AN article about " ROLE OF ENCUMBRANCE CERTIFICATE IN PROPERTY DEALINGS "

ROLE  OF ENCUMBRANCE  CERTIFICATE  IN PROPERTY DEALINGS

Public in general frequently use encumbrance certificates in property transactions as the sole evidence to ascertain free and marketable title of the vendor. They are under the impression that the encumbrance certificate would disclose all the charges created on a property. But, it is not so. There may be several types of encumbrances, which will not be reflected in the encumbrance certificate. The application for encumbrance certificate is to be submitted at the jurisdictional Sub-Registrar's office under whose jurisdiction the property falls. The prescribed application form for obtaining an encumbrance certificate is form No. 22.

In order to get a proper and valid certificate, it is very important that the applicant should clearly mention in the application the period for which the encumbrance certificate is required, detailed description of the property, its measurements, boundaries, and the person who is applying.  The encumbrance year commences from April 1st of a calendar and closes on March 31st of the next calendar year. Any fraction of the encumbrance year attracts fee for the full year.  The fee prescribed is for single property and per individual application form. 

Form No. 15 or 16

The encumbrance certificate is issued either in Form No.  15 or 16.  If the property does not have any encumbrance during the particular period for which encumbrance certificate is sought, then encumbrance certificate in Form No.16 will be issued i.e., Certificate of Nil Encumbrance will be issued. If the property has any encumbrance registered during the particular period for which encumbrance certificate is sought, then encumbrance certificate in Form No.15 will be issued.  The certificate in Form No.15 discloses the documents registered in respect of the property, the parties to the deed, nature of encumbrance, amounts secured or transacted in the said deed, registered number of the document, book no., volume no., and date. The encumbrance certificate issued always will be in the language in which indexes are prepared in particular Registrar or Sub-Registrar's Office. If the indexes are not in English and the applicant wants certificate to be prepared in English, then the request of the applicant will be complied with to the extent possible. In Karnataka, now computerized encumbrance certificates are issued.

There is a provision for inspection of the records of the property maintained in the office of the Sub-registrar by the applicant himself/herself. In case the applicant prefers not to exercise this authority and merely submits application for issue of encumbrance certificate for a particular period, the department would be issuing the encumbrance certificate with due diligence and care.  However, there is a rider clause in the computerized encumbrance certificate to state that the department shall not take responsibility for mistakes, if any, in the encumbrance certificate.

Limitation

Though an encumbrance certificates discloses all registered encumbrances on a particular property during a specified period, it has certain limitations. The encumbrances disclosed in the certificate are for the period for which certificate is issued and encumbrance created during the period prior this period or during the later period are not reflected in the certificate. The encumbrance certificate is issued in respect of the property as detailed in the application form and not as per the registered documents of the property.  Thus, if the description of the property described in the application does not match with the details of the property as shown in the registered documents, then details of such documents are not reflected in the encumbrance certificate. The encumbrance certificate discloses the encumbrances created by documents which are registered in a particular office.  In other words, it is the extract of the property register maintained in the Sub-Registrar's office and the document which is not registered and whereunder any charge is created does not get reflected in the encumbrance certificate. Further, there are certain documents for which registration is not compulsory but registration is optional.  These documents include testamentary documents, document creating lease for a period of not exceeding one year, any decree or order of a court, or award.  Since these transactions are not compulsorily registerable, they do not find any mention in encumbrance certificate.

Agricultural Land

Agricultural lands are generally inherited. The change of ownership is recorded in revenue records, mutation register of village panchayath. Such changes of ownership are not registered. As such encumbrance certificates do not reflect the true ownership of the agricultural land. R.T.C, Mutation extracts give complete details of change of ownership, details of possession, conversion of agricultural land to non-agricultural purposes.  Therefore, it is better to insist and rely on RTC and mutation extracts in case of agricultural lands in addition to the encumbrance certificate.

It is always advisable to obtain encumbrance certificates for a minimum period of 43 years and to verify whether the encumbrance certificate is issued for the complete period of your requirement and whether it contains the boundaries and the measurements of the property, signature of registering authority and the office stamp apart from disclosing the names and the signature of the persons who have searched andverified the records of the property. It is also advisable for the prospective purchaser of property to inspect the property personally and to verify and confirm that the original title documents are available with the vendor.  In addition to this, some additional safeguards like paper notification, searching in jurisdictional courts for any pending cases may also be undertaken to protect the interests of the purchaser.

It is advised that for tracing the clear and marketable title of the property, the purchasers should not mainly rely on the encumbrance certificate issued by the Registrar or Sub-Registrar’s office, but has to examine all other relevant documents, such as title deeds, latest khata certificate, khata extract, and tax paid receipts.