A non-encumbrance certificate is one of the most important documents in the real estate sector. Along with the occupancy and completion certificates, it is an essential document required before availing a loan from any financial institution in the country.
Here’s a detailed rundown of what is non-encumbrance certificate, its importance, and how to get one online.
In the context of real estate, encumbrance refers to any charge levied on an asset as a security. For example, when a house is bought on advances, the lender will impose costs on this property as a security against the loan. The property also remains mortgaged with the lender for the duration of the loan.
Before availing an advance from a lender against property or when buying or selling a house, the applicant has to make sure that the concerned property is free from financial and legal liabilities. A non-encumbrance certificate is a legal deed that lists all the transactions related to a particular property over a specified period of time.
Individuals need to make sure that a property is free of financial or monetary charges before buying or selling it. Essentially, if a loan was previously sanctioned against an asset or it is mortgaged to a lender, it has to be cleared, and free title must be established before a new loan can be availed.
A non-encumbrance certificate is one of the most important documents required when buying or selling a property. Along with ownership and completion certificates, it is an essential document that individuals must present to a financial institution to obtain a loan. So, when you go in for a loan for any property, lenders will ask for this deed to ensure that there are no existing charges on the property and that the applicant has a clear title to it.
In case there is an existing charge on this property, and a transaction is made without issuing a no encumbrance certificate, there is a possibility that the legal and financial liabilities will have to be shouldered by the buyer.
Non-EC fees vary among states and is calculated based on the property size and duration for which the certificate is applied. Applicants will need to pay an application fee and service fee in certain states, ranging from Rs.1 to Rs.200.
By default, an encumbrance certificate is issued with information up to 12 years at a specific charge. That said, applicants can request a longer duration as well.
For example, in Tamil Nadu, fees for information for the first year is Rs.15, and an extra Rs.5 is charged per additional year. In Telangana and Andhra Pradesh, fees for details up to the first 30 years is Rs.200, which goes up to Rs.500 for additional years. Similarly, the request fee in Delhi starts at Rs.200 and increases depending on the location and time for which the information is requested.
Only a few states offer non-encumbrance certificates online, including Telangana, Andhra Pradesh, Puducherry, Odisha, Tamil Nadu, and Kerala. All other states still offer a handwritten encumbrance certificate which can be obtained from the sub-registrar’s office.
To apply for a non-encumbrance certificate online, visit the official government portal and follow these steps:
There are two types of non-encumbrance certificate, as discussed below:
Form 15 is issued if this property has previous encumbrances during the time for which an applicant requests an EC.
Form 16 or NIL Encumbrance Certificate is issued when no lender has placed a lien on the concerned property. There will be no charges placed on it during a specified time, and the homeowner has free title to it. Such properties are eligible for a new loan from any financial institution in the country.
Preserve the nil encumbrance certificate as it is mandatory to submit it while applying for a mortgage loan.