[ecis2016.org] There have been several heart breaking cases where a buyer has given a hefty advance on his dream home, only to discover that the seller has an existing loan on the property and thus, can’t sell the house, till the loan has been repaid. Housing News recommends ways in which you can avoid this scary scenario
Obtain a no-objection and no encumbrance certificate
In case the society has been formed, the share certificate would have been issued to the owner of the property. While issuing a loan against a property, the lender takes the original share certificate, as well as full chain of documents starting from the builder or the housing board, up to the document, through which the present seller became the owner of the property. So, a request for a no-objection letter from the society, will certainly reveal the existence of any loan on the property because the society is under an obligation to inform the lender and take prior permission, before it registers any transfers of the property.
Inspect the documents registered with the office of assurances
Every transaction of immovable property is required to be registered, under the provisions of the Indian Registration Act, 1908. These documents are available for public inspection. Based on the CT Survey number or any similar particular of the property in question, the existence of legal ownership can be ascertained from the office of registrar.
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Generally, loans against house property are taken under what is known as equitable mortgage, under which only the original documents of the property are deposited with the lender. Prior to 1st April 2013, such transactions were not required to be registered in Maharashtra and no records would be available, in case money has been borrowed prior to this date. However after 1st April 2013, all the transactions of equitable mortgage are required to be registered and available for inspection. In case any document for this purpose is executed, the same needs to be registered with the registrar, within four months. However, in case no document is executed, the borrower is required to give notice to the registrar within 30 days about the equitable mortgage created, failing which he will be liable to fine and imprisonment of 1 to 3 years.
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Inspect the CERSAI website
The central government, in collaboration with certain public sector banks, formed the Central Registry of Securitisation Asset Reconstruction and Security Interest of India (CERSAI) in March 2011. This company was formed, with the aim of creating a database of properties on which any charge has been created for the purpose of securing any loan of borrowing.
On payment of a nominal fee, you can search the database maintained by this institution (https://www.cersai.org.in/CERSAI/IBACRPageLoaderServlet) in order to find out whether the property under question has been charged/mortgaged, for securing any borrowings.
The search results will show the details of the property, only if the property in question has been mortgaged with any of the financial institutions. Since all banks have been asked to file details of all subsisting charges that were also created prior to the formation of this company, it would serve as a single-point reference, for verifying the existence of any loan on the property. Please note that in case money has been borrowed from a non-financial institution, the same would not have been registered in this database.
Insist on the original documents
If the seller has borrowed from a private lender and not from a financial institution, none of the above solutions would work, as the same would not have been recorded and registered. As buying a home involves substantial investment, insist on seeing the original documents, like chain of agreements, share certificate, etc., before you part with any money.
(The author is a taxation and home finance expert, with 35 years’ experience)
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