Encumbrance certificate: All you need to know

Encumbrance certificate is a proof that the property in question does not have any monetary and legal liabilities. This certificate contains details of any transaction on the property. It points out any liabilities in the form of a mortgage or loan against the property that has not been cleared.

Why is encumbrance certificate required?
As this certificate proves that the property is clear of any legal dues, it assures a buyer that the property has a free, marketable title. A home buyer must obtain the encumbrance certificate owing to three reasons:
a. A no encumbrance certificate validates that the property is not already mortgaged. In case the property is already mortgaged, the liability of the outstanding loan will be passed on to the new owner.
b. As the certificate is an evidence of free title/ownership, it is required in all transactions pertaining to the property.
c. Banks and financial institutions will need the certificate in order to provide a loan on the property. Again, government authorities will require a 13-30 years encumbrance certificate.

Where can you get the encumbrance certificate from?
This certificate is issued by the office of the sub-registrar for a particular period of time. The sub-registrar’s record, in turn, is based on the property documents that have been registered. This means that the certificate will not have any record of a document that has not been registered with the office of the sub-registrar. As it is issued for a fixed period of time, encumbrance certificate is not valid for the period before or after the period that is mentioned.

Does the certificate carry any limitation?
A limitation of encumbrance certificate is that there can be transactions other than those reported in it. Documents such as the equitable mortgage papers are not registered with the registrar’s office. That’s because such documents do not fall under the scope of the Registration Act 1908. Besides, testamentary documents and short leases for a period less than a year can be excluded. Others that can be excluded relate to oral tenancy, tax liabilities or prior unregistered agreements such as an unregistered will.

How to apply for a no encumbrance certificate?

1. Fill in Form 22 with a non-judicial stamp affixed and attach an attested copy of proof of address. While applying, specify the purpose for which the encumbrance certificate is required.
2. The application must have complete details of the property including its measurements, boundaries and survey number.
3. Submit your application at the office of the jurisdictional sub-registrar along with the requisite fee. The fee is charged on a per year basis.
4. The office of the sub-registrar conducts a detailed inquiry of the property in question. If it finds any charges registered against the property, it issues Form No 15. However, if the report is favourable and no such charges are found against the property, Form No 16 is issued as a “no encumbrance certificate.” This inquiry process usually takes 15 to 30 days.  

Form No 15: This form will contain a record of sale, lease, mortgage etc. This will have to be placed on record that is maintained by the registering authorities.

The encumbrance certificate is issued in the language in which the records at the sub-registrar’s office are maintained. An additional fee needs to be paid in case an English translation of the certificate is required

Resource : http://www.99acres.com/articles/encumbrance-certificate-all-you-need-to-know.html