Joint property ownership is an excellent way to share financial responsibilities and enjoy the advantages of property ownership. However, it requires careful planning, legal documentation, and much more knowledge. Whether you are considering joint ownership with family, friends, or business partners, you need to understand the types, tax benefits, and legal considerations before making the right choice.
Read today’s Brick & Bolt blog to understand more.
Types of Joint Ownership
There are many different types of joint ownership. They are classified based on legal significance regarding control, transferability, and survivorship rights. The major types of ownership are as follows:
- Joint Tenancy with Rights of Survivorship (JTWROS)
- Tenancy in Common (TIC)
- Tenancy by the Entirety
- Community Property
- Coparcenary
Joint Tenancy with Rights of Survivorship (JTWROS)
This shared ownership of the property has two or more people who have equal property shares. The speciality of this type is the right of survivorship. This means that if one of the joint tenants dies, their share automatically goes to the remaining owner(s) without needing to go through the legal probate process.
The creation of a JTWROS often requires unities in time, title, interest, and possession.
- Unity of time: All joint tenants must receive their interest in the property at the same time.
- Unity of title: All joint tenants must acquire their ownership through the same legal instrument, such as a deed
- Unity of interest: All joint tenants must have equal shares in the property
- Unity of possession: Each joint tenant has the right to possess and enjoy the entire property equally.
If any of these unities are broken, the joint tenancy is severed, and the ownership converts to a tenancy in common. JTWROS is commonly used by married couples, family members, or business partners who want the property to pass smoothly to the surviving owner(s) after the joint tenant’s death.
A drawback of JTWROS is that an owner cannot pass their share of the property to their family or anyone else in their will. Instead, their share automatically goes to the other owner(s) when they pass away. Another issue is that joint tenants must all agree on property-related decisions, which can lead to disagreements.
Tenancy in Common (TIC)
This is a co-ownership type where two or more individuals carry an undivided interest in a property. In tenancy in common, you can have unequal shares of the property. This means that after the death of one of the tenants in common, their interest in the property passes to their estate and is distributed as per their will or state intestacy laws. You can create TIC agreements anytime, allowing additional individuals to join the ownership after the initial arrangement. Each tenant can sell or borrow money against their share independently. However, no tenant can claim any specific part of the property as their own, even if they own a bigger share.
This co-ownership option is commonly used between unrelated parties or business partners who wish to maintain control over their individual assets and estate planning.
Conflicts can happen between owners over property management, maintenance costs, or sale terms. Transactions involving TIC can be complicated since all owners must agree on decisions about financing, taxes, and transferring ownership shares.
Tenancy by the Entirety (TBE)
Tenancy by the entirety (TBE) is a type of joint ownership that is exclusively available to legally married couples. The co-owners must be legal spouses (husband and wife). TBE works under the principle that the couple is a single legal entity, and each spouse has an undivided interest in the entire property. This means that neither spouse can sell, transfer, or encumber the property without the consent of the other. The joint ownership right in TBE can be terminated by divorce, death, or mutual agreement between each other.
Their speciality is the right of survivorship. If one spouse dies, the surviving spouse automatically becomes the sole owner of the property without needing to go through a legal probate process. However, TBE is not available in all states and will apply to limited types of property, like real estate.
Community Property
Community property is a legal rule where any earned money, property, or assets gained during a marriage belong equally to both spouses, no matter whose name is on the title documents. While community property is common in some countries, it’s not a standard rule across all Indian states but may apply in specific situations. Unless explicitly mentioned in a legal agreement, this law does not directly apply in India.
Coparcenary Under Hindu Law
Under Hindu law, the Hindu Undivided Family (HUF) system, you can get ancestral property irrespective of gender. By the 2005 amendment, a child can get equal rights to ancestral property by birth, not through a will. This ownership allows all family members to have a share from the moment they are born. However, decisions regarding the property typically require consent from all tenants. The HUF structure also offers tax benefits and legal protection for family assets.
