Buying a property, want to know if the property is on lease or is mortgaged? What if someone has taken a loan against the property? whether the property is the subject matter of pending litigation? Or is there any other liability on the property?
Answer to these questions is one important certificate you should have to have a wholesome knowledge of the property. That certificate is called Encumbrance Certificate or EC.
Meaning and importance
A buyer is interested in buying some property, for which he tries to collect information about it. He will buy a property, free from liabilities because he would not want to discharge the liabilities of others. EC, a legal document, helps buyers to find out if there are any charges on the property. EC is a certificate of assurance that a property you buy has no financial or legal liability.
An Encumbrance Certificate is important because:
Protects from fraud
If the owner/seller of the property has mortgaged it and has taken a loan against it, you would not buy it. Owner/Seller misrepresents about it, fraudulently avoids his liability, does not disclose about property’s liability intentionally, it is a fraud. EC helps the buyer to keep away from fraud and get a clear picture of the property.
Real status/price of the property
Sometimes, the owner/seller of property tries to sell his charged property at a low price to get rid of it. So, the buyer believes that he is in a profitable position but later comes to know about the truth. To avoid such a situation, EC is required to know the real status and valuation of the property.
Applying for a home loan
After the transfer of property to the buyer, he applies for a home loan from the bank, and it will ask for EC. If the buyer doesn’t have EC and the property is already charged, the bank will reject the claim of loan. So, the buyer should have an EC.
Contents of EC
Once you know what is an EC, you should know the constituents of the Encumbrance Certificate.
This depicts monetary costs over the property like loans, mortgages, leases, tax liens, contractor’s liens, maintenance dues, etc.
They are of two types:
Legal- depicting if some suit is pending over the property or property is the subject matter of a will/deed.
Physical- representing any easement rights, right of way/use on the property.
Application, filing, and issuing of encumbrance certificate
There are two ways of applying/filing EC.
For an efficient procedure of filing EC, online is the best method. You need to visit your state’s official land registration website and select the option to apply for an EC. Then fill out an application form 22 with your and the property’s details. You have to pay a fee as shown along with the documents mentioned below. At last, you will get an EC, which you can download.
You need to visit Sub-registrar’s office under whose jurisdiction the property is situated. You will get a Form 22, fill it with details and documents. Then pay the fees at the counter. Once the process is complete, you will get the Encumbrance Certificate.
- Application form 22
- Address proof of applicant (attested copy)
- Property address, survey number, title deed details/number, transfer deed details
- Period for which the EC is required
- The purpose for which the EC is applied for
- Aadhar card
Sub-registrar will issue the EC in either of two forms:
If there are encumbrances/liabilities in the property during the period for which the applicant has sought EC.
If there are no liabilities, this form is issued, also called a nil-encumbrance certificate.
Limitations of EC
After knowing everything about the Encumbrance Certificate, you should also know, its limitations.
Any short-term lease for less than one year is not necessarily registered which is not depicted in sub-registrar records. Such leases do not find a place in EC.
Any transaction over property that is not registered with the sub-registrar is not depicted in EC.
Will not registered
Sometimes, the owner makes a will for the property without registering it. Such will does not find a place in EC.
Before buying a property, you should know everything about that property. For this, you should try and get an Encumbrance Certificate for the property. It will depict if there are any charges/liabilities over the property. If not, you can make up your mind to buy the property, else you will be burdened with liabilities. However, you cannot escape when transactions over property are not registered.
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