Co-ownership or joint ownership is when two or more persons hold title to the same property. There could be various forms of co-ownership.
Some forms of co-ownership:
When two or more people buy a property but do not specifically mention the shares that each has in the property, a tenancy-in-common is said to exist. All the co-owners can use the entire property and every co-owner is deemed to be having an equal share in the property.
After the death of one of the co-owners, the interest in the house does not pass to the other co-owners but to the person named in the Will of the deceased, who will then become a tenant-in-common with the surviving co-owners.
This is a form of co-ownership where a property is owned by two or more persons at the same time in equal shares. This type of coownership provides rights to ownership of the property for the co-owners who outlive other co-owners.
In case one joint tenant dies, his interest automatically passes on to the surviving joint tenants.
Tenancy by entirety
In this case, the co-owners are husband and wife with each owning one half. Neither spouse can sell the property without the consent of the other. The share of ownership of one co-owner automatically passes on to the co-owner who outlives the other. The couple should be married.
The marriage can be terminated by divorce, death or mutual agreement of both the spouses. However, such a termination will result in the type of ownership to be converted to tenancy-in-common.
Legal issues to be noted
A point to be noted is that the fact of a co-ownership should be clearly mentioned in the sale deed. It is to be noted that mere co-ownership of property without reference to any specified extent will be understood that the co-owners, husband and wife, had equal interests in the property.
The names of the co owners, along with their respective shares of joint ownership or the ownership in the property, should be clearly and specifically mentioned. This way, in case of any income from the property or any gains received on the transfer of such property, it can be divided in the respective proportions of ownership of property.
According to the Transfer of Property Act, every coowner has a proprietary right of the entire property. As such, any sale has to be done with the consent of all co-owners involved. Only in certain cases, the co-owners get exclusive rights to certain parts of the property, which he can transfer. In case of a currently-dwelling house, consent has to be sought from all co-owners who jointly own the house.
A co-owner is entitled to right to possession, use and can dispose off his share of the property if it is clearly stated in the deed. In case a co-owner is deprived of his property, he has a right to be put back in possession.
As it is difficult and costly to add a co-owner at a later stage, it should be done at the time of acquisition of the property.
Extent of ownership
The sale seed can specify the shares of the co-owners - the proportions of ownership between the individuals. In case one wishes to add a co-owner at a later stage, he can execute a sale deed. He can sell a portion of the property to the other person and then get the sale deed registered as a co-owner of the property by paying the necessary charges. This will entail payment of stamp duty.
Alternatively, one can execute a gift deed. He needs to make a gift deed, get is executed on stamp paper, and register it at the registrar's office.
In case of co-ownership, the transmission of property is easy as if one of the partners dies the surviving automatically becomes the sole owner of the house.
Both the owners can claim tax benefits. They both can claim deductions of up to Rs 1.50 lakhs for the interest paid on the home loan. They can also claim tax benefits of up to Rs 1 lakh for the principal amount under Section 80C.
Whenever the property is sold, the co-owners will have to pay tax on the capital gains earned by them.
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