What happens if the encumbrance certificate reveals an outstanding loan on the property?

If an encumbrance certificate (EC) reveals an outstanding loan on the property, it indicates that the property has a mortgage or a charge against it. Here's what typically happens in such a scenario:

1. Verification of the Loan Status: The prospective buyer or the party interested in the property should verify the details of the outstanding loan mentioned in the EC. This involves confirming the accuracy of the information, such as the loan amount, the lending institution, and any pending dues.

2. Communication with the Lending Institution: Once the outstanding loan is identified, it is advisable to contact the lending institution mentioned in the EC. This allows for further clarification on the loan status, including the remaining balance, any default or pending payments, and the process for settling the loan.

3. Negotiations and Settlement: Depending on the nature of the transaction, the buyer and seller can negotiate the terms for settling the outstanding loan. This could involve adjusting the sale price, with the buyer assuming responsibility for the outstanding loan or ensuring that the seller repays the loan before the property transfer.

4. Legal Assistance: It is recommended to seek legal advice from a property lawyer or a professional with expertise in real estate transactions. They can help review the encumbrance details, assess the legal implications, and guide you through the necessary steps to address the outstanding loan.

5. Resolution of Loan Prior to Property Transfer: In most cases, it is preferable to ensure the outstanding loan is settled before the property transfer takes place. This ensures a clear title and avoids any complications or disputes related to the loan in the future.

It is crucial to conduct due diligence and consult with legal professionals to navigate the situation appropriately. Resolving the outstanding loan ensures that the property can be transferred without any encumbrances, providing a clear title to the buyer and securing the interests of all parties involved.