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Whenever you buy a property on loan, the bank or the non-banking finance company you take a loan from would keep the original sale deed and related property documents. This is to ensure that they have a right over the property in case of non-repayment of the loan. Through the property documents it keeps and owns, the lending institution has the “lien" or the right to retain the property belonging to the borrower until the loan is fully repaid.
WHAT HAPPENS
If you are the borrower and the bank has the lien, you are not allowed to sell the property without the bank’s consent. Also, you cannot transfer the title of the property to someone else. However, any property that carries a lien can be forced into sale by the bank in order to recover the loan amount. Usually, this happens in cases of default.
IF YOU WANT TO SELL A PROPERTY UNDER LIEN
If the borrower decides to sell the property and the bank allows him to do so, the borrower needs to repay the entire loan amount before the sale. The bank clears the title for transfer to the new buyer only after that. Also, the bank releases the documents and your rights over the property once the loan is repaid. This makes the transaction simpler as the property is then a freehold property.
IF YOU WANT TO BUY A PROPERTY UNDER LIEN
In case you buy a property where the lien of the property is with the bank, you may be asked to pay the entire amount before taking the possession of the property. The same could be adjusted with the total value of the apartment. In case you also need a loan to buy the property, you would, typically, have to opt for the same bank from which the earlier owner has taken a loan.
WHEN CLOSING THE LOAN
Once your loan tenor gets over or you manage to prepay and close the loan, you can ask the bank to release the original sale deed and title documents. For this, you require to fill a lien release form. The form has details of your loan amount and repayment. Once the form is submitted, the bank returns the property papers and you have complete rights over your property. Make sure the bank updates its records concerning your property.
—Devesh Chandra Srivastava
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