Definition
Any charge, lien, mortgage, or claim on property that affects its free and clear title. Before a bank creates a mortgage, it verifies the title to ensure there are no prior encumbrances. An Encumbrance Certificate from the Sub-Registrar's office shows all registered charges and mortgages on a property.
Example
An Encumbrance Certificate showing a prior mortgage in favour of SBI would alert a subsequent lender to the prior charge.
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Defined by Advocate Subodh Bajpai, Senior Partner, Unified Chambers and Associates