Legal Advice

The cooperative bank has granted a mortgage loan to an individual without the presence of a completion certificate

Question: The cooperative bank has granted a mortgage loan to an individual without the presence of a completion certificate from the municipal corporation. As the completion certificate has not been issued, there is a risk that the bank may lose its claim on the property. Please seek guidance on this matter for appropriate steps to address the situation.


If a bank has sanctioned a mortgage loan for an individual without the existence of a completion certificate from the municipal corporation, several implications may arise:

  1. Legal Risk:
    • The absence of a completion certificate indicates that the property may not have received approval from the municipal corporation, leading to potential legal consequences. It might violate local building regulations and zoning laws.
  2. Security Concerns:
    • The bank’s claim on the property may be at risk due to the lack of a completion certificate. The certificate serves as evidence that the construction complies with the approved plans and regulations, providing security to the lender.
  3. Title Defects:
    • Without a completion certificate, there may be title defects associated with the property. This could affect the transferability of the property and impact the bank’s ability to enforce its mortgage.
  4. Insurance Issues:
    • The absence of a completion certificate may affect the property’s eligibility for insurance coverage. Insurance providers often require compliance with local building codes, and the lack of a completion certificate may lead to challenges in obtaining or maintaining insurance.
  5. Marketability of the Property:
    • Properties without proper municipal approvals and completion certificates may face difficulties in the real estate market. This could impact the resale value of the property and potentially hinder the bank’s ability to recover its funds in case of default.
  6. Potential Penalties:
    • Municipal authorities may impose penalties or fines for unauthorized construction or lack of compliance with building regulations. The property owner, and by extension, the bank, may be subject to such penalties.

The requirement for a completion certificate as a mandatory document for loan sanction can vary based on several factors, including local regulations, the lending institution’s policies, and the type of loan being sought. Here are some considerations:

  1. Local Building Regulations:
    • In many jurisdictions, local building regulations may mandate the issuance of a completion certificate for properties as evidence that construction work has been completed in compliance with approved plans and regulations. Lending institutions may take this into account when processing loans.
  2. Lender Policies:
    • Banks and financial institutions may have their own policies and risk assessment criteria when determining loan eligibility. Some lenders may require a completion certificate to ensure that the property is legally compliant and poses minimal risk.
  3. Type of Loan:
    • The necessity of a completion certificate may depend on the type of loan being sought. For mortgage loans or home loans, lenders may be particularly concerned about the legal status of the property, making a completion certificate more crucial.
  4. Property Valuation:
    • Lenders often conduct property valuations as part of the loan approval process. The absence of a completion certificate might affect the valuation, potentially influencing the loan amount that can be sanctioned.
  5. Insurance Requirements:
    • Insurance providers may require evidence of legal compliance, such as a completion certificate, before providing coverage for the property. Lenders may consider this factor when sanctioning loans.

Shivendra Pratap Singh


High Court Lucknow