A very common assumption among property buyers is that obtaining an Encumbrance Certificate, or EC, is enough to establish that a property is free from encumbrances. But an EC does not certify that the property has a perfectly clear title. It is essentially the result of a search of the transactions and instruments recorded in the relevant registration records for the property and the period searched. It can therefore tell us what is recorded there, but it cannot magically discover every legal or equitable interest that may exist outside those records.
Please read this: The underestimated risk of encumbrance in real estate investing (which equity doesn’t have).
About the author: Manmohan Sethumadhavan is a freelancer, investor, and personal finance enthusiast “in search of the absolute truth.” You can follow Manu on Twitter @ManuTsr. He is the author of the popular Revised Capital Gains Taxation Rules Ready Reckoner for FY 2025-2026.
The Transfer of Property Act, 1882 deals with the different forms of mortgage and how a mortgage can be created. The Registration Act, 1908 deals with which documents must be registered and the consequences of registration or non-registration. Transfer of Property Act recognises a mortgage by “deposit of title deeds”. In simple terms, a borrower can create security over a property by delivering the title documents to the creditor with the intention of creating a mortgage, and this transaction is excluded from the general requirement to register the instrument.
This is the mechanism behind what is commonly called an equitable mortgage. A person takes a property-backed loan from a bank or financial institution, hands over the original title deeds to the lender with the necessary intention, and creates the mortgage. There may also be a memorandum or other documentation recording the transaction, but in the ordinary case the mortgage itself does not necessarily appear as a registered document in the Sub-Registrar’s records. Consequently, an EC obtained from the registration office can be completely clean even though the original title deeds are lying in the custody of a lender as security for an outstanding loan. Banks and other regulated lenders are familiar with this form of security because the law specifically recognises it.
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Some States have amended the Registration Act to require registration of documents associated with a mortgage by deposit of title deeds. Tamil Nadu and Maharashtra, for example, specifically require registration of instruments evidencing an agreement relating to the deposit of title deeds. Maharashtra has gone a step further by requiring the mortgagor to file a Notice of Intimation where such a mortgage is created without a formal written instrument.
Then came CERSAI, which significantly improved the situation, but did not solve the problem completely. The Government established the Central Registry of Securitisation Asset Reconstruction and Security Interest of India, or CERSAI, under the SARFAESI framework. The purpose was to create a central database of security interests and reduce the possibility of multiple lending against the same property. RBI has required banks and NBFCs to register records of equitable mortgages with CERSAI, and interested persons can search these records.
Situations can still arise where an interest affecting a property is neither visible in the EC nor present in CERSAI. A private loan secured through a mortgage arrangement outside the CERSAI framework is one obvious example. Title issues can also arise that are not registration transactions at all.
That is why examination of the original title deeds remains so important. The originals provide evidence of the chain of title and, equally importantly, reveal where those documents actually are. A certified copy of a registered sale deed can establish what the registered document says, but it cannot by itself tell a prospective buyer whether the original title deeds are sitting in a bank’s custody or someone’s locker because they have been deposited as security.
This limitation begins with how an EC search is conducted. Property records are often not organised around one simple, unique property number that makes identification foolproof. Survey numbers, sub-divisions, old and new survey numbers, joint ownership, changes in boundaries and descriptions, and variations in party names can make the records surprisingly complicated. The accuracy of the search therefore depends heavily on the input information. A small error in the survey number, sub-division, owner’s name or the period searched, or simply insufficient information, can result in a search showing no registered encumbrance and consequently produce a “clean” EC, even though the search may not have covered the relevant records.
This does not mean that an EC is unreliable. An EC is obviously useful, but it should be understood correctly. It does not certify that no encumbrance exists anywhere. It just answers one question: “What encumbrances are recorded in the registration records I searched?”