FINANCE TIP OF THE DAY
Can you afford your loan?!
Know the quantity of loan you can afford. The banks may sanction loan based on your income but you should look at your monthly expenditure and see if you can afford the maximum that banks offer. As a thumb rule, remember not to let your credit exceed 40% of your income!
What are the rights of the co-owner of a property?
According to the Transfer of Property Act every joint or co-owner has a proprietary right of the entire property. Hence, any sale has to be done with the consent of all co-owners involved. If, however there are specific conditions in the agreement that gives co-owners exclusive rights to certain parts/portions of the property, a co-owner can sell his portion to whom he chooses.
Sanjay and Mughda were a happily married couple before some unfortunate circumstances forced them to separate. They co-owned a house and Sanjay insisting on dividing all the things between the two, got hold of a lawyer to handle his claim. The lawyer, after feeding some legal mumbo jumbo to her, convinced Mughda that she did not have a stake in the house. Little did she know that she had equal rights to the house! All this, because of Mughda’s ignorance about the rights of a co-owner.
Who is the co-owner of a property?
Co-ownership or Joint ownership simply put is when two or more persons hold title to the same property.
What are the types of co-ownership?
Tenants in Common — When two or more people buy a property but do not specifically mention the share 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. Upon 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.
Joint tenancy — Joint tenancy is a form of co-ownership where property is owned by two or more persons at the same time in equal shares. This type of tenancy provides rights to ownership of the property for the co-owners who outlive other co-owners. Unlike tenants-in-common, when one joint tenant dies, his/her interest automatically passes on to the surviving joint tenant(s). There are four legal requirements necessary in order to create a joint tenancy:
- Unity of time
- Unity of possession
- Unity of title
This legal requirement simply means that the co-owners need to take the same title at the same time, same deed and with equal interests.
Tenancy by entirety — This is a special form of joint tenancy when the joint tenants are namely the husband and wife — with each owning one-half. Neither spouse can sell the property without the consent of the other. In this type of tenancy also, the share of ownership of one co-owner automatically passes on to the co-owner who outlives the other. Apart from the four aspects mentioned in joint tenancy – Unity of time, possession and title, another aspect is also key here. This last aspect is the unity of marriage, which can be terminated only 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”, explained above.
In the event of such an occurrence, it is important to brush up the laws involving transfer of property to be clear about one’s rights.
What are laws related to transfer of property by a co-owner?
Section 44 of the Transfer of Property Act 1882 deals with transfer by a co-owner and it also deals with the rights of a transferee in this type of a transaction.
According to the Transfer of Property Act every joint or co-owner has a proprietary right of the entire property. Hence, any sale has to be done with the consent of all co-owners involved. If, however there are specific conditions in the agreement that gives co-owners exclusive rights to certain parts/portions of the property, a co-owner can sell his portion to whom he chooses. However, a currently dwelling house is an exception to this rule, where consent has to be sought from both co-owners who jointly own the house.
What are the rights of a co-owner?
A co-owner is entitled to three essentials of ownership:
- Right to possession
- Right to use
- Right to dispose off his share of the property if it is clearly stated, in the deed.
Therefore, if a co-owner is deprived of his property, he has a right to be put back in possession. For example, in Mughda’s case, she can rightfully claim her share in he property.
Why is co-ownership better?
If you are a married couple, co-owning a house it with your spouse has many benefits. Both can get tax benefits. In case of a joint ownership, the husband as well as the wife individually will be able to claim deductions under Section 24 of the Income Tax Act, for up to Rs. 1, 50,000 for interest. You can claim tax benefits for your principal amount under Section 80 C for a maximum Rs. 100,000. It also enables you to bargain for a bigger loan amount by clubbing your spouse’s income. It also enables easy transfer of property to your children.