Power of attorney Explained !
If you are dealing with a property, almost invariably, there will be a power of attorney. It is employed to facilitate almost any kind of property transaction including sale, settlement, development of properties, partition, exchange, agreements of various types, loan transactions and so on.It is a very important document and has far reaching implications. An understanding of the document and the legal provisions will give you an idea of how it can be used and also the consequent responsibilities that may arise.
A power of attorney (POA) is in the nature of a grant or authorisation. The person, who grants the power, is known as the "Principal" or the "Donor." The person in whose favour it is granted is known as the "Agent" or the "Attorney" or the "Donee." A power of attorney can be granted by or in favour of any person who is competent to contract. A company, subject to the terms contained in its Memorandum and Articles of Association, can grant or accept a POA. If executed by a firm, subject to the clauses in the Partnership Deed concerned, it will be taken as having been executed by partners concerned. A minor or a person, who is disqualified by law, cannot grant or execute a valid POA.
An important fact to be noted is that a POA does not require any consideration such as sale price, advance or other benefit, for execution. The extent of powers conferred has to be drawn on the basis of the wordings contained in the document.
Wordings in document
Certain incidental powers, which are essential to exercise the powers, can be inferred. To cite an example, if the powers include a power of sale, it can be inferred that the Agent will have powers to execute the sale deed, present it for registration and complete the transaction. This has to be culled out by considering the wordings in the entire document and is essentially a matter of interpretation. The law has strict construction on the wordings in a POA. If the wordings are clear and specific, a lot of disputes and difficulties can be avoided.
At times, you may come across a person who may be dealing with the property as an owner, who may, in reality, be a POA holder. It is possible that such a person has settled payment with the real owner and has obtained a POA. If properly documented, he or she may acquire an interest in the property. In such an event, the POA may become one coupled with interest. This kind of power cannot be revoked, except with the prior consent of the Agent. In common parlance, this is referred to as an irrevocable POA.
Unless coupled with interest, a POA can be revoked. If the Deed granting the POA is registered, then the Deed of Revocation also has to be registered.
Erroneous clauses
An Agent is authorised only to undertake such acts as set out in the Deed. If the Agent exceeds the scope of powers granted, the same may not be binding on the Principal to the extent that the powers purported to be exercised are in excess of the powers granted. The Principal, may, however, choose to ratify such actions of the Agent, in which case, the powers could be taken as properly exercised.
While drawing up a deed or document signed by the Agent, it should be shown as being entered into or executed by the Principal, represented by the Agent concerned. Some documents are executed in the name of the Agent, which may create confusion owing to erroneous recitals or clauses. Particularly, in the case of sale deeds, the name of the owner or the Principal should be properly included, as omission to do so may cause problems in registering a deed of rectification as well.
Certain persons dealing with properties, especially builders, at times, take only a POA from the owner. It is advisable for such builders to have an agreement for sale or development with the owner, as the case may be. This will help in having proper documentation of the rights and obligations of the parties.
Mortgage
If a POA includes power to mortgage a property and money is received by the Agent, on the strength of the security of the property, you may be liable to repay it as per the terms of mortgage. The liability will also be personal and may not be confined to the property provided as security. As such, in matters where the property is to be mortgaged for the benefit of the Agent, both the Principal and the Agent should work out terms and incorporate clear wordings in the Deed of Power of Attorney excluding the personal liability of the Principal.
An Agent cannot do any anything that he is not empowered to do under the POA. Further, certain obligations or acts, which have to be personally carried out by the Principal, cannot be performed by the Agent. For example, an artiste or a singer may have agreed to give a performance. This performance has to be given only by the person concerned and cannot be performed by a POA. Will cannot be executed by an Agent. An Agent, after having executed a document as representing the Principal, should not sign the document as a witness in his individual capacity. The execution of a POA may involve matters worth crores of rupees. Title does not pass by a POA. However, it may flow through the POA. Depending on the nature of transaction, the wordings in the document are of utmost importance and if you are involved in the execution of a POA, take care that it reflects the true nature and spirit of the transaction.
posted by Gaurav Malik @ 9:38 pm
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