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Precautions to be Taken Before Giving POA to a Land Promoter

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Precautions to be Taken Before Giving POA to a Land Promoter

Last updated: April 3 2015
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  • Precautions to be Taken Before Giving POA to a Land Promoter

    I would like experts to advice me the pre-cautions to be taken before giving POA to a private party/land promoter.

    We have our family property(3 acres of land near chengalpet). A promoter is willing to buy our land. He is asking us to give POA to him when he pays the 50% of the sale amount, and agreed to pay the remaining 50% amount in next 30 days.

    Now, I would like to know, will there be any problem for us on giving POA by receiving only 50% of the sale amount. What precautionary steps I have to take on giving the POA to that promoter. literally to say, I need to get the remaining 50% amount without any huzzle.

    cheers.
  • #2

    #2

    Re : Precautions to be Taken Before Giving POA to a Land Promoter

    Do not do it.

    You will not get the 50% he will transfer the property to himself with that POA.

    Even if you get 100% before giving POA, once he develops the land and sell it for higher price, you will be liable for any faults and you will be liable to pay Capital Gains Tax on the final price that he sells.

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    • #3

      #3

      Re : Precautions to be Taken Before Giving POA to a Land Promoter

      I understand there is a risk in giving POA by getting only 50% of the sale amount,

      But I would like to know how to mitigate the risk and safely handle this.

      would like to know the points that can have in the agreement which will bind the promotor legally which gives us the assurance of getting our remaining amount.

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      • #4

        #4

        Re : Precautions to be Taken Before Giving POA to a Land Promoter

        Originally posted by gbraja4u View Post
        I understand there is a risk in giving POA by getting only 50% of the sale amount,

        But I would like to know how to mitigate the risk and safely handle this.

        would like to know the points that can have in the agreement which will bind the promotor legally which gives us the assurance of getting our remaining amount.
        Which part of my post you do not understand?

        I am saying it is BIG risk to give POA even after reviving 100%

        You are still taking about 50%.

        Palum kenaruinu theirinja ulla villuguravana Yaru kapathuva?

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        • #5

          #5

          Re : Precautions to be Taken Before Giving POA to a Land Promoter

          This is called as Shootings ones Own Foot.

          It still surprises me how the promoters are able to fool people in the name of POA.

          A power of attorney (POA) or letter of attorney is a written authorization to represent or act on another's behalf in private affairs, business, or some other legal matters.

          So if you give POA to the promoter, it means you cannot make yourself available and that you are authorizing the promoter to represent you.

          Ask the promoter to register the land from you. He might say that he is trying to avoid the registration charges and will insist you to do so saying that it doesn't make any difference to you. Like Economist mentioned any capital gain, you will have to bear..

          If you still want to proceed further, then I will pray to God for you..

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          • #6

            #6

            Re : Precautions to be Taken Before Giving POA to a Land Promoter

            #1

            Well. You may give Conditional POA duly registered with concerned SRO stating that balance payment of 50% would be paid within 30 days failing which POA will cease to exist . In that case, Pomoter also may put a clause to get the initial 50% paid back with or without interest in case he is not able to mobilize the balance fund.

            If Promoter is not agreeing for such termination clause , it is clear that he is not having wherewithal nor confident enough to mobilize. Then there ends the matter .

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            • #7

              #7

              Re : Precautions to be Taken Before Giving POA to a Land Promoter

              Thanks Economist and madan.

              I wanted to know how safeley it can be done, but repeated alerts from experts making me to hold it.

              So i have another plan to execute this deal with the promoter, would appreciate to know your commnets, will this work in favour of me.
              Instead of giving the POA to the promoter, I shall enter in to a sale agreement with him getting partial amount, which allows him to develop the site and make the booking from pruchasers(but he cannot sale now).
              after a considerable number of plot bookings from people, I myself personally go and execute the sale deed in favour of people who have booked the plots after directly receiving the cash from those parties ( this sale deed registered at GV).
              once i get the full amount i shall ask the promoter to register in his name or take POA.

              P.s --> apart from capital gains is there any other risk in this process.

              please advice.

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              • #8

                #8

                Re : Precautions to be Taken Before Giving POA to a Land Promoter

                @Ravi cbe,

                As you have mentioned the promoter is fine with entering into a conditional POA in which case is he is not able to mobilise the fund within the time then he agreed that i can deduct 10% in the advance amount and can pay him the balance.

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                • #9

                  #9

                  Re : Precautions to be Taken Before Giving POA to a Land Promoter

                  This is called special power of attorney, it is conditional, revocable and backed by an agreement with various clauses to protect interest of all parties involved. However be wary of capital gains implication pointed out by Economist. The promoter may make huge margin and you will end up paying tax for it.

                  Better option is tripartite agreement with promoter and seller. Even then the promoter may make a huge cut, so make sure your interests are protected by consulting financial advisor and competent lawyer.

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                  • #10

                    #10

                    Re : Precautions to be Taken Before Giving POA to a Land Promoter

                    Specific PoA is different to General POA

                    You did not mention what type of PoA.

                    The PoA can limit the holder to specific activity only (such as applying for building permission etc) they are reasonably safe.

                    Some builders pay 100% get full General PoA - they are dangerous.

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