Non-Encumbrance Certificate - Definition, Types and Details Included - ABC of Mo ney

Purchasing a home is one of the biggest achievements in life. But the bigger the purchase, the higher the amount of scrutiny needed.One of the most critical aspects of purchasing real estate is ensuring that the property you’re interested in is free from pending monetary charges or dues. The non-encumbrance certificate helps you ascertain this fact.Here is everything you should know about the non-encumbrance certificate and why it is important for every homeowner-

In real estate, encumbrance is any charge created on the property. For instance, when you take a home loan for purchasing a property, the property is kept as collateral with the lender. Thus, in the legal records, the property will be shown as having an encumbrance throughout the duration you repay the loan.Once the loan is fully repaid, you can take the NOC from your lender to the local property registrar to remove the encumbrance and clear the property title. A non-encumbrance certificate will then be generated to confirm that the property is free from encumbrance.

As a buyer, it is essential to ensure that the property you are about to purchase is free from pending monetary dues or legal issues. In addition, you need to make sure that the existing owner has repaid the loan (if any) and the property title is clear for seamless ownership transfer. The non-encumbrance certificate verifies this fact.If you’re about to purchase a home with a housing loan, then the non-encumbrance certificate is one of the most important documents you’ll need to get the loan approved.

The non-encumbrance certificate includes detailed information on transactions related to the property over a period of 12 years. You can also ask for older details. As a potential buyer, it’ll help you ascertain whether or not the property you’re about to purchase is free from pending legal issues and monetary dues.It’ll also help you verify that the person selling the property is actually the legal owner. Moreover, you can also find out the total number of past owners.

The non-encumbrance certificate is provided as a physical document at the sub-registrar’s office. However, in some states like Kerala, Tamil Nadu, Telangana, and Odisha, you can generate the non-encumbrance certificate online.Here are the steps you can follow for generating the certificate online-

• Visit the official state government portal and click on “Encumbrance Certificate Application Form”
• You’ll be redirected to Form 22, which should be filled with the required information and submitted with a Rs. 2 non-judicial stamp
• You’ll also be required to provide property details, including the exact area of the house
• Attach the required documents and submit your application
• Once the application form and documents are submitted, the local sub-registrar’s office will conduct a physical property inspection and deed verification
• If everything is in order, then you should receive the certificate within 3-4 working days after the inspection

There are two different types of non-encumbrance certificates-

• Form 16 It is issued in the case if there is NIL encumbrance on the property. The form confirms that the property is free from lien and financial issues for the specified duration. It also suggests that a new home loan can be taken to purchase this property.
• Form 15 It is generated if there are any pending legal issues or financial dues on the property. You should avoid purchasing such properties as it could lead to severe issues in the future. Moreover, you can't get a home loan for such properties.

The feeling of purchasing your first home is out of the world. But there are several things you should be aware of when making the purchase to avoid any discrepancies in the future. With regards to documentation, a non-encumbrance certificate , along with an occupancy certificate and possession certificate, deserve your utmost attention.You can only get a home loan if the property is free from encumbrance and it is confirmed through the non-encumbrance certificate. Even if you are not taking a home loan for the purchase, you should only make any payment after thoroughly analyzing the non-encumbrance certificate and verifying that the property is free from legal and financial issues.

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.