• Buying an apartment flat with property already mortgaged

Dear Sir/Madam,

I am purchasing an ready-to-move apartment flat from a reputed builder in Bangalore. 

1) Builder has obtained OC for the apartment. 
2) Title of the property is clear but a charge against the property in favour of Bank. Builder says the original sale deed of the property is with the Bank and the mortgage is registered in sub-registrar office. Builder also got a loan closure letter from the said bank but property is not discharged from the mortgage. My question is why bank is not releasing the original property document if the loan is closed? is there anything hidden here..

3) I asked builder to get an NOC from the bank towards sale of a flat in this mortgaged property. Bank has issued an NOC with condition that I pay the sale consideration in escrow account.

Under the above conditions is it legal and safe to purchase such a ready-to-move in apartment flat? Please advise..
Asked 7 years ago in Property Law
Religion: Hindu

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7 Answers

1) if loan closure letter is issued by bank then original documents should be returned by the bank to builder . bank may not be handing over originals as there may be some dues pending of the builder

2) since NOC has been issued by bank you can proceed with purchase of the apartment provided sale consideration is deposited in escrow account

Ajay Sethi
Advocate, Mumbai
95168 Answers
7604 Consultations

5.0 on 5.0

1) bank NOC would be valid only if full consideration is deposited in escrow account

2) inform builder that you willing to pay balance 90%provided earlier payment made by you is deposited in escrow account

Ajay Sethi
Advocate, Mumbai
95168 Answers
7604 Consultations

5.0 on 5.0

1. When a mortgaged loan is closed, the Bank isues No-Due certificate to the borrower and immediately returns the original title deed which was deposited with the Bank by the borrower for creating security interest on the said property against the loan taken by him. It is strange that the bank has not yet returned the said original title deed of the property. Visit the Bank and investigate in to the matter. it also might be that the said title deed has further been mortgaged with another Bank for availing loan for another project of the builder. First get the matter clarified from the Bank before further proceeding in to the matter.

2. If the Bank has asked you to pay the sale proceeds to the Escrow account then it is clear that the builder is yet to close his loan account.

3. First see in your own eyes that the original title deed of the property is with the said Bank who has issued NOC for your buying the ftat. if the dsame is found with the Bank, then you can buy the said flat by paying the amount to the escrow account as asked by the Bank and get the flat registered in your name.

Krishna Kishore Ganguly
Advocate, Kolkata
27245 Answers
726 Consultations

5.0 on 5.0

1. Visit the Bank and collect confirmation from them that they have no objection if the balance amount of 90% payment is kept in their escrow account.

2. If your said attempt fail, ask for return of the amount paid by you to the builder and if he refuses to refund the said amount, file a complaint case before the local District Consumer Dispute Redressal Forum against the builder alleging deficiency in service and unfair business practice claiming refund of your said amount paid to him with interest, damage and cost.

Krishna Kishore Ganguly
Advocate, Kolkata
27245 Answers
726 Consultations

5.0 on 5.0

My question is why bank is not releasing the original property document if the loan is closed? is there anything hidden here..

You should insist the builder to retrieve the original documents from bank with an endorsement by bank for the mortgage loan fully discharged and no objection certificate. A NOC is a clearance certificate issued by the lender assuring that all dues have been cleared. A loan closure certificate also to be obtained.

Last but not the least is to get Lien removed on property from Registrar office. Lien is a legal claim against an asset which is used to secure a loan and which must be paid when the property is sold.

Bank has issued an NOC with condition that I pay the sale consideration in escrow account.

Under the above conditions is it legal and safe to purchase such a ready-to-move in apartment flat? Please advise..

Once you and the seller have signed a mutually acceptable purchase agreement, your agent will collect your earnest money check and deposit it in an escrow account at the escrow company specified in the purchase agreement.

The escrow company acts as a neutral third party to collect the required funds and documents involved in the closing process, from the initial earnest money deposit to the loan documents to the signed deed.

An escrow account (sometimes called an impound account depending on where you live) is set up by your mortgage lender to pay certain property-related expenses on your behalf like property taxes and homeowner’s insurance.

Many lenders require that you pay your taxes and insurance using escrow, so they can make sure that the bill gets paid and the property is not at risk. Your mortgage service provider will manage the escrow account and pay these bills on your behalf. Sometimes, escrow accounts may also be required by law.

Thus to be confirmed about all such incidental payments, the bank may insist payment through escrow account.

It is better you obtain legal opinion before making payment to purchase the property.

T Kalaiselvan
Advocate, Vellore
85369 Answers
2231 Consultations

5.0 on 5.0

1) Is this OK if I pay remaining 90% in escrow account? will the bank NOC remain valid?

The bank will decide about this. If it is agreeable for the bank to accept the balance amount alone in the escrow account, you may proceed or else you may advise the builder to transfer the advance amount also to transfer to the escrow account and retrieve the mortgaged title deed with NOC, no due certificate and loan closure certificate etc.

T Kalaiselvan
Advocate, Vellore
85369 Answers
2231 Consultations

5.0 on 5.0

If a charge is created in favour of the bank then the title is not free and marketable. The property which is mortgaged cannot be sold without the permission of the mortgagee as there is a charge in favour of a mortgagee. Tell the builder to get the property discharged from mortgage and obtain the original title deed. Till then do not buy the property.

Ashish Davessar
Advocate, Jaipur
30763 Answers
972 Consultations

5.0 on 5.0

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