable property, referred to in the document.However in other cases, the document may be presented for registration either in the office of the sub registrar in whose sub-district the document was executed or in any other sub registrar office in the state as the executants desire.

Notarising

Notarising the Power of Attorney is as good as registration.  Section 85 of Indian Evidence Act applies to the documents authenticated by the notaries.

The court shall presume that every document purporting to be power of attorney and have been executed before and authenticated by notary public or any court, judge, magistrate,Indian consul or vice consul or representative of Central Government shall be presumed to be properly executed and would be a conclusive proof.

Each page of the document notarized should bear the official stamp of the notary disclosing his registration number, jurisdiction and also signature of the notary public.  Appropriate notary stamp has to be affixed.

Documents executed outside India; any power of attorney executed outside India needs authentication,which means it has to be executed in the presence of certain designated officers.

As per section 85 of Indian Evidence Act the following persons are empowered to authenticate the documents;

1.Notary public

2.Any court of Judge or Magistrate

3.Indian consul or vice consul

4.Representative of the Central Government

Section 85 of the Indian Evidence Act applies equally to the documents authenticated by notary public of other countries.So any power of attorney executed outside India shall be authenticated by Notary public of such country or Indian consul, vice consul or by representative of Central Government.

Such documents need to be stamped within three months from the date of receipt in India, to be payable at the District Registrar’s Office as per Section 31 and 32 of Karnataka Stamp Act 1957.

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PRESENT REAL ESTATE SCENARIO

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The global recession has hit not only the financial institutions and share markets in the country but also the real estate sector. On the one hand, there is no demand for high cost apartments and there is an unsold stock, while on the other there is a great demand for housing from poor, lower and higher middle class for economy houses. 

Government should never forget that the slump in the real estate market will have a direct bearing on other sectors as well such as Steel, Cement, electrical, paint, glass and wood industries etc.The real estate industry provides employment to a large number of skilled, unskilled and technical personnel. Not only this, the Real estate industry is a great revenue earner for the States both under direct and indirect taxes. 

Since Housing is one of the basic necessities, Government should initiate urgent action to cater to the housing needs from all categories of people. Formation of Special Residential Zones for construction and supply of residential accommodation for poor, lower and middle class people at affordable costs, motivating the private property developers to construct economy houses or apartments for poor, lower and upper middle classes by offering subsidy or incentives, introduction of Single Window Clearance system to avoid delay in getting approval from BDA / BMRDA and No Objection certificates from different Governmental bodies such as, BWSSB, BESCOM Pollution Control Board, etc., reduction in the levy of taxes such as VAT, Service Tax, etc., levied on the raw materials used in the construction industry and reduction of stamp duty and registration charges and the estimated market value of the immovable properties and buildings fixed by the Government could be some positive steps in this direction. 

The levy of property tax can be on slab system basis instead of percentage basis. Further, the commercial banks may be instructed to provide housing loans to the people with reduced rate of interest with an assurance that the rate of interest will remain stable during the tenure of the loan period.

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SEARCH REPORT IN PROPERTY TRANSACTIONS

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Investing in land and buildings require huge sums of money.Therefore, every purchaser of immovable property has to be very careful and take all precautions to protect his interest and to make doubly sure that the vendor has good and marketable title and the property is free from encumbrance. 

There are various documents which would provide vital information as to whether a property in question is free from encumbrance and the vendor has good and marketable title.Upon going through these public documents available in the Sub-registrar's office, search reports are prepared and such search reports contain information as to whether the property in question is encumbered or not and the vendor possesses a clear and marketable title or not.Search reports are prepared by advocates upon verification and confirmation from the concerned authorities as to genuineness of the documents.

Search report gives a summary of the ownership details of a property and changes in ownership that have occurred from time to time including existing or not of any charge or encumbrance over the property.The search report discloses if there is any existing mortgage, litigation, or claim which may adversely affect the title of the property. Search reports are prepared upon verification of the property documents for the last 30 years. It would be in the interest of the buyers that they insist on production of search report before executing the 'agreement to sell' with the property developers or with the owners of the property. 

The search report does not display the defects in the title to the property or any transactions that have not been recorded in the Sub registrar's office. If any document is not registered with the sub-registrar's office it cannot be mentioned in the search report. 

