Power of Attorney: Meaning, Types, & Home Loan with GPA in Property

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05 JANUARY, 2023

In law, a power of attorney (POA) is a document authorising an individual, a group of individuals or a company to act or take and implement decisions on the behalf of another individual, group of individuals or company. The circumstances under which these decisions can be taken are defined and described in the POA. The Powers of Attorney Act of 1882 governs the POA, and registration is not mandatory, except for certain circumstances such as those pertaining to immovable property valued at Rs 100 or more.

In simpler words, POA means giving someone the legal authority/power to do certain tasks, such as selling a property, representing the POA initiator before the court, or negotiating with potential buyers.

What is a Power of Attorney?

As the name suggests, Power of Attorney is giving another person, group or company the power or authority to take decisions on your behalf.

The individual, group of individuals or company who grants the authority are referred to as the principal/grantor/donor
The individuals, group of individuals or company who received the authority to act on another’s behalf is referred to as the attorney/grantee/donee

These decisions taken by the grantee in the absence or incapacitation of the grantor are legally binding. In other words, the POA allows the authorised person/s to make decisions in your absence or in certain cases, when you do not have the mental acuity to take sound decisions. The POA will have specified terms and conditions.

Many people think of and establish an attorney-in-fact who will help with financial matters like money transfers and bill payments. During your absence, this allows much of your work to continue, like getting a home loan on power of attorney, as they possess the necessary powers to take action.

Types of Power of Attorney (POA)

Based on the level of responsibility delegated, POAs can be classified into four types.

Conventional Power of Attorney

The general power of attorney, GPA's full form in property, pertains to just one specific responsibility for a limited period. Grantees are authorised to make business and personal decisions as specified.

For example, grantors can grant the grantee the power to sign a sale deed when they are out of town.

Durable Power of Attorney

Designed for a lifetime, the durable POA will stand the test of time. The POA agent is empowered to take decisions if and when the grantor is incapacitated and/or unfit to make sound decisions. Until and unless the grantor cancels the POA, a durable POA generally lasts until the grantor's death.

For example, an agent appointed by the grantor can manage investment portfolios of an individual.

Springing Power of Attorney

A springing POA is used in the case of incapacitation of the grantor for specific events, dates, and conditions.

For example, if a military man is disabled or deployed overseas, he can appoint a POA agent.

Medical Power of Attorney

There are two types of medical POA: springing and durable. In general, healthcare decisions are made using this instrument. POAs are activated only when the grantor is not conscious, mentally sound, and physically fit.

POA agents can pay grantors' medical bills, for example. Nevertheless, until and unless specified in the POA, they do not have the authority to take decisions with regards to continuation or discontinuation of the life support system.

How a Power of Attorney (POA) Works?

A power of attorney (POA) is most commonly used when someone becomes incapacitated and unable to handle their affairs, such as managing home loans and other financial matters. The person with a POA is permitted to perform specific tasks.

The person who appoints an attorney-in-fact—the principal—can revoke this ability at any time or designate another individual as POA with or without establishing another one first. However, once someone has been appointed as POA, they remain in that role until either:

They resign.
They die.
The principal revokes their appointment.
There comes the point where no one else can take over for them because all other powers have been withdrawn from them altogether due to incompetence caused by illness or injury.

Who Can Be Chosen as the Power of Attorney (POA)?

It is important to understand what GPA means in property and its importance in making an informed decision. The person chosen as a power of attorney for a bank loan in India must be a resident of India and should be an Indian citizen. Those who are not citizens but have legal status in India must reside in this country for at least 181 days during a financial year.

The person chosen as the POA should be at least 18 years old when taking on this role. The person selected as POA must have the mental capacity to understand the responsibilities they will be appointed with.

What Happens If You Lack a Power of Attorney (POA)?

If you don't have a POA, your family members will have to get permission from the court to take care of your financial matters. The court will appoint a person as a guardian and decide whether this person is fit.

How can Power of Attorney help in Home Loans?

The bank cannot provide direct loans to a power of attorney. In contrast, you can apply by power of attorney for a home loan if you are a homeowner. NRIs usually use this method to get a loan approved.

Bank loans in India require a power of attorney approval, but the requirements may vary as each bank has its criteria. Here are the criteria for getting a power of attorney for a bank loan in India.

NRIs and POIs who execute a power of attorney should meet the following criteria:

Power of attorney holders should be Indian residents residing in the country.
For a power of attorney to be valid in a state where it is executed, it must be executed on non-judicial stamp paper of appropriate value in that state and notarised.
You must paste the POA holder's photographs and get them attested by the executor and maker of the POA.
A Judicial Magistrate or Notary Public must attest the signatures of the POA executants/makers.
A power of attorney must be signed on every page by the executor/maker.

Conclusion

If you want to buy a property, get home loans or execute any legal transaction in your absence, you need a GPA. If you are an NRI and want to purchase a property in India, it becomes even more essential, as many laws do not apply to NRIs.

You can appoint someone as your agent or proxy to act on your behalf and help complete the buying process by executing all necessary documents.