Owning a property is a dream come true for every one of us. However, buying a property involves complexities and documentation that most people do not understand and in the process, end with a property that becomes a lifelong headache. In order to have a clean, legal transaction one of the key documents that need to be checked is the Encumbrance Certificate also referred to as ‘EC’ in short.
What is an Encumbrance Certificate?
The term Encumbrance means charges/liabilities created on a property that is held as a security or collateral against a loan or mortgage as the case may be. An EC consists of all the registered transactions done on the property during the period for which the EC is sought. Simply put, it is a certificate sought for a particular period evidencing the property purchase/sale, the presence of any transaction or mortgage.
What is the significance of an Encumbrance Certificate?
An EC is needed to know the past property transactions while buying a property. It further states that the property is free from all the liabilities. Through an EC a buyer can ensure that the property has a free title and is free from all the dues. Apart from knowing the past property transactions, most banks demand an EC for the past 13 years before granting a home loan/loan against the property. An EC can be acquired from the sub registrar’s office where the particular property deed has been registered.
What are the different kinds of Encumbrance Certificates?
An EC is issued based on the time period it is sought for and if any transaction has taken place during this period. There are two types of ECs;
a) Form 15:
Form 15 is issued if the mortgage, sale or other deeds of the property are registered with the sub-registrar. The Form consists of registered property transaction details in the owner’s name for a particular period.
b) Form 16:
Form 16 is issued as a Non-Encumbrance Certificate if no transaction has taken place/no transaction is registered for the sought period. When a Non-Encumbrance Certificate is issued on Form 16, it evidences that the property is free from all the liabilities for the given period. This certificate does not include any unregistered property transactions.
One should submit a copy of the Sale Deed to obtain an EC. A person applying for an EC should fill in the Form 22, affix a non-judicial stamp and submit it to the jurisdictional sub-registrar’s office. Complete residential address, property survey number, property location, the sought period, property description, its measurements and boundaries should be mentioned in the Form. A minimal fee amount will be charged on the basis of the period it is applied for. The time taken to obtain an EC will be between 3-7 working days or more depending on the sought period.
Can a buyer solely rely on an Encumbrance Certificate?
No! A buyer should avoid depending only on the EC. A large number of buyers solely rely on the EC to know about the past property transactions and to check for unencumbered free title, but little do they know that not all the past property transactions are registered in the EC. The EC will consist of property transactions only for a particular period and excludes the period before and after that. If there is any pending litigation on the property, it may not reflect on the EC.