If a person is known by this title, there is nothing wrong with that, because the word “Sayyid” may be used for the leader of a people, or for a faqeeh or scholar, or for those who are descended from Faatimah through the children of al-Hasan and al-Husayn. All of these are forms of address which are well known among the people. The Arabs used to call tribal leaders and elders “Sayyid” (e.g. Sayyid Bani Foolaan – the leader of such-and-such tribe, etc). The Prophet (peace and blessings of Allaah be upon him) used this word, when he asked some of the Arabs, “Who is your leader (sayyid), O Banu So-and-so? Who is your leader (sayyid), O Banu So-and-so?”, i.e., who is your chief? And he (peace and blessings of Allaah be upon him) said concerning al-Hasan, “This son of mine is a sayyid and perhaps Allaah will reconcile two great groups of Muslims through him.” It is disliked (makrooh) to address a person as Ya sayyidi (O my master) or Yaa sayyidanaa (O our master), because when it was said to the Messenger (peace and blessings of Allaah be upon him), “You are our master,” he said, “The Master is Allaah, may He blessed and exalted”; and because this may make him conceited and proud. So we should not do that. Instead we should say, “O So and so” or “So Abu (father of) So and so,” using the names, kunyas (Abu So and so, etc.) and nicknames which are known.
With regard to using the phrases “Yaa Sayyidi” and “Yaa Sayyidanaa” when addressing one another, it is better not to do that.
Saying “Sayyid” to a munaafiq or kaafir is not permissible, because of the hadeeth, “Do not say ‘Sayyidanaa’ to a munaafiq, because if he is really your master then you have angered your Lord.” (Narrated by Ahmad, Abu Dawood and al-Nasaa’i; classed as saheeh by al-Albaani in Saheeh al-Jaami’, no. 7405, p. 1234)
And Allaah knows best.