Co-Owning a House with a Friend
Jun 01, 2017 Home Trading Steps
Many home buyers prefer to go in for joint-ownership or co-ownership of property because of advantages like tax benefit, increased loan limit, and pooling of funds. Most of these co-ownerships are between spouses or close family members. In some cases, people are also interested in buying a property with a friend. A lot many queries relating to this arise wondering if such a co-ownership is possible. The answer to this is that it is indeed possible. But some legal and financial implications must be considered before going ahead with such a decision.
One of these is the possibility of taking a home loan. Joint home loans are common and easy to take for joint ownership between spouses, parents and children, and siblings. But for relations other than these joint loans are not possible. In the case of friends and unmarried couples, banks do not sanction joint home loans. In such cases, both individuals must furnish proof of personal accounts and individually provide guarantors. Also, both individuals need to prove that they have means to repay the loan.
Another factor to consider is the property title. If someone co-owns a property with a friend, both would have an equal share in the property. It is important to consult a lawyer before making a sale deed as it must be made under both the names. Joint registration of ownership must be made in order to make both individuals equal co-owners. This can help in any disputes that may arise in future.
For instance, if one of the joint owners dies, the type of joint ownership recorded in the deed will supersede the individual’s will. Consider that Amit and Mohan co-own a property with joint tenancy. Amit, here, dies and leaves a will saying that property may be inherited by his wife. But because Amit and Mohan are joint tenants, the property will be inherited by Mohan and not Amit’s wife. In case of more than two owners as joint tenants, the co-owners receive a proportionate share of the deceased person’s portion according to their share in the property. On the other hand in case of tenants in common, the portion of the deceased will be inherited by his/her legal heirs.
In case of joint ownership with a non-relative, the type of co-ownership must also be recorded, i.e., joint tenants or tenants in common. Sharing of maintenance and other expenditures of the property must also be decided on the basis of the share in ownership.
It is advisable to consult a tax consultant to understand the tax implications of joint ownership of property.
Considering the issue of property transfer, it is advisable to sign a partition deed among the co-owners. This is true for co-ownership between family members as well as non-relatives. In case the co-owners decide to divide the property with an agreement, each retains his/her share and rights. After the division, each portion needs to be registered separately and gets a new property title.
It is important to consider these issues and decide on them before finalising the decision of co-owning a property with a friend. This will be beneficial to avoid any future disputes.
One of these is the possibility of taking a home loan. Joint home loans are common and easy to take for joint ownership between spouses, parents and children, and siblings. But for relations other than these joint loans are not possible. In the case of friends and unmarried couples, banks do not sanction joint home loans. In such cases, both individuals must furnish proof of personal accounts and individually provide guarantors. Also, both individuals need to prove that they have means to repay the loan.
Another factor to consider is the property title. If someone co-owns a property with a friend, both would have an equal share in the property. It is important to consult a lawyer before making a sale deed as it must be made under both the names. Joint registration of ownership must be made in order to make both individuals equal co-owners. This can help in any disputes that may arise in future.
For instance, if one of the joint owners dies, the type of joint ownership recorded in the deed will supersede the individual’s will. Consider that Amit and Mohan co-own a property with joint tenancy. Amit, here, dies and leaves a will saying that property may be inherited by his wife. But because Amit and Mohan are joint tenants, the property will be inherited by Mohan and not Amit’s wife. In case of more than two owners as joint tenants, the co-owners receive a proportionate share of the deceased person’s portion according to their share in the property. On the other hand in case of tenants in common, the portion of the deceased will be inherited by his/her legal heirs.
In case of joint ownership with a non-relative, the type of co-ownership must also be recorded, i.e., joint tenants or tenants in common. Sharing of maintenance and other expenditures of the property must also be decided on the basis of the share in ownership.
It is advisable to consult a tax consultant to understand the tax implications of joint ownership of property.
Considering the issue of property transfer, it is advisable to sign a partition deed among the co-owners. This is true for co-ownership between family members as well as non-relatives. In case the co-owners decide to divide the property with an agreement, each retains his/her share and rights. After the division, each portion needs to be registered separately and gets a new property title.
It is important to consider these issues and decide on them before finalising the decision of co-owning a property with a friend. This will be beneficial to avoid any future disputes.
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