For a first-time homebuyer, the number of documents required to become the legal owner of a property can often come as a surprise. However, each one of these documents and certificates plays a very important role in ensuring that your property meets specified requirements and that you are the undisputed owner of your new home. Among these
documents, an Encumbrance Certificate is one of the most important to secure when you decide to invest in a property. If you are applying for one for the first time, here are the most important points you need to understand about an Encumbrance Certificate and how to secure one for your property.
What is an Encumbrance Certificate?
An Encumbrance Certificate acts as proof that a property is not under any legal dispute or financial liabilities, such as a pending home loan or a mortgage taken out against the property. This certificate is a record of all the transactions carried out against the property within a specific time frame. The time period can range from 10 to 30 years, depending upon your requirements. Sometimes, when applying for a home loan, the bank or financial institution might specify a particular timeframe for which they want an Encumbrance Certificate issued. It is always safest to check the loan requirements before applying for an Encumbrance Certificate to ensure you have the right time period.
The certificate is created on a Form 15 or 16. Brand new properties are unlikely to have any history of transactions and therefore, the EC for them will be issued on a Form 16 – a Nil Encumbrance. This is also known as an NEC (Nil Encumbrance Certificate). But for properties that do have a history of mortgages, loans, sales and transfers, a Form 15 EC will be generated.
What is not included in an Encumbrance Certificate?
While you can expect your Encumbrance Certificate to include the transactional history on your property, not all details might be listed. The EC marks the difference between transactions that have been formally registered and those that haven’t. For instance, if the property has passed from one owner to another and this transfer was registered, the EC will reflect it. On the other hand, short-term leases and testamentary documents (for example, a
will) might not always be registered and therefore, will not be documented in an EC.
Why do you need an Encumbrance Certificate?
An Encumbrance Certificate is mandatory for any property owner, but especially for individuals who are looking to apply for a home loan. Banks usually require an Encumbrance Certificate for the last 10-15 years as proof that the property is not under any legal or financial conflicts. It is also required if you are planning on applying for a loan against the property. But even if you are not looking to apply for either of these, an EC is important to
secure your status as the property’s legal owner and to ensure that it is not under any disputes.
How do you apply for an Encumbrance Certificate?
You can apply for an Encumbrance Certificate after you register your property. This is important because the EC can only be issued by the sub-registrar’s office in which the property in question is registered. Certain states like Tamil Nadu, Karnataka and West Bengal allow property owners to apply for an EC through an online portal.
If your state doesn’t have this option, you can obtain an EC through the following steps:
1. Download a Form 22 from your state government’s website. You can even get this form from your local registrar’s office if you do not have access to the website.
2. Along with the application form, you will also be required to submit valid address proof (that has been attested), property details, title deed of the property and the fee applicable for processing your request. The fee usually varies, depending upon the time period for which you are requesting an Encumbrance Certificate. You can find out the exact amount from your state government’s website or at the registrar’s office.
3. Once your documents are validated, an Encumbrance Certificate will be issued. Usually, this can take anywhere between 15-30 days from the date on which you submitted the application. The Encumbrance Certificate is a critical document when you are applying for a loan,however, it is just as important for homeowners since it acts as a validation of their property’s legal and financial status. Because of this, it is vital that you ensure you receive
an Encumbrance Certificate after purchasing a home.
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