I was talking to one of Navi Mumbai’s reputed builders and he was telling me about a time when he sold a flat in an under construction project. The deal was registered and the builder issued a ‘Mortgage NOC’ as the buyer wanted to take a loan. The Mortgage NOC is a legal document wherein the builder says that he will not allow the flat to be transferred unless the lender informs him in writing that the loan has been repaid and they have no lien on the flat. All was fine.
After about 6 months, he received an unusual letter from the bank stating “Please issue mortgage NOC to Mr.xyz for flat no.xxx (the same flat)”. No explanations at all. He called up the bank to find out the cause of this unusual letter.
It seems that the first owner sold the flat to xyz. The agreement was registered and the initial amount was paid. Xyz was to take a loan and fortunately for him, he happened to go to the same branch where the first loan was taken from. The bank realised that something was amiss and it was a clear case of cheating. But if they went to the police, the matter would go on for years. So, the best thing was to give a loan to xyz, who will pay the first buyer, who will pay back the bank!
The only problem was that to release the loan, they had to have a ‘Mortgage NOC’ from the builder, who would be in the wrong as he would be issuing two NOCs for the same flat! So, he asked the bank to give him a letter asking him to release the first NOC. The bank could not do that as they had not received the loan amount back! After a lot of talks, they found a way out.
After all this, it was obvious that the second buyer was taken for a ride and was saved due to sheer luck. The following is the minimum that should be done before paying for a flat:
- Ask to see the original agreement and make sure that the flat is actually on the name of the person who is selling it. Also, the fact that the original agreement is with the seller means that there is a reasonable chance that the guy has not taken a loan against the flat. There are several lenders who do not take the original documents when giving a loan, so seeing the original document with the seller is not an absolute guarantee that there is no loan outstanding against the property.
- Take a copy of the registered document and ask a lawyer to conduct a ‘search’. He goes to the sub registrar’s office and finds out the chain of ownership of the property. Also, any loan against the flat is supposed to be registered at the sub register’s office. So, this is another way to ensure that there is no loan against the flat.
- If the society is formed, meet the secretary, if not, meet the builder. There are several things that can be found out in such a meeting:
- Whether the flat is mortgaged – the builder or the society has to give a ‘Mortgage NOC’.
- Whether there are any dues pending against the flat.
- Whether the guy has taken a ‘token’ amount from someone else. There are cases where the seller takes a ‘token’ amount and then does not go ahead with the deal.
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