Selling a house with co-owners is a difficult process because everyone who owns a share must first agree to the sale and then follow all of the rules of the sale. Is it valid and legal for one of three co-owners of a property to sell it without the knowledge of the other two? This guide explains in detail how to sell a house with co-owners and the difficulties that may arise.
What does it mean to co-own a property?
This is the legal status of all individuals who band together to own a property. This is also known as joint ownership. In India, there is no limit on the number of people who can co-own a property.
Who can be the co-owners?
According to Indian law, there are no specific guidelines for who can be co-owners of property in the country. Anyone can buy and co-own a property, including parents and children, siblings, spouses, and business partners.
What are the types of co-ownership?
Mentioned are the four types of co-ownership.
1) Joint tenancy: According to this, each owner of the property will have equal ownership rights and an undivided interest in the property. This type includes the right of survivorship, which states that if one co-owner dies, his share will be distributed equally to all surviving co-owners.
2) Tenancy in common: In this type of ownership, each co-owner has specifically stated their share of the property. As a result, a co-owner has the option to mortgage, transfer, or sell his share of the property at any time. In the event that a co-owner dies, his share is transferred to his family.
3) Tenancy by the entirety: Married couples own an equal share of property and are granted survivorship rights. If one of the spouses dies, the other inherits all of the property.
4) Community property: Under this, assets acquired during marriage belong to both spouses, regardless of who acquired the property.
When can someone sell a co-owned property?
A person may sell a co-owned property if
1) All co-owners agree on the terms of the sale and how the proceeds will be distributed.
2) If each co-owner’s share is clearly marked in the sale deed, a co-owner may sell their portion of a jointly owned property without the consent of the others. However, if individual shares of the property are not specified, it is required to obtain permission from another co-owner before selling a jointly owned property.
How to sell property with co-owners?
The following are the steps to sell a property with co-ownership:
Get consent of all owners
When selling a property, it is critical to obtain the consent of all owners. One cannot sell a property without the consent of the co-owners unless it is legally permissible. In fact, attempting this is a waste of time because the SRO during verification may detect this. The buyer can file a fraud case against the sellers, and they may face severe penalties.
Decide on the property selling price
To determine the selling price or market value of the property, have it valued by a registered valuer. Once this is completed, all co-owners should agree on a price and begin the sales process. You can sell a property with or without the assistance of a real estate agent. While the agent’s commission is a percentage of the property’s sale price, he has good market contacts and may be able to speed up the sale process by finding potential buyers and negotiating the sale price. Also, an agent is helpful in doing all the documentation work during the sale of property, as selling a co-ownership property with several owners may be slightly tricky as compared to selling a property with a single owner.
Check for any financial dues on the property
A property can only be sold after receiving a no-objection certificate (NOC). No property will receive a NOC from the society or municipal body if dues such as maintenance fees, pipeline gas bills, electricity bills, property taxes, and so on are not paid. Evaluate any pending dues, divide them among the co-owners based on their share, make the payment, and receive the acknowledgment receipt and NOC.
Another important point is to check the original sale deed to see if there are any outstanding debts related to the property, such as whether it has been mortgaged or if there is an existing loan on the property. It is critical to inform the buyer of this in order to avoid any potential disputes.
Determine the ownership share and the distribution of proceeds.
All co-owners should agree on the price at which the property will be sold, as well as the costs associated with the sale. Furthermore, all co-owners must understand their share of the proceeds from this transaction, which is determined by the percentage of property they own. This is stated in the sale deed agreement for the property that the individual owns with coowners.
Find a buyer
The next step is to find a buyer who agrees to buy the joint-ownership property for the price quoted. While the buyer may conduct due diligence on the property and the owners, the sellers (co-owners) must also conduct due diligence to ensure that the buyer is not a fraud who may fail to pay the full amount agreed upon and then harass the owners when transferