Adnan Siddiqui Shares Key Legal Insights on Hidden Risks in Mortgaged Properties
In a recent article published by The Economic Times, Adnan Siddiqui provided critical insights into the often-overlooked legal risks associated with purchasing mortgaged properties, underscoring the importance of comprehensive due diligence for prospective buyers.
Highlighting the foundational step in any property transaction, Siddiqui emphasized that obtaining an Encumbrance Certificate for a period spanning at least 13 to 30 years from the Sub-Registrar’s office is “the first and non-negotiable step.” This, he noted, enables buyers to trace recorded financial liabilities and ownership history linked to the property.
However, he cautioned that reliance on Encumbrance Certificates alone may be insufficient. Siddiqui pointed out the importance of conducting a CERSAI search, which captures equitable mortgages created in favour of banks and financial institutions encumbrances that often do not appear in standard EC records. He stressed that such hidden liabilities are frequently at the core of disputes involving mortgaged properties.
Further elaborating on due diligence measures, Siddiqui advised that buyers must carefully verify revenue records, including mutation entries at the Tehsildar’s office. These records can reveal critical information such as co-ownership claims, government acquisition notices, and tenancy-related disputes, all of which may materially affect the property’s title and usability.
On the contractual front, Adnan recommended that agreements to sell should incorporate robust legal protections. Specifically, he highlighted the need for an explicit warranty clause that holds the seller personally liable for any undisclosed encumbrances, along with an automatic entitlement for the buyer to receive a refund with interest in case such liabilities surface post-agreement.
Drawing from a recent Supreme Court judgment, he outlined three key legal principles. First, he noted that sellers are under a clear legal obligation to disclose all material facts relating to the property. Concealment of a mortgage or any encumbrance constitutes fraud, rendering the contract voidable and safeguarding the buyer’s right to recover the advance paid.
Second, he clarified that buyers cannot be faulted for failing to physically inspect original title deeds in every instance, particularly where misrepresentation or concealment by the seller is established.
Third, he underscored the judiciary’s consistent approach in protecting bona fide purchasers, reinforcing that the legal framework seeks to balance transactional diligence with fairness where buyers act in good faith.
Adnan’s insights serve as a timely reminder that real estate transactions require not only financial evaluation but also rigorous legal scrutiny to mitigate risks and ensure secure ownership.
By entering the email address you agree to our Privacy Policy.