Lender loses property documents: Apply to sub-registrar for title copies

Before you can do so, the bank must issue a non-traceable certificate, file an FIR, and publish a public notice in newspapers on your behalf

The Coimbatore District Consumer Disputes Redressal Commission recently directed a housing finance company to pay ₹10 lakh in compensation to a borrower for losing original property documents submitted at the time of availing a home loan. Here are the steps borrowers can take if a lender misplaces their property papers.

 

Precautions During Submission 

Borrowers must submit ownership documents, including the agreement to sell, title deed, possession letter, NOC from the builder or society, approved building plan, encumbrance certificate, and tax-paid receipts when applying for a home loan. These are held as collateral.

 

Property documents can get lost for various reasons. “They could get misplaced, damaged due to improper storage, or lost due to fire and other natural calamities,” says Raoul Kapoor, co-chief executive officer (co-CEO), Andromeda Sales and Distribution. 

Borrowers must retain attested copies. “Get a written acknowledgement from the lender listing each document submitted,” says Adhil Shetty, CEO, BankBazaar.com. 

Lender Liable to Penalty

  Lenders must remove any lien and return the original property documents within 30 days of loan closure, according to Reserve Bank of India (RBI) rules. “If the lender fails to do so, they must communicate the reasons. They are also liable for a penalty of ₹5,000 per day of delay,” says Shetty.

 

In case of loss, the lender must assist the borrower in obtaining certified copies. “The bank must bear all the costs involved in retrieving or recreating those documents. They get another 30 days to fulfil their obligation. If they fail to deliver the documents or certified copies even after that period, they have to pay a penalty of ₹5,000 per day until the issue is resolved,” says Shetty.

 

What Should Borrowers Do?

  File a written complaint with the bank’s grievance redressal officer and secure an acknowledgement. Ask the bank to provide a written confirmation stating the documents are untraceable. “This written record is crucial for any future legal action or complaint under the Consumer Protection Act, 2019, or RBI guidelines,” says Nivedita Bhardwaj, partner, King Stubb & Kasiva, Advocates and Attorneys.

 

Borrowers will need to provide a few additional documents to the lender to initiate the re-acquisition process. “Obtain a non-traceable certificate on the bank’s letterhead, loan closure or no dues certificate (if the loan is repaid), a list of the lost documents, the bank’s internal investigation report (if available), and a formal assistance letter with indemnity support,” says Bhardwaj.

 

Ask the bank to file an FIR and publish a notice in a widely circulated newspaper. “The property owner must prepare a notarised affidavit confirming the loss, attach a copy of the FIR and newspaper notice, and apply to the sub-registrar’s office (where the property is located) for certified copies of the title documents. These copies are issued after verification and payment of a nominal fee,” says Shrishail Kittad, senior partner, IndiaLaw LLP.

 

When to Escalate the Matter 

After filing a written complaint, allow the bank 30 days to respond. “If the issue remains unresolved, complain to the RBI ombudsman through the Complaint Management System (CMS) portal or offline, along with proof of loan closure and earlier communication. The ombudsman may then direct the bank to return the documents and, where appropriate, award compensation,” says Amit Kumar Nag, partner, AQUILAW.

 

Filing a consumer complaint is another option. “If a bank has failed in its duty of care by losing your property documents, and has refused to cooperate, delayed the issuance of necessary documents, or caused significant hardship or financial loss, file a complaint before the Consumer Disputes Redressal Commission,” says Bhardwaj.

 

Relief Consumer Court Can Offer

 

• Can direct the bank to return original title deeds
• Award compensation for mental agony, harassment, and consequential financial loss
• Impose litigation costs on the bank
• In aggravated cases, may award punitive damages

 

Source: AQUILAW