Encumbrance in general parlance means, difficulties faced by someone in moving easily or hurdles impediments, obstacles.
In legal parlance, it means the changes, or liabilities that are created on a property. In simple words, the property in question is not free, but has been a security for any debt, obligation of the owner of the property.
Public in general frequently use encumbrance certificates in property transactions as routine subject. They are under the impression that encumbrance certificate discloses all the encumbrances on the property. It is very important that the period of the encumbrance certificate, description of the property, its measurements, boundaries are clearly mentioned in the application for encumbrance.
The prescribed application form is No. 22. The full details of the property, the period and the person who is applying should be disclosed in the application. The application fee is Rs. 5/-. The fee charged varies depending upon the period. It is Rs. 30/- for the first year and Rs. 10/- each subsequent years. The year commences from 1st April and closes on 31st March. Any fraction of year attracts fee for the full year. The application has to be submitted to the jurisdictional sub-registration office under which the property falls. The free prescribed is for single property / individual. If the properties belong to a single individual or jointly owned or under single survey number / village, no extra fees to be paid.
Though encumbrance certificates disclose the encumbrance on a particular property, it has certain limitations. Public should not completely rely on the certificates issued by the Registrar or Sub-registrar office.
The encumbrances disclosed in the certificate are for the period for which certificate is issued. Any encumbrances created prior or later are not included in the certificate.
The encumbrances relate to the property details of which as furnished in the application. If the description of the property in any of the registered documents is different from what is described in the application, such details are not reflected in the certificates. The issuing office also makes it very clear that, though search in the records for any given period is made with due diligence the issuing office is not responsible for omissions and commissions.
The encumbrances certificate discloses the encumbrances created by the documents which are registered in particular office. In other words it is an extract of the register. Any document which is not registered does not find place in the certificate.
There are various documents for which registration is not compulsory and only optional. Most important among them are equitable mortgage or mortgage by deposit of title deeds. Many banks finance against deposit of original documents. The borrower or guarantor delivers to bank the original title documents of the property. This creates a valid mortgage which need not be registered. The document creating lease for a period of not exceeding one year is not compulsorily register able. Any decree or order of a court, any award need not be registered. Testamentary documents will, also need not be registered. Such documents which are not registered does not find place in Encumbrance certificate.
It is always advisable to inspect the property personally and to verify whether original title documents are available with property owner.
In case of agricultural lands, they are generally inherited. The change of ownership is recorded in revenue records, mutation register of village. Such changes of ownership are not registered. As such encumbrance certificates does not reflect the true nature of the property. RTC, mutation extracts give complete details of change of ownership, the details of possession, the conversion of agricultural land to non-agricultural purpose. As such it is better to insist and rely on RTC and mutations extract in addition to the encumbrance certificates in case of agricultural lands.
It is always practicable to verify the encumbrance certificates for a minimum period of 43 years.
Always verify the encumbrance certificate are issued as per your requirement of period, and it contains boundaries and measurements of the property, signature of registering authority and office stamp apart from disclosing the names and signature of persons who have searched and verified the records.