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Encumbrance Certificate: Meaning, Importance, & Significance In Property Purchase

Encumbrance Certificate

A property purchase can be a taxing process requiring much research and consideration. It includes selecting the right property, determining its affordability, and choosing the right lending institution to finance the purchase. Once everything falls in line, the extent of paperwork required for the process is overwhelming. Loan companies demand a heap of documents to confirm a borrower’s identity, financials, and repayment capacity. 

Similarly, if you are a property owner and want to borrow against it, the lender would like to ensure the collateral you use is not mortgaged already. An Encumbrance Certificate (EC) provides this information to make the lenders feel safe. Read on to learn more about this document and how to obtain an online EC.

What is an Encumbrance Certificate?

An Encumbrance Certificate is a legal document that validates that a property in question is free from all legal and financial obligations. Besides, it showcases a property's condition and complete details about its current and previous owners. It also provides information about all property ownership transfers and mortgage obligations. When buying a property or taking a loan against property, lending institutions refer to its online EC to verify its ownership, mortgage and transfer-related details. Lenders also demand this document when you apply for a property loan to purchase it.

An Encumbrance Certificate online is a common document used in the real estate sector. It certifies that a property is free of legal and financial obligations like a loan or mortgage. Therefore, lending institutions give due consideration to this certificate when financing a property. When applying for a loan against property, the document displays a liability or charge on a property the owner uses as collateral.

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Why is an Encumbrance Certificate Required?

When lending a loan against property, an EC certificate online lets the lender assess a borrower’s eligibility for the loan. An EC is one of the most significant loan against property documents that protect a property’s legal titles and help avoid fraudulence. The document allows the lenders to determine if the property has a mortgage lien, lease rights, or third-party rights against it. 

The lenders decide to conduct a transaction for the property only if the EC online view states that the property has no associated encumbrances. However, if the EC confirm charges against the property, it will alert the lender to protect their interests and convince them to avoid any further transactions regarding the property.

Types of Encumbrance Certificates

An Encumbrance Certificate may display four major types of encumbrances, including the following:

Lien: A lien to secure a mortgage or another financial obligation is one of the most common types of encumbrances against a property. It remains on the property until the borrower pays it fully. It can also be a tax lien for unpaid tax payments. Contractors may also file a lien if the owner does not pay them for property repairs, usually leading to foreclosure upon non-resolution.

Deed Restriction: Also known as a restrictive covenant, a deed restriction imposes limitations on property usage. It may range from specifying the parking area to restricting construction or prohibiting satellite dishes on the roof. Typically, its primary purpose is to maintain a property’s value and is common in properties of historical significance.

Easement: An easement grants specific entities or individuals the right to utilise a property they do not own. For instance, neighbours sharing the driveway or a utility company using the land to install a power grid. Usually, an easement is regarding the property use instead of its ownership.

Encroachment: An encroachment occurs when some part of a property extends onto a surrounding property. It might involve a tree or fence crossing the property line. The property owner often seeks its removal, as it complicates the property’s title transfer.

Understanding these encumbrances is essential for owners, buyers, and lenders to estimate the property’s value, usage, and rights. You may obtain the right Encumbrance Certificate online based on the encumbrance type. These include the following:

Form 15: If the property’s mortgage, sale, or other deed is registered with a corresponding sub-registrar, a Form 15 is necessary. It provides complete information about the transaction during a specific period. It also includes details about the encumbrance type, such as a lease, partition, or gift, along with the party details, registration number, etc. 

Form 16: The government issues Form 16, a non-encumbrance certificate, when a property has no registered transaction. This type of EC certificate online ensures the property is free from all liabilities for a specific period. However, it does not contain any unregistered transactions on the property.

Benefits of Encumbrance Certificates

Download the Encumbrance Certificate to enjoy any of these benefits:

  • An EC certificate contains all registered developments on a property during a specific period. You can download EC online for a period of up to 30 years. The facility can be advantageous when you plan to buy the property in question.
  • When you purchase a property, you may risk getting liabilities about the property. It is an important document that confirms that the property in question is free from any outstanding liabilities. Through an EC online view, a potential property buyer can ensure the previous owner has not taken a loan against that property.
  • If you seek a loan against property, an EC is one of the most important loan against property documents the lender will use to determine your loan eligibility.
  • An EC certificate is necessary for a property’s mutation.
  • If the owner does not pay the property tax for more than three years, the authorities will require this document to update their records.

How to Get an Encumbrance Certificate Online?

