Home buyers should move forward to purchase a property only if they are absolutely sure that it is free from legal or financial trouble. But how do we know if there are any claims or charges against the property? An Encumbrance Certificate will certainly help in this regard.
What is an encumbrance certificate?
An Encumbrance Certificate tells the buyer if the property is clear of charges. These charges could be a mortgage loan, liens, a third party sale or multiple transactions on the same property. After knowing the encumbrance history of the property, the buyer can safely proceed with the transaction.
Why do we need an encumbrance certificate?
An encumbrance certificate will caution the buyer beforehand about the property. For instance, the buyer might not be sure about the third party rights on the property or has doubts about the seller. He or she can then get an encumbrance certificate to verify if the property is free of litigation.
Is it mandatory to get an encumbrance certificate?
No, it is not mandatory to get an encumbrance certificate. However, if the buyer wants to apply for a home loan or if he or she would like to use the property as collateral to get a loan, the lender might ask for an Encumbrance Certificate.
How and where can we get it?
The encumbrance certificate is issued by the Registrar of Assurances or the Sub-Registrar's office where the property has been registered. One needs to submit an application for an encumbrance certificate by paying a nominal fee. The applicant may also specify a certain time period for which he needs the certificate. It is issued usually within 15-30 days.
If the property has any financial or legal claims against it, the encumbrance certificate will reveal it. However, if the property is free of encumbrances, a nil encumbrance certificate is issued.