They let him partially possess at all times in return for immortality (and maybe for the status of gorosei/GK, if it's coveted even without immortality). Then he fully possesses when he wants to.
It's a stretch, but it's possible Garp and Dragon knew about the rule somehow, and didn't visit their hometowns much because of that. Though I don't see how they would know. Dragon would need a spy, or they'd need to know other Domi Reversi cases and put it together.