Whenever you plan to buy a property or take a loan against property, you will need an Encumbrance Certificate to validate that the property is free of lien. Instead of physically visiting the sub registrar's office, you can apply for one online by filling in a few details. Follow these steps to get an Encumbrance Certificate online:

  • Visit your state’s official website to get an online EC.
  • Select the option to get an EC certificate online.
  • A window will appear to apply for an EC certificate.
  • Fill in the required details and click on ‘Save/Update’.
  • Enter the search period for which you want the certificate.
  • Click ‘Calculate fee’.
  • Pay the application fee using your preferred payment method.
  • An ‘Acknowledgement Window’ will appear.
  • Select ‘View Acknowledgement’ to download and print the acknowledgement.
  • A land records department inspector will inspect and examine the property records for the specific period.
  • After inspection, the department will issue an Encumbrance Certificate online that will include all the transactions that occurred during the period.

After applying, you can also track the status of your EC application using the following steps:

  • Visit the portal.
  • Click on "Certificate".
  • Choose "Encumbrance Certificate".
  • Click on "EC Status".​​
  • Enter the necessary transaction details.
  • Fill in the CAPTCHA 
  • Select "Check Status"​ to track the EC status online​.​​
  • The status will appear on the screen, which you can save or download for future reference.​​​

How to Get an Encumbrance Certificate Offline?

When applying for an Encumbrance Certificate, remember that only a few states issue these documents online. For other states, you must still pursue the offline procedures. These are the steps involved:

  • Visit the sub-registrar’s office where the property is registered.
  • Fill out Form 22 with the necessary details, including the property’s complete address, location, descriptions, measurements, boundaries, survey number, etc. 
  • Include copies of the relevant documents, including the sale deed.
  • Submit the form to the sub-registrar’s office and attach a non-judicial stamp.
  • Pay a small fee required for the service.

After completing the above process, receiving an Encumbrance Certificate may take 15-30 days. However, it may vary based on the required period.


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Which States Issue Online Encumbrance Certificates?

Usually, you must visit the sub-registrar’s office physically and fill out Form 22 to obtain an Encumbrance Certificate. However, some states allow you to apply for an online EC using their official portal. These include Odisha, Gujarat, Andhra Pradesh, Kerala, Tamil Nadu, Puducherry, Uttar Pradesh, and Telangana. 

The online process makes obtaining an EC much easier and faster than offline. Moreover, you can also track your application status using the portal with the reference number you receive. All you need to do is visit the portal, enter a few property-related details, and pay the application fee to download EC online.

Documents Required to Get an Encumbrance Certificate

Whether you apply for an Encumbrance Certificate online or offline, you must provide the following documents to complete the process. When applying online, you must upload scanned copies of the required documents through the portal, and when applying offline, you must submit them with Form 22 at the sub-registrar’s office. The documents required include the following:

  • Identity proof (Aadhaar card, PAN card, ration card, driving license, or Voter ID)
  • Address proof (attested copy of the Aadhaar card, Voter ID, ration card, or driving licence, ration card)
  • Signature proof 
  • Purpose of application
  • EC requirement period
  • Tax receipts
  • Power of Attorney 
  • Document of property registration containing the book numbers, date, deed, and signature
  • Deed details of the property and its title or possession
  • Sale deed, gift deed, or partition deed of the property, if applicable
  • Reference letter or a letter from the authority concerning the property registration

Eligibility Criteria to Get an Encumbrance Certificate

There is no specific eligibility criterion to apply for an Encumbrance Certificate in India. However, here are a few conditions to fulfil:

  • Any person who has an interest in the property can obtain an EC.
  • The applicant must provide the necessary documents, including identity proof, address proof, tax receipts, etc.

Conclusion

Obtaining an Encumbrance Certificate is crucial to ensure the property has a clear title and has no legal liabilities or claims. With various platforms offering EC services, obtaining an online EC has become much faster and easier than ever. Check the specific requirements in your state to download EC online and protect your investment. You will also need the EC if you apply for a loan against property at Hero FinCorp. 

Frequently Asked Questions

1. What information does an Encumbrance Certificate contain?

An EC contains details about a property’s ownership, mortgage and transfer-related details.

2. What is the difference between an Encumbrance Certificate and a property title deed?

A property title deed reflects an individual’s property ownership, while an Encumbrance Certificate records registered encumbrances with it.

3. How long does it take to obtain an Encumbrance Certificate?

Obtaining an EC takes around 15-30 days from the date of application.

4. Is an Encumbrance Certificate necessary for all property transactions?

An EC certificate is not necessary, but it helps owners, potential buyers, and lenders ensure that the property is free of lien and other legal and financial obligations.

Did You Know

Disbursement

The act of paying out money for any kind of transaction is known as disbursement. From a lending perspective this usual implies the transfer of the loan amount to the borrower. It may cover paying to operate a business, dividend payments, cash outflow etc. So if disbursements are more than revenues, then cash flow of an entity is negative, and may indicate possible insolvency.

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