Commercial banks do insist on production of search report before granting any advance or loan for purchase of any property. For availing a housing loan from a banking institution, it is a per-requirement that the title of the property of the present owner should be clear and marketable. Usually banks do not finance any encumbered property or if the property is under legal dispute, as it would reduce their security and increase their exposure to risk. This means the seller should be genuine and the actual owner of the property.The property should not be under any dispute or litigation.The charges for search report are nominal and are included in the processing and administration charges by the bank to sanction and disburse the loan. 

This process of obtaining the search report gives security to the buyer. It assures the purchaser that the title of the property which he plans to buy is good and there won't be any problems at a later stage because of any per-existing charges, encumbrances or legal contentions on the property.

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OCCUPANCY CERTIFICATE

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Occupancy Certificate is a very important document.It evidences the completion of the building as per the approved plan and compliance of local laws. Local bodies like;City Corporations/City Municipalities issue Occupancy Certificates.Without Occupancy Certificate,it is difficult to get the water and sanitary connections.Financial Institutions also insist on Occupancy Certificate.

 

Problems with respect to issuance of Occupancy Certificate arise on account of violation of building Law, which are increasing day by day.Though the people have spent their hard earned money on the project with a dream of owning a house, they could not occupy the house for want of Occupancy Certificate. They have to suffer for none of their faults.

Having invested their precious money in such buildings and after waiting for many years to get Occupancy Certificate, the Purchasers are forced to occupy the flats even without power, water and sewage connections instead of losing the property.

In one of the cases, a Builder was unable to obtain the Occupancy Certificate. After a prolonged wait, he requested his Purchasers and handed over the apartments without power, water and sewage connections. He put the entire blame on the Revenue Authorities and disappeared. The Occupants had to find their own ways.

Obtaining the approval of the plans has become just a formality and a casual affair. Nobody will abide by that. It is just a document to be produced during inspection. During the boom time, a Builder constructed several houses and flats violating building rules and regulations.He deviated from the approved building plans and went on to construct apartments where he should not have constructed.The Civic Authorities refused to give Occupancy Certificate despite the best efforts of the Builder.

In the mean time, the apartment Purchasers on the assumption that things were happening to their satisfaction, performed house warming ceremonies and took possession of the flats. When they were about to move in, the Builder revealed the shocking news that even though he had constructed the apartments and houses to their liking, the Authorities were not issuing Occupancy Certificate on one pretext or the other.

Another Builder constructed small flats targeting the Middle Income Group (MIG). The Authorities, however, refused to issue Occupancy Certificate because of deviation from the approved plan. In this case, the Builder got the plan approved for construction of 4 dwelling units, 2 on the ground floor and 2 on the first floor.However, he did something different in gross violation of the approved plan.Instead of constructing 4 dwelling units, he constructed 6 dwelling units. The persons, who invested in Flats, are now desperate, as they would lose their money and the flats, if the Authorities decide to demolish the structure.

It is not only the flat Owners are suffering. A few Builders, who have a heart for the investing Public, too face problems.One such Builder constructed 8 flats in accordance with the building regulations and Bylaws and approved building plan. He has completed 5 flat and 3 remains to be completed. The Builder received full payment from five Purchasers while the other three backed out. This has put the Builder in a difficult situation. For want of funds, three flats remained incomplete and Occupancy Certificate could not be obtained as the Authorities will issue Occupancy Certificate only after completion of the entire construction.The Financial Institutions refused to lend in the absence of Occupancy Certificate or No Objection Certificate from the Authorities. The net result was that not only the Builder was losing money but also the Purchasers of the flats, who have to pay interest to the Financial Institutions. The Financiers too face difficulties in getting repayment of loan installments.

The Authorities in the scheme of things must be blamed for this state of affairs. The inspecting Authorities do not carry out periodic and surprise visits at the construction site. In case of deviation, they should take the Builder to task in the beginning itself and not at the flag end of the construction. Majority of the Builders follow rules and regulations but a few do not. They disobey rules and regulations and violate them.This is a vicious circle, which only the Government can break. Government must initiate immediate remedial action to stem the rot. The Authorities should not be very rigid in granting completion of Certificates. If the Builder has deviated a little more than the allowed percentage, the Authorities may impose a penalty and regularise the building.

The Investors too are responsible for this fiasco. They do not check the antecedents of the Builder and his track record. Before taking possession, they do not check whether the building is according to the agreement. Many do not demand the Occupancy Certificate, Parent Documents, Title Deeds, Deposit receipts from the Builder.The Purchaser, who has not collected the required documents, will have to face various types of problems at a later stage.

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