Key Differences and Legal Implications
| Type of Ownership | Key Features | Legal Implications |
| Joint Tenancy | Equal shares, right of survivorship | Avoids inheritance disputes, less common in India due to inheritance laws. |
| Tenancy in Common | Flexible shares, no right of survivorship | Offers flexibility in inheritance management, suitable for passing shares to heirs. |
| Tenancy by the Entirety | Exclusive to married couples, equal rights, right of survivorship | Similar to joint tenancy but specific to married couples; not explicitly recognized in Indian law. |
| Community Property | Assets acquired during marriage, equal rights | Not a standard form in India; property rights depend on legal agreements. |
What is the Difference between Joint Ownership and Co-ownership?
Don’t get confused between joint ownership and co-ownership. They are different in various ways. Joint ownership and co-ownership are legal arrangements where two or more individuals share ownership rights to a property. Each co-owner holds a specific share, either equal or as agreed, and shares responsibilities, including financial liabilities and property maintenance.
Joint ownership typically indicates a specific form of ownership known as “joint tenancy” or “joint tenancy with right of survivorship” in real estate. In joint tenancy, each owner has an undivided interest in the total property. If one joint owner expires, their interest automatically transfers to the surviving joint owners.
Co-ownership is a more general term encompassing various forms of shared ownership, including joint ownership. Co-ownership doesn’t necessarily indicate joint tenancy or the right of survivorship. Co-owners can pass their share to heirs or sell it independently.
Legal Aspects of Joint Ownership
To maintain your joint ownership of property and avoid potential disputes, you need to understand all aspects. The major aspects are as follows:
Ownership Agreement
All co-owners should clearly mention their share of the property in the sale deed. This helps everyone understand how much of the property each person owns. It also avoids future arguments about ownership. Clarity and avoidance of confusion can be achieved by adding details about who pays what, who handles maintenance, and how ownership changes.
Stamp Duty & Registration
When registering a property, all co-owners names must be registered appropriately. This is important to prove ownership and show each person’s share in the property. In some areas, the number of co-owners and their relationship may affect stamp duty or taxes. To avoid legal issues, co-owners should make sure their registration papers are accurate and follow local laws.
Nomination & Will
Co-owners should create a will that clearly states who will inherit their share of the property. This is especially important if the property ownership allows each person to leave their share to someone outside the joint ownership rules. Without a will, the property may go to heirs based on local inheritance laws, which may not match the owner’s wishes. Creating a clear and valid will ensures their intentions are followed.
Partition of Property
If co-owners want to split their ownership, they can do so in two ways. They can create a partition deed, a legal document that clearly shows how the property is shared. Another option is to agree on the division through a mutual settlement, which avoids court involvement and saves time and money. Both methods help settle disputes and prevent legal issues.
Tax Implications of Joint Ownership of Property
In India, joint ownership of property can offer many tax benefits. Some of the major tax benefits are:
- Under Section 80C, each co-owner can claim deductions on principal repayment up to Rs 1.5 lakh and interest up to Rs 2 lakh on home loans.
- Rental income is taxed proportionally among co-owners based on their ownership share.
- Capital gains tax applies to each co-owner’s share upon sale, with potential exemptions under Sections 54, 54EC, or 54F.
- Some states offer stamp duty rebates for joint ownership, particularly for women.
To get these tax benefits, you must have accurate documentation as a co-owner.
Key Considerations Before Opting for Joint Ownership
Before getting into joint ownership of a property in India, you need to consider the following factors to ensure a smooth and legally secure arrangement:
- Clear Documentation of Ownership Proportions: The documents should clearly define the ownership proportions among co-owners. This clarity helps prevent future conflicts and protects each co-owner’s rights.
- Financial Obligations: Understanding financial obligations, including home loan repayment responsibilities, is vital. Joint ownership can increase collective purchasing power, but it also means shared financial liabilities.
- Choosing the Right Type of Ownership: Selecting the right type of ownership (e.g., joint tenancy or tenancy in common) depends on succession planning and financial goals. Joint tenancy offers the right of survivorship, while tenancy in common allows for more flexible inheritance arrangements.
- Consulting a Legal Expert: Engaging a legal expert to draft agreements and wills is crucial to avoid disputes. A well-drafted co-ownership agreement should include details such as ownership shares, decision-making processes, and exit strategies.
You need to choose the right type of ownership by understanding various kinds of joint ownership. You need to create succession planning and financial goals with the help of experienced professionals. Consider all aspects in order to make better decisions.
Hemali Patel