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What is an Encumbrance Certificate?

Encumbrance refers to any legal or monetary dues that can impact the transferability of the property. The Encumbrance Certificate acts as an assurance that the property in question is free from any monetary and legal liabilities.

An Encumbrance Certificate (EC) is one of the most important documents required during property transactions as a proof of free title/ownership. While purchasing a flat, apartment or plot, it is important to ensure that the property is clear of any monetary or legal liabilities. An EC ascertains that the property has a free/marketable title without any legal or monetary liabilities such as a home loan or mortgage.

Importance

  • An EC is of vital importance for those applying for home loan or loan against property since banks and financial institutions generally ask for 10-15 years of encumbrance. Hence, it is advisable that a homebuyer must obtain an EC, not only to secure his/her legal title on the property but also to corroborate that he/she will be eligible for a loan.
  • For sellers and buyers, it validates free title/ownership of a property and is required in all property related transactions.
  • It acts as an assurance that the property you are investing in is free from any legal dues and has a marketable title.

Limitations of an EC

One of the biggest limitation of an EC is that it can be obtained only for a particular period of time. The details mentioned on it will be based on the documents registered with the registrar, which means that there could be transactions other than those mentioned on it. For instance, the EC will not have details of leases and testamentary documents which are for less than a year’s period.

How to obtain an EC?

It is issued for a fixed period of time and can be procured from the sub-registrar’s office where the property has been registered. Various States including Telangana, Andhra Pradesh, Kerala, Tamil Nadu, Karnataka, Gujarat, Puducherry and Odisha provide computerised extracts of the EC. In other States, one needs to follow a procedure to obtain a handwritten certificate.

To sum up, an EC plays an essential role in any property transaction. Not only does it guarantee that the property has a clear title, it is also a proof that the ownership of the property you are looking to purchase will come without any additional dues. Hence, it is advisable that buyers should obtain the EC of the property before taking the plunge.

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