What is Encumbrance ?

BEFORE PURCHASING PROPERTY OR ENTERING INTO LEASE AGREEMENT OR RENT AGREEMENT YOU SHOULD ENSURE THAT THERE ARE NO ENCUMBRANCES ON THE PROPERTY IN QUESTION!

Encumbrance means a liability which burdens the property, for example, lease, mortgage, easement, restriction, covenant, rent charge etc. Encumbrances which can be carved out of ownership, generally are securities, leases, servitude’s, trusts etc. It is generally a burden or charge upon the property.

In the instant case: AIR 2007 Kerala 114 the Hon’ble High Court of Kerala [k.s.Radhakrishnan acting c.j. and justice Antony dominic] held that:
By virtue of Securitization Act there is no necessity of the Bank resorting to provisions of Rent Control Act for evicting the tenant. The word encumbrance enumerated in Rule 9(9) of Securitisation Rules cannot be given a restricted meaning. As lease is an encumbrance over the property, In any view the borrower is bound by the terms and conditions stipulated in declaration executed by him in favor of Bank undertaken that he would not lease out the property. Contrary to the said stipulation the tenant was put in possession and therefore by virtue of Securitization Act there is no necessity of the Bank resorting to provisions of Rent Control Act for evicting the tenant. Securitisation Act has got overriding effect over the Kerala Buildings(Lease and Rent Control) Act and parties are governed by the Securitisation Act and not by the Rent Control Act. The authorized officer is to deliver the property to the purchaser free from encumbrances in terms of Rule 9(9). Occupants are not to be physically dispossessed at the time of issuing notice under section 13. The physical possession can be taken by the Bank by following the procedure laid down in Section 14 or after the sale is confirmed.

Likewise the Lease, Lease is therefore an encumbrance over the property. In any view the borrower is bound by the terms and conditions stipulated in declaration executed by him in favor of Bank undertaken that he would not lease out the property.