As a result, numerous homebuyers are opting for joint ownership or co-ownership of property. Although it may sound like an easy task of sharing the financial liability, one must be aware of the different types of co-ownership property in India which involves several legal aspects. To avoid any confusion and legal complications buyers should have a clear idea about the various types of co-ownerships that exist in India.
Meaning of Property Co-Ownership
Joint ownership or co-ownership means that two or more buyers jointly purchase a property and enjoy the benefits of such property. All these buyers are the co-owners of that particular property. A co-owner has a right to possess, use and dispose of his share in the property. Any of the co-owners has the right to transfer his share of such property to a co-owner or make someone else the co-owner by selling his share to this person.
Different Types of Co-Ownership or Joint Ownership
Mainly, there are three possible ways to own a property jointly and the types are explained below:
- Tenancy In Common: Tenancy in Common takes place when two or more buyers jointly buy a property but do not explicitly mention their shares at the time of buying. All the tenants are entitled to have equal rights to the property while they are alive. In this type of tenancy, any co-owner can wilfully transfer his share to anyone of his choice. Since tenants in common do not have the right of survivorship, the co-owners can make their own Wills to ensure the transfer of their shares after their demise.
- Joint Tenancy:Under this type of joint ownership, two or more buyers can have equal shares at the same time through a single sale deed. Allthe tenants get the right of survivorship, meaning, the demise of one such co-owner will result in the automatic transfer of his share of the property to the other co-owner(s). Joint Tenancy ensures unified interest for all the co-owners to the same property. Through Will or intestate succession, a joint tenancy can be created.
- Tenancy by Entirety: Only a legally married couple is entitled to have this special form of joint ownership. In this form of ownership, the right of survivorship works similar to joint tenancy. Both the spouses will have equal shares and rights of the property through a single sale deed. No partner can sell or transfer their shares to a third person. Spouses, however, can transfer their shares in each other’s names. Tenants of this agreement cannot sell the property without the consent of the other. However, a tenancy by entirety can be terminated only through a divorce of the couple, death or by any mutual agreement between the spouses.
Sale Transfer of a Joint Property
Generally, Section 44 of the Transfer of Property Act 1882 deals with the rights of co-owners and the procedure of transfer with the consent of all co-owners. However, apart from this Act, every individual State in India also have laws dealing with co-ownership properties.
Benefits of a Co-ownership Property
Co-ownership property is a great choice for a buyer who is facing a financial struggle to buy a property on his own. Since the government has policies to grant certain rebates to women when it comes to investment in a property, it is beneficial for the married people to buy a co-ownership property. Tenancy by entirety ensures tax benefits or deductions under Section 24 of the Income Tax Act for both the husband and the wife. For purchasing a commercial property in this country, the co-ownership property is a good option because all the co-owners will have equal rights of the property according to the terms of the agreement.
Complications of Co-ownership Property
Undoubtedly there are benefits of the co-ownership property, but it also has a flip side which is explained below:
- In co-ownership properties, owners are jointly liable for any default in repayment of loan and default of one can lead to liability of another.
- The credit rating of both parties will get affected if they are co-applicants for the loan in joint properties.
- Being a co-applicant for a loan in joint properties, getting another loan will be limited since you have already availed one loan.
- In a tenancy by entirety, husband and wife become co-owners which can complicate matters during divorce since co-ownership properties in bungalows or buildings with many floors can be divided, but the option of dividing apartment units is difficult and often prohibited in law.
- Joint ownership in properties also makes it difficult to sell or transfer properties without the approval of other co-owners.
- Lastly, co-owners can set a right of preemption on joint properties which will force you to first offer your share to the joint owner during the sale. If the co-owner refuses, only then you can sell your share to an outside buyer.
To protect your share, rights and interests in joint ownership or co-ownership properties, it is very important to set out such terms and conditions within the agreement to sale and other purchase related agreements. To understand why co-ownership is better and how it might be financially beneficial for you, contact an experienced property lawyer. To guide you in the right direction, contact here or email [email protected] with your queries.