It is common that you hand over your original property documents to the lender either a bank or NBFC, when you take a loan. The lenders are usually careful in handling the customers’ documents but, there are cases where the banks can misplace the documents due to some unconscious situations. You or the lender knows it only when you go to collect the original documents during a loan closure.
What are the documents the lenders have with them.
The most important original documents about the property are with the lender.
- Sale deed
- Mother deed
- Katha (Extract and Certificate)
- E C till date
- Approved building plan/Layout approved plan
Why do the lenders need to put the original property documents with them?
Trusting the home the bank lends in order to fulfill your dream. To avoid the chances of unavoidable situations like customer not repaying the loan under any situation, the bank keeps the originals with them. So, literally, your home becomes yours, only after you repay the total loan amount.
How can the loss of original documents happen?
After the documents are received by the customer, the bank files it and stores it in a locker making it utmost confidential. But at times the loss of original property documents can happen due to different reasons.
When you avail a home loan, all the original documents of the property pass through multiple hands before being dispatched to the central repository. For most of the banks central repository is in Mumbai. If you request for xerox of the documents during the tenure of the loan, then the documents will be pulled out from the repository and after taking a xerox, these are again kept in the locker of central repository. These central repositories are normally maintained by a third party. After the loan is closed, the original documents go through the same cycle before being handed over to the owner. There is always a possibility that the loss of original property documents can happen during this process.
Also if the premises is shifted to a new building, then the original property documents can be misplaced while transferring.
What you should do when there is loss of original property documents by the lender?
If there is a loss of original property documents by the lender, it is their sole liability to obtain authentic duplicates or a certified copy of the same. An FIR needs to be filed by the lender, and the entire process and all costs are to be borne by the lender.
To understand clearly, let’s go through a case study on loss of original property documents.
Case Name : Secretary/Manager, Mayyanad Regional Co-Operative Bank V/S Ebrahimkutty
Appeal Number : First Appeal No. 288 of 2014.
Date of Judgement/Order : 20/02/2017
Courts : National Consumer Disputes Redressal Commission (NCDRC)
Facts of the Case:
- Ebrahimkutty had taken a loan from Regional Co-operative Bank against mortgage of his property in a village of Kerala by depositing the original title deed. On repayment of the loan in 1999, the bank failed to return the deed.
- The bank later verbally informed him that the original deed could not be found and attempts were being made to trace it. The bank advanced further loans to him against the same title deed. These loans too were repaid in due course.
- The last loan was finally closed on September 8, 2012, but the bank still could not find the title deed.
- The bank then informed him that the original deed was misplaced while shifted its building premises.
- Aggrieved, he filed a complaint before the Kerala State Commission. He claimed that his property was worth Rs 75 lakhs, but he could not sell it as the bank had lost the original document. He sought a compensation of Rs 25 lakhs.
- The state commission directed the bank to return the original deed and also pay compensation of Rs 10 lakhs within one month, or along with 12% interest, if delayed. In case of failure, to return the title deed the bank was ordered to issue a written certificate about the loss.
- The bank appealed against this order. It contended that the loss of the deed was communicated way back in 1999, but the complaint was filed 12 years later, so it ought to have been dismissed.
- It also argued that complainant had not been able to show that he had suffered any damage due to the loss of the title deed. Complainant argued that the bank had merely admitted that the deed had been misplaced, but had never admitted that it had been lost.
Issue: Whether Bank would be liable to pay for loss of documents taken against loan?
Document lost cannot be recovered: The National Commission observed that if a document is misplaced, there is a possibility that it could be recovered at a later stage. If it is lost, the question of recovery does not arise.
False assurance wont effect Period of Limitation :The Commission noted that even in the affidavit filed by the bank, it had denied that the original title deed was lost, and had asserted that an assurance had been given that it would be returned as soon as it was traced. So the Commission held the complaint to be within limitation.
Loss of Deed would effect value of property:The Commission also observed that the loss of the title deed would affect the value of the property, so complainant would be entitled to be compensated.
Deficiency of Service:The National Commission held the bank guilty of deficiency in service and ordered the payment of compensation amounting to Rs.5 lakhs along with 12% interest for the period of delay
Never neglect the loss as it might decrease the value of the property. It is always better to have a written note by the lender about the loss. Once you get the note, preserve it as that is the only document you have for your property.