What is an Encumbrance Certificate?
An encumbrance certificate is needed in a property transaction as an evidence of free title and ownership. It is a document issued by the registration authorities. While buying a property, it is important to confirm that it does not have any legal dues. A prospective buyer must ensure the property has a clear and marketable title.
‘Encumbrance’ is the charges or liabilities created on a particular property, whereby it is held as a security for a debt that has not been discharged as on date. An encumbrance certificate contains details of all transactions and certifies that the property is not mortgaged and has no legal dues. It is obtained from the sub-registrar’s office where the deed has been registered. An encumbrance certificate is important while buying property, applying for a home loan or going in for a loan against the property.
Government authorities and financial institutions usually ask for 13 to 30 years’ encumbrance certificate. It is issued for a particular period and does not cover any period prior to or following the period mentioned. It is an extract of the register maintained by the sub-registrar, which in turn is based on the documents registered with the registrar.
In case a particular document is not registered with the registrar, it won’t be captured in the encumbrance certificate. There are certain transactions relating to property which are outside its scope. This is because such documents are not compulsorily registrable under the Registration Act 1908.
Equitable mortgage: This is a mortgage by deposit of title deeds where the borrower deposits the original documents pertaining to the property with the bank and does not get it registered at the registrar’s office.
Testamentary documents and leases: These documents are not required to be registered with the registrar. Any lease for a period of less than one year does not need to be registered.
Others: Oral tenancy, tax liabilities, prior unregistered agreements, family arrangement, unregistered Will and other unregistered agreements will not show here.
Need for certificate: In any transaction of sale or purchase of property, a ‘no encumbrance certificate’ is a very important document. It is also issued for the purpose of mortgaging property for a loan. It certifies that the property is not already mortgaged.
Obtaining the certificate In order to obtain this certificate, one needs to apply on Form 22 (with Rs 2 non-judicial stamp affixed) to the tahsildar, giving the complete residential address and the purpose for which the certificate is required. A copy of any residence address proof, attested, should be attached. Title details, details of ownership of the property, survey number and address should be mentioned. It is very important that the period, a full description of the property, its measurements and boundaries are clearly mentioned in the application.
The application should be submitted to the jurisdictional sub-registrar’s office. The requisite fees need to be paid. The fee is to be paid year-wise, with any fraction of a year being taken as a full year. The tahsildar will seek a report from the Patwari on whether there is an entry in favor of any person or legal body. In case there is no such entry and the report is favorable, the no encumbrance certificate is issued after conducting a detailed inquiry. The time taken may be anywhere between 15 to 30 days.
Encumbrance certificates are issued either on Form No 15 or Form No 16. Encumbrance Certificate on Form No 15 records sale, lease, mortgage, gift, partition, release etc that have been registered before the registration authorities and recorded in Book I maintained by the registration authorities for any particular period for which the encumbrance certificate is sought. This helps in verifying the title since certain transactions reflected there, especially in the parent deeds and documents which are not in the possession of the present owner may be applied for and obtained in the form of certified copies.
The certificate in Form No 16 is issued by the registration authorities only when no transactions have occurred in the period for which the encumbrance certificate is sought.
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