Non-Encumbrance Certificate

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.

Non-Encumbrance Certificate meaning

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.

Steps to get non-encumbrance certificate online?

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:

1. Use the sitemap to locate the Government Forms section
2. Here, click on - Stamps and Registration > Application form of Encumbrance Certificate
3. Download and fill up Form 22 with the requested information. Affix it with Rs. 2 non-judicial stamp
4. You also need to submit a formal proforma requesting assistance in the process. State your property details, like the full address mentioned in the registration deed, including all measurements and boundaries to identify nearby properties
5. Attach the required documents along with your Form
6. Submit your application to the nearest Tehsildar or sub-registrar office and collect the acknowledgement slip.
7. The sub-registrar’s office will conduct a physical inspection of your property and check the index for any previous deeds issued during the requested period
8. Online applications are usually processed in 2-3 working days. You will receive the EC from the sub-registrar’s office in 6 to 30 working days

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.

Why do you need a Non-Encumbrance Certificate?

Here are some key reasons why you need a Non-Encumbrance Certificate (NEC):

1. Proof of clear title:

The NEC certifies that the property is free from any legal claims, mortgages, or liens, ensuring that the title is clear and unencumbered.

2. Essential for property transactions:

When buying, selling, or transferring property, a NEC is often required by banks, financial institutions, and legal authorities to verify the property’s legal status.

3. Mortgage and loan processing:

Banks and lenders require a NEC to ensure there are no existing encumbrances on the property before sanctioning home loans or any other forms of credit.

4. Avoid legal disputes:

Obtaining a NEC helps protect you from future legal disputes related to property ownership or claims from third parties, as it ensures the property’s title is clear.

5. Ensures smooth property registration:

A NEC is typically required for the registration of a property to verify that it is free from legal encumbrances, making the process smooth and hassle-free.

6. Verification for inheritance or succession:

The NEC can be useful when verifying the property’s legal status during inheritance or succession, ensuring there are no disputes before transferring ownership.

7. Required for property litigation:

If involved in a property dispute, a NEC can help establish the clear ownership and legal standing of the property in question.

Benefits of a Non-Encumbrance Certificate (NEC)

1. Proof of clear title
   The NEC certifies that the property is free from legal claims, mortgages, or liens, ensuring the owner has a clear and unencumbered title.
2. Essential for property transactions
   It is a mandatory document for buying, selling, or transferring property, providing legal assurance to all parties involved in the transaction.
3. Facilitates loan approvals
   Financial institutions require an NEC before approving loans against property to ensure there are no prior encumbrances.
4. Prevents legal disputes
   By verifying that a property is free of claims, the NEC protects buyers and sellers from future legal disputes related to ownership or third-party claims.
5. Required for property registration
   A NEC is often necessary for registering property, ensuring that it complies with legal norms and is free from encumbrances.
6. Simplifies inheritance and succession
   During property inheritance or succession, the NEC verifies the property’s legal status, preventing disputes among heirs.

Importance of non-encumbrance certificate

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-Encumbrance Certificate fees

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.

A Non-Encumbrance Certificate (NEC) is an indispensable document in the realm of real estate, safeguarding the interests of buyers, sellers, and lenders alike. It serves as proof that a property is free from financial liabilities, legal disputes, or mortgages, ensuring a clear and unencumbered title. This certificate not only facilitates secure property transactions but also simplifies the process of obtaining loans, registering properties, and verifying ownership during inheritance or succession.

Whether applying for a loan against property or transferring ownership, the NEC guarantees transparency and legal compliance, protecting individuals from future disputes and financial risks. With its ability to provide a comprehensive record of property transactions, it is a critical tool for maintaining confidence in property dealings.

Understanding the process of obtaining an NEC, whether online or offline, is essential for navigating the complexities of real estate with ease and assurance.

Some popular encumbrance certificate in India