Freehold And Leasehold Property In Chandigarh

The Chandigarh administration in an attempt to put a check on transfer of property as it has been done in Himachal Pradesh so as to prevent the loss of revenue, artificial boom created by the dealers and the investors and also to plug other malpractices, is laying stress on the use Power Of Attorney (POA).

Keeping this in view, in Chandigarh maximum commercial properties are on leasehold which means that these properties cannot be sold under the law of the land and registered with the Estate Office but can be transferred through POA only. Flats in certain sectors like sector 41 to 52 and also in 38 west are also on lease and can be transferred on POA only. This is done by the administration in order to control the boom in the real estate sector. And to some extent the government has been successful as these properties are not sold openly and thus the rates are controlled. The POAs are very effective in cost control. For e.g. a 2 bedroom flat in MDC is for 35 lakhs whereas on lease it can be available for 21-22 lakhs.

A power of attorney (POA) is an authority given by way of a formal instrument whereby one person, who is called the donor or principal, authorises another person, who is called the donee, attorney or agent, to act on his behalf.

Whereas. Section 1-A of The Powers of Attorney Act, 1882 defines Power of Attorney as "Power of Attorney includes any instrument empowering a specified person to act for and in the name of the person executing it".

A freehold property (plot or a flat) is one where there is a whole and sole owner(s), ownership is full and unconditional (within the provisions of the laws of the land) and there is no lessor / lessee involved.

Where as leasehold property is the one where the government or the authority remains the owner of the property for a specific time period usually 99 years. A specific lease is paid by the lesse to the lessor who in this case is the government, which may be changed from time to time. It can be transferred through a POA only and no registry can be done on it. But POAs can be done on leasehold as well as a freehold property. This means that freehold property can be transferred on POAs and Registries but the leasehold can be transferred through POAs only.

The Administration is also trying to find out a way of eliminating power of attorney sales as there are risks and malpractices associated in buying a flat on Power Of Attorney (POA) basis because purchasing a property on a POA basis is not permitted under the law of the land and also person can sell a property to more than one buyer on POA basis which is not possible in the case of registry. For example if Mr. A sells a flat to Mr. B on POA and the same to Mr. C also, and then Mr. C sells a 2 bedroom flat to Mr. D on a registry bypassing Mr. B completely. Here Mr. becomes the owner of the flat and Mr. B ultimately is at complete loss. Though the party at default can be sued, then the court proceedings are time consuming and expensive also. POA can be either revocable or irrevocable, depending on what sort of a POA one has made.

Though instruments like Agreement to Sell, Conveyance Deed, Exchange of property, Gift Deed, Partition Deed, Power of Attorney, settlement and Deed and Transfer of lease attract Stamp Duty on market value of the property, the amount of stamp duty in the case of POA is less than the Registry.

The time limit of a POA can vary depending upon the will and the potential of the buyer. But usually the properties are on lease for 99 years which means that till 99 years these cannot be sold on registry, no loan can be taken on such property and also no construction or renovation can be done on such property. A specific amount of rent is to be paid on the leasehold property which can be percentage of the basic price. For e.g. say if a property of 1 kanal in Mohali whose freehold rate is 1.3 crore then the leasehold rate would be around 70 lacks which would be paid as rent in equal amounts.