Encumbrance Certificate : Definition, Types, Uses & More

If you are in the market to purchase a property then there are many new phrases you will learn and laws you have to familiarise yourself with. One such important phrase is ‘encumbrance certificate’. This document ensures that you avoid certain legal and financial obstacles when you purchase the property. The encumbrance certificate can assure you that the property you are keen on buying is not legally bound to a loan or used as collateral against loans from a bank.

You could also require an encumbrance certificate when you are taking a loan from a bank. For example, if you need a loan to buy a property, or if you need a loan against a property that you already own, you will have to present an encumbrance certificate.

In this article, we look into the meaning of an encumbrance certificate, its importance when buying a home or property and how to apply for an encumbrance certificate, online and offline.

What is an encumbrance certificate?

When you are looking to purchase property, you need to find out whether it has any financial or legal entanglements. In order to do this you have to find out about the encumbrance certificate of that property. An encumbrance certificate can legally certify that a property has no financial or legal liabilities.

The encumbrance certificate will also show the details of all the past owners of that property as well as the property status. It will have details regarding all the past transfers of ownership and the mortgage binding details. In case a property is still under a home loan or mortgage, you will not be able to obtain an encumbrance certificate for it.

When applying for a home loan to buy a property, you will have to show the encumbrance certificate document to the bank you are applying to. It is also needed if you are looking to take a loan out against your owned property.

Why is an encumbrance certificate required?

An encumbrance certificate is required to prove that a property is not bound to any financial or legal liabilities. It is used to prove the free title or possession of a property. You need an encumbrance certificate when buying or selling property and banks require it when you apply to them for home loans. It is a document that proves that the property does not belong to any person or financial institute and is free to buy or sell.

The different types of encumbrance certificates

There is not just one type of encumbrance. Broadly, there are four common kinds – namely, easements, deed restrictions, encroachments, and liens.

1. Easement

This type of encumbrance gives someone the right to use a property when they do not own it. For instance, a telecommunications company may get an easement to place cell phone towers on property owned by a landowner. Another example of easement is one that gives permission to the owner of a neighbouring property to utilise the driveway or compound of another property for convenient access.

2. Deed restriction

Also known as restrictive covenant, deed restriction puts a limitation on what changes can be done to a property. For example, the restriction could be not allowing a satellite dish to be placed on the roof or terrace of a property. Or it could be allowing only specific spaces for cars to be parked. It can also put restrictions on what constructions can take place on the land. These restrictions can help set rules for what can and cannot be done on a property, therefore defining what the land can be used for. Most often these limitations are put in place to help protect the value of the property – especially when it comes to older property with historical value.

3. Encroachment

Encroachment refers to when a part of one property goes over onto an adjacent plot or property. For example, if a tree in one property grows up and over to extend over to a neighbouring piece of land. In these cases, the owner of the property whose space was encroached upon would like for that encroachment to be extracted. This is done so that when it is time to sell a property or transfer the property title to a new owner, the process isn’t marred by any issues due to encroachment.

4. Lien

A lien is often placed on a property to get a financial obligation from the person who owns it – for example, a home loan. This is the most common kind of encumbrance there is. A lien will be on the property being mortgaged until the loan has been paid in full. Other examples of this type of encumbrance are tax liens which are placed on a property due to unpaid taxes. A contractor can even get a lien if they have not been financially compensated for work done to a property. When a lien’s stipulations are not met, it could even lead to the foreclosure of the property. Then the money gained from the sale will pay off the owner’s debts.

How to apply for an encumbrance certificate?

You can either apply for an encumbrance certificate online or offline. We outline the two ways to do it.

1. How to apply for an encumbrance certificate offline?

To apply for an encumbrance certificate offline you will have to do it with application number 22 at a sub-registrar. This is the way it is done in most states, working with documents that are handwritten. If you are applying for an encumbrance certificate you will also need to give self-attested copies of address proof, property papers, registration papers and more. All the documents relevant to the property need to be attached.

The fee to process the encumbrance certificate will vary according to what state in India the property is in. An encumbrance certificate is valid for only a specific amount of time and will need to be updated after that time limit is over.

If you miss updating the encumbrance certificate of your property or are applying for an encumbrance certificate for your property, you will need to avail the NEC, Nil Encumbrance Certificate.

The Nil encumbrance certificate will state the property’s status in the time period between two encumbrance certificates.

2. Process for applying for an encumbrance certificate online?

You can also apply for an encumbrance certificate online in a few states in India. These include Gujarat, Andhra Pradesh, Telangana, Karnataka, Tamil Nadu, Kerala, Odisha and Puducherry. When you want to obtain an encumbrance certificate in these states, you can go to the respective state’s website to begin the application process. Listed below is the application process for getting an encumbrance certificate in Karnataka.

  1. Go to kaverionline.karnataka.gov.in
  2. Click on ‘Register as New User’ to make an account
  3. Fill the registration form with required details
  4. Click on ‘Register’ to submit the form
  5. An activation code will be sent to your email address or mobile phone number. Use this to login and click on ‘Activate’
  6. Once you have logged in, you can change your password
  7. Now click on ‘Services’ and click on ‘Online EC’
  8. You will be required to select the registration year of the property (dates after 2003 are available only)
  9. Add the property details asked and click on ‘Send OTP to View Document’
  10. You will receive an OTP. Enter it to view and download the document.

If an attested copy of the encumbrance certificate is needed, click on ‘Check to apply for digitally signed EC’ and then on ‘View Document’. Once the PDF is open, you will see a tab saying ‘Proceed’ at the bottom, which you will have to click to download. Then you will need to make a payment. You will receive a payment receipt. Click on ‘Refresh Payment Status’ and your encumbrance certificate online application can be seen in the ‘Pending/Saved Application’ section. After the authorities get your request, it will be digitally signed and accessible to you.

What are the uses of an encumbrance certificate?

Listed below are the different uses of an encumbrance certificate

Encumbrance certificate for purchase : It is needed when buying a home to ascertain that you are negotiating with the right party and the property does not have any liens.

Encumbrance certificate for sale : When a person wants to sell their property, they will need to present the encumbrance certificate with other needed documents to an interested buyer. To get the encumbrance certificate, the person selling the property has to apply for the document and obtain it from government files.

Encumbrance certificate for property mutation : A new owner who has purchased a property has to use property mutation to document the transfer of ownership officially.
Encumbrance certificate for loans: Banks usually need an encumbrance certificate as one of the required documents before they can sanction an application for a home loan.

Encumbrance certificate for the elimination of provident fund (PF) : If you need to use your provident fund (PF) when making a down payment for a property, your employer can ask for the encumbrance certificate.

How to Check the Status of an encumbrance certificate?

If you want to check the status of an encumbrance certificate online you can log in to the state government website. It takes 30 days to get approved on the upper limit. Once it is approved, you can download the document from the website. In case 30 days have passed and there is no update on the status, contact the helpline provided on the website or email to inquire about the status.

What documents are needed to obtain an encumbrance certificate

Here is a list of the documents needed in order to obtain an encumbrance certificate

  • Encumbrance certificate application form
  • Attested copy of address proof
  • Copy of previously executed deed of the property (sale deeds, gift deeds, partition deeds, release deeds, etc)
  • Details about the property
  • The property’s title details
  • The registered deed number, date, book number, volume/ CD number, and signature of the applicant
  • Time period for which the encumbrance certificate is needed
  • Purpose of the encumbrance certificate – reason it has been applied for
  • If the application is made by an attorney holder, then a Photocopy of the Power of Attorney is required
  • Aadhar card
  • Property card (if it is available)

What is the difference Between encumbrance certificate, completion certificate and occupancy certificate

Understanding the various terms used in the real estate market can be stressful when you are buying a property. The differences between encumbrance certificate, completion certificate and occupancy certificate can be confusing. Here is how to differentiate between the three.

Encumbrance certificate : This document states that a property is legally unencumbered by debts or obligations.

Completion certificate : Completion certificate is a legal document that is obtained when a building is completed and matches the building plan as well as any other specifications.

Occupancy certificate : An occupancy certificate is a legal document that states whether a building is secure to enter. This is usually issued after the completion certificate is obtained.

How to download encumbrance certificate online

If you are looking to download an encumbrance certificate online, here are the steps:

  • Log in to the website.
  • Go to the encumbrance certificate section and enter your details.
  • If the status of the encumbrance certificate is approved, download the document in the form of a printable pdf
  • You will have to attach the printed copy with the records of your property.
  • It takes around 15-30 days for the status to be approved.

An encumbrance certificate is one of the most essential legal documents to have when you are planning to buy a property. It reveals the legal and financial status of the property you are interested in and gives you a clear idea of its ownership history, allowing you to make your investment decision with all the necessary information.

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