What to do if your home has been mortgaged without you knowing?

2 min read

A home is one of the biggest investments that a person makes in his/her lifetime.  It is necessary to ensure that the builder of the property is reliable and has a good record. Certain cases have occurred when the homebuyer received eviction notice from the bank who did not have any idea that their property was mortgaged by their builder. Even though the homebuyer has paid the entire cost of the property to the builder, the bank can lawfully claim the property to recover the loans if the builder fails to repay within time.

With the ever rising population and demand of property, mortgage fraud is increasing at an alarming rate as homebuyers are trying to acquire a property in this competitive field. As a homebuyer, the primary thing to do in order to save yourself from mortgage fraud is by educating yourself. Buying a new house is a very emotional experience for you and your family. But you should never rush while making a decision. Take all the time that you need to assess the people you deal with while buying the property – from your real estate agent to your builder. If you are doubtful about some person or the proposals that they are making, talk to a trusted friend or good advisor who has experience in buying a property. There are certain things that the homebuyer should keep in mind to safeguard his property if such unfortunate circumstances occur.

What you should know in this regard

Houses already sold to homebuyers cannot be mortgaged by the builder. The builder’s authority over a unit in a project no longer exists when the property is registered under the buyer’s name. The homebuyer becomes the lawful owner of the property after he pays the stamp duty charges and registration fees to the government authorities and clears all unpaid dues.

Only those units within the property that are not yet sold can be mortgaged by the builder. Further, if a person buys or agrees to buy an apartment, his right over the property shall not be affected by any such mortgage made by the builder. It is common for builders to take bank loans for the purpose of constructing and completing their projects. But it is certainly not ethical to sell properties that are already mortgaged or mortgage already sold property.

When a property is in mortgage, it means that the builder still owes money to the bank and has not satisfied the loan yet. Before selling the property to a homebuyer, the builder should ideally always settle the bank loan first as the bank is well within their rights to declare a claim over those properties if the loan is not repaid. The bank loan should be settled first followed by releasing of the mortgaged units. The builder should then collect the no object certificate (NOC) from the bank. Finally the property can be rightfully put to sale.

Some additional action points

It is mandatory for the homebuyer to be careful and check the builder’s background before buying a property. The buyer can easily find out whether the builder has taken a bank loan for construction of the property on the Registrar of Companies website. Also, the buyer can make sure that his ownership rights over the property is not under any risk by asking the builder for an NOC from the bank. Without the NOC, the buyer cannot have a strong enough legal case in case of any problem. The buyer can also pay the EMI in the bank account from where the builder has taken a loan.

It is also necessary for the buyer to find out whether the builder has mortgaged the property before or after the registration. The buyer can have a strong legal case if the builder has mortgaged the property after its registration. It is also the bank’s discredit if they offered a mortgage loan against a property that is already sold out. Even under such circumstances, the homebuyer would have to legally tackle the situation. They may have to go to the debt recovery tribunal, state high court or even to the CDRC of the state to win the legal battle.

However, if you have not bought a property and rented it instead, the owner or the builder may do as they please and you will be in no position to take any legal action against that as you are not the rightful owner.

 

Resident Editor