Co-owners right in the property

Authored By: Jiya

Co-owners right in the property

Introduction

When two or more people collectively own, manage and use the property, where each has a share or interest in the property, then it is called co-ownership or joint ownership of property. Usually, co-ownership provides great advantages when it comes to purchasing large assets such as real estate and brings with it many benefits such as shared risk, equal financial responsibility, tax benefits and many more. But likewise, it comes with a lot of risks. Sometimes it can become difficult for co-owners to deal with certain situations where one co-owner decides to transfer his share to someone else or when there is no unanimity on the transfer. This can lead to strained relationship between the co-owners.

So, which act which deals with such issues and determines rights of co-owners and transferee?

It is Transfer of Property Act,1882 which provides for rights and liabilities to co-owners and transferee. This act provides with legal provisions for transferring of the property and safeguards rights of the owners. It also ensures contractual obligations are fulfilled by the parties to the contract.

Who is a co-owner?

Co-owner is a person who owns a property jointly with another person or organisation. Co-owners may have equal or unequal shares in the property. They collectively take all the decision, share all the financial obligations and bear losses together related with the joint property.

Advantages of co-ownership

• Ownership provides many tax benefits to all the owners.
• The financial burden is shared among all the co-owners of the property.
• The responsibilities of maintenance repairing and management is also shared.

Disadvantages of co-ownership

• Disagreements can lead to strained relationship between the co-owners. This can also cause delay in decision making on important matters related to the property.
• It can lead to financial strain on the co-owners in case of failure of one co-owner to fulfil his financial obligation.

Types of co-ownership

• Tenancy in common
  • When two or more people buy the property together but does not mention the share of each co-owner then it is called tenancy in common.
  • In this case each tenant in common is considered to have equal share in the property. They have the right to transfer their interest and the property does not get transferred by way of survivorship to other tenants in case of death of tenant in common. His share will either go by way of Will, or through inheritance laws, then that person will be considered as tenant in common with the surviving co-owners.
• Joint Tenancy
  • When two or more persons have equal ownership in the property then it is called joint Tenancy. The co-owners do not have specified share or interest in the property and after the death of one co-owner, his ownership is transferred to surviving co-owners as law of survivorship is applied in Joint Tenancy. Joint tenants have undivided interest in the property.
  • Apart from this, there is also another type of ownership which is Tenancy by Entirety. In this type of joint ownership, the husband and wife are joint owners of the property which they hold together. This property cannot be transferred to 3rd person by either spouse and only can be transferred to each other. Only after death, divorce, or by mutual agreement, this ownership comes to an end and after that, it becomes tenancy in common.

Transfer of Property Act,1882

Section 7 of Transfer of Property Act,1882 states that who is competent to contract. Competency requires person to be a major who is of sound mind and is not disqualified from law, only then a person can enter a contract. This section is read with Section 44 of Transfer of Property Act,1882 which mentions rights and liabilities of the transferee in transferred property. These rights include: right to joint possession, right to enforce partition, right to make improvements on his portion of the property, etc.

Rights of co-owners in the property

Co-owners have certain rights with respect to joint property and these rights can be exercised till the extent it does not interfere with other co-owner’s rights in the property.
Following are the rights of co-owner in the property:

• Right to possession- The co-owner can enjoy the property to the extent of his share or interest in the property.
• Right to use and manage the property- The co-owner can use the property in whatever way he wants. But again, it should not interfere with interest of other co-owners of the property.
• Right to dispose of the share- the co-owner has the right to dispose off his share of the property to another co-owner or to a stranger. But this transfer cannot be done without the consent of other co-owners unless specifically mentioned in the agreement as any such transfer affects the right of other co-owners in the property. But there are certain exceptions to this rule and in certain situations, property can be sold or transferred without consent of other owners. Those situations are:
  • In tenants in common the property can be transferred or sold without consent of other owners.
  • Also, if the co-owner obtained court order, which allows him to sell or transfer their share in the property they can do so without the consent of another co-owner.
  • If there is specific provision in the agreement which allows owners to sell or transfer their share without consent of the other owners, it is completely legal to sell or transfer share without the consent.

But if no such provision is mentioned in the agreement, and such property is sold or transferred without consent of the other co-owners, it will be deemed to be an illegal transfer and this could be challenged in the court by other co-owners.

Conclusion

Thus, co-ownership is beneficial in many ways, but caution should be given while purchasing the joint property. During the drafting of the agreement, clarity should be given in regards to transfer ownership and usage, so that chances of disputes become less in the future.