1. Introduction
This seemingly fictional but real-life tale is about two families living in Delhi who had known each other for over 25 years and found themselves entangled in a complex real estate dilemma. It is the story of Om Prakash, a long-time resident, and Nandani, his neighbour, who unknowingly bought a mortgaged property.
2. Setting Some Context
Om Prakash inherited a house from his father—initially a leasehold property owned by the Delhi Development Authority (DDA). In the early 2000s, it was converted to freehold, granting the family full ownership.
By 2018, Om Prakash wished to transform the house into a four-story modern home with stilt parking but lacked the necessary funds. With a heavy heart, he decided to sell one floor to his long-time neighbour, Nandani, who was on the lookout for a larger space for her growing family.
3. The Trust Factor
Having known each other for over two decades, Om Prakash and Nandani entered into the transaction mainly on trust. They agreed upon staggered payment terms spread out over the construction period for the home purchase. A 5% of the total consideration amount was paid as a down payment / token amount. This arrangement was convenient for both parties—it allowed Nandani to avoid the burden of paying the entire amount at once while Om Prakash received the capital he needed to complete the construction progressively.
4. The Oversight
While trust is invaluable, it can sometimes blind individuals to necessary precautions. In 2018, before handing over the first tranche of cash, Nandani and her family briefly reviewed the original documents Om Prakash provided. Believing their long-standing relationship was enough, they didn’t pursue further verification.
When the time for final registration arrived in September 2020, Nandani overlooked obtaining the complete chain of documents from Om Prakash. This is a classic case of trust taking precedence over caution.
5. The Unfortunate Discovery
It wasn’t until later that Nandani discovered a significant complication—Om Prakash had mortgaged the entire property, not just the floors he retained. This meant that Nandani unknowingly bought a floor of a mortgaged property. She found herself entangled in a financial and legal mess that could have been avoided if she had taken the necessary steps before buying the property.
But why is this such a serious problem? And what exactly does it mean to mortgage an entire property?
6. The Difference Between Mortgaging the Entire Property and Just a Part of It
To understand this issue more clearly, let’s break it down with an example. During the registration process, when someone buys a portion of a property, such as a single floor, the sale deed clearly specifies which part of the property they own.
Similarly, when a mortgage is taken, the mortgage document will specify whether the loan is against the entire property or just a portion of it.
In Nandani’s case, Om Prakash had mortgaged the entire property. This means that if he defaults, the bank could repossess and sell not only his portion but also Nandani’s, despite her being a separate owner.
If, instead, Om Prakash had only mortgaged his portion—let’s say just a single floor—the situation would be very different. In that case, if he defaults on his loan, the bank would only have the right to sell Om Prakash’s floor, leaving Nandani’s portion of the property unaffected. However, because the mortgage applied to the entire building, Nandani’s investment was at risk, even though she had no involvement in Om Prakash’s loan.
This differentiation is crucial for anyone buying part of a property. Understanding whether the property or just a portion of it is mortgaged can be the difference between secure ownership and facing the risk of losing your investment due to someone else’s debt.
7. How This Could Have Been Averted?
Several steps could have safeguarded Nandani from the pitfalls of this transaction:
- Acquiring a Part of the Original Chain of Documents
One essential step whenever purchasing a portion of a property is to ensure that the buyer obtains a part of the original chain of documents. It prevents any one individual from holding the entire chain of property records, which can block future transactions. Splitting the documentation guarantees that all parties must be involved in any future dealings with the property, adding a layer of protection for each party. Example - One party keeps the title deed while the other party has the conveyance deed.
Why is this important?
The possession of the original documents indicates that the property is not mortgaged, as the bank holds all the original documents in the case of a mortgage or home loans.
- Verifying Court Cases and Mortgages
Before proceeding with registration, it’s crucial to confirm whether the property is involved in any court cases or mortgaged. The concerned party can do this check at the local Sub-Registrar office, where property records are maintained. A simple check could have revealed the mortgage on Om Prakash’s property, allowing Nandani to avoid the transaction altogether.
8. How Landeed Could Have Helped Nandani
This unfortunate turn of events highlights the importance of performing due diligence. Platforms like Landeed can provide access to essential land records that reveal critical details, including Mortgage Reports.
The Importance of a Mortgage Report
A Mortgage Report is a crucial document that reveals whether a property is mortgaged. The report is a search for movable, immovable, and intangible properties based on asset details. In India, these reports are provided by CERSAI Portal (Central Registry of Securitisation Asset Reconstruction and Security Interest of India).
CERSAI, a government-constituted company, was established under the Companies Act 2013 and has its headquarters in New Delhi. Its role is pivotal in ensuring that financial institutions and even the general public can verify whether a property is tied to any loans or liabilities. Before CERSAI, it was nearly impossible for buyers and even financial institutions to know whether a property was mortgaged, as this information was often only known to the property owner.
The CERSAI Portal allows financial institutions and the general public to access details related to equitable mortgages, helping prevent legal disputes and hardships for unsuspecting buyers. If Nandani had accessed this mortgage report before finalising her purchase, she could have discovered the existing mortgage on Om Prakash’s property and avoided this predicament.
Additionally, platforms like Landeed allow users to check the status of Prohibited Properties, ensuring that the property is free from encumbrances or disputes. A simple check could have revealed the mortgage on Om Prakash’s property, allowing Nandani to avoid the transaction altogether.
Get instant access to Mortgage Report on Landeed
9. Conclusion
The story of Nandani and Om Prakash reminds us of the risks involved in relying solely on trust when purchasing property. It underscores the need for thorough due diligence, especially by obtaining a Mortgage Data/ Mortgage Report from platforms like CERSAI and ensuring a complete verification of all property records. This single step could save buyers from future legal and financial challenges.
At Landeed, we are committed to making land records and property details easily accessible. Our platform simplifies the process of checking land records and property titles, empowering individuals to protect themselves from title disputes, illegal encroachments, and other legal issues.
Landeed – Building Easy Access to Land Records
Download the Landeed App today and make property transactions smoother, safer, and more transparent. With Landeed, you can access crucial land records—no matter how old or outdated they may be—and protect your property from title issues and encroachments.
Keywords
- CERSAI (Central Registry of Securitisation Asset Reconstruction and Security Interest of India) Registration
- Fraudulent Activities
- Interest Rate
- Home Purchase
- Home Loans
- Housing Market
- Credit Score
- Refinancing
- Financial Assets
- Collateral
- Borrowers
- Security Interest
- Financial Transactions
- Registration Process
- Default
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