The implications of co-owning a house or property for legal heirs

When buying property jointly with someone else, it is imperative that one knows the difference between joint owners/tenants and tenants in common and chooses wisely.

We look at the differences between joint owners/tenants and tenants in common and highlight situations that may be better for you.

What does joint ownership/tenancy mean?

When two or more owners hold a property together, it is known as joint ownership or joint tenancy. On the death of one or more of the owners, their shares pass on automatically to the surviving joint owner/tenant by the right of survivorship. Only when the final owner dies will his/her legal heirs inherit the property, as per such last owner’s succession laws.

For example, X, Y and Z are the joint owners of land. X dies. The land then belongs to Y and Z. After Y dies, the land belongs to Z. After the death of Z, the land belongs to Z’s legal heirs.

The legal heirs or family members of X and Y do not get any right in the land. This is referred to as survivorship.

To be sure, joint ownership/tenancy is created only by way of agreement. If there is no agreement defining the ownership as joint ownership or joint tenancy, the law presumes the ownership to be tenants in common.

What is tenants in common?

Tenants in common is when there are two or more owners who hold distinct shares of their own. The shares under a tenants in common mode can be of any proportion – and when those shares are other than equal, they are defined as such in a legal document.

Shares of tenants in common never pass on automatically to other owners (as in the case of joint owners/tenancy) and instead pass on via the terms of succession of the owner.

For example, X, Y and Z are tenants in common of land. Z dies, leaving all his land to P, who becomes a tenant in common with X and Y. Thereafter, upon the death of each person, their respective portion is transferred to their heirs and not to the survivors.

Also read: Use a Will to gift your property, or you may end up being homeless

Law regarding joint tenants and tenants in common

With regard to the rights of co-owners, Section 44 of the Transfer of Property Act, 1882, deals with the transfer by one of the co-owners and the rights of a purchaser in this type of transaction. The relevant part of Section 44 of the transfer of property reads as under:

“Section 44: Where one of two or more co-owners of immovable property legally competent in that behalf transfers his share of such property or any interest therein, the transferee acquires as to such share or interest, and so far as is necessary to give, effect to the transfer, the transferor’s right to joint possession or other common or part enjoyment of the property, and to enforce a partition of the same, but subject to the conditions and liabilities affecting at the date of the transfer, the share or interest so transferred.”

According to this section, every co-owner has a proprietary right on the entire property. This means every co-owner has an undivided right title in interest in the property. To simplify, all the co-owners have a right in each and every square inch of the co-owned property to the extent of their defined share. Put another way: a tenant in common’s rights to property is limited to the share s/he holds, not the actual physical property. Such co-tenants have the right of maintenance towards the entire property; the property cannot be divided in any way depending on their share of ownership.

This would mean that if any co-owner sells his share, only his rights in the property get transferred.

For example: In joint ownership/tenancy, if A and B are joint owners/tenants and A sells his share to P, P will become a joint owner/tenant with B. If P dies, B will inherit the whole property.

In tenants in common, if A and B are tenants in common, when A sells his share to P, P will become a tenant in common with B. If P dies, P’s legal heirs will become tenants in common with respect to A’s share in the property.

In both cases, the co-owners are allowed to sell their shares in a property to others. The difference arises only in the event of a co-owner’s death. In the case of joint-ownership, if one of the owners dies, his or her share automatically goes to the other joint owner/s of the property. However, in the tenants in common mode, the shares pass on to the legal heirs.

Presumption of co-ownership

The courts in India have held in several judgments that if there is no clear wording in the conveyance regarding the type of co-ownership, it is always presumed to be tenants in common.

If two or more people hold property in any capacity, it is always presumed to be tenants in common unless the contract specifically states the property is held by joint owners/tenants. It must be noted that co-owners can choose to convert or change the type of ownership at any point through an agreement to this effect.

Before entering into a property transaction, it is important to be aware of the relationship that one gets into with the co-owners. Understanding these principles helps to determine one’s rights upon events like death.