The Encumbrance Certificate: All the Information You Need to Have
If you are thinking of about buying a house property, land or a plot among such other immovable assets, there is a strong probability that you must have come across the ‘Encumbrance Certificate (EC)’.
Investing in a house is a big ticket investment and it is expected that you must have had all the requisite documents with you.
Make sure you do not forget to obtain Encumbrance Certificate for the particular property.
What is Encumbrance certificate?
Encumbrance is a term you will hear often in context of real estate.
An encumbrance refers to any charge or liability that is created on any asset; it is basically a certificate of assurance offering the buyer a guarantee that the concerned property is free from all types and forms of legal or monetary liability such as a mortgage on the property or a pending loan.
It serves as an evidence of free title/ownership. Obtaining an encumbrance certificate serves two very important functions: first and foremost it assures the homeowner or the person buying a flat, land, plot, etc that he will be the rightful owner of the property.
Additionally, encumbrance certificate is important for obtaining loans from banks and financial institutions for the specific property.
Banks generally ask for an EC for 10-to 15 years. Some may even ask for 30 years.
It is therefore of utmost importance that you obtain an EC on the property that you are planning to purchase, not only to secure your legal title on the property but also to ensure that you will be eligible for a home loan.
How can you obtain an EC?
The Encumbrance certificate for property is available at the sub-registrar’s office where the property has been registered and can be obtained from there.
The following processes need to be carried out to confirm the transactions that have taken place with concern to a property.
Certain states like Kerala, Gujarat, Karnataka, Andhra Pradesh, Tamil Nadu, Puducherry and Telangana that have made provisions for computerized EC extracts.
Please note that to make an application for an EC, you need to fill form 22. The Encumbrance certificate is issued in Form No. 15 whereas a Nil Encumbrance Certificate (NEC), is issued in Form No. 16.
What can expect to find in your Encumbrance Certificate?
The Honorable High Court of Karnataka in a landmark judgment ruled that an EC issued by the Registration office against an immovable property will not solely be for encumbrance but all of all acts and encumbrances affecting such property.
It means that all recorded transactions of the property as recorded by the registrar will be looked into and all the relevant details will be reflected in the EC. It is also of utmost importance to note that the EC is issued for a particular period and transactions carried out during that period will only be considered.
Moreover, only the details of those transactions that have been registered with the office will be considered. Short term lease deeds and testamentary documents which are not required by the law to be registered will be outside the purview of the EC.
Completion and Occupancy Certificates
It is important to note that an Encumbrance certificate is different from completion and occupancy certificates.
A CC is issued by the concerned local authority to a builder or a developer after the construction work has come to the conclusion and the developer has complied with all the rules, regulations and procedures.
After the CC has been issued, an OC or a Possession Certificate (PC) is issued by the local municipal authorities. This certificate states that building is ready for occupancy and the authorities have no objection to it.
If you are planning to buy a flat or a house and wish to shift into it, ensure that the builder or the developer has been issued a CC and OC.
While an EC contains details about the chain of transactions relating to a property, it may not contain all the records that could prove beyond doubt that the person selling it is the actual owner of the property.
It is therefore recommended that people interested in buying a property should insist on a possession certificate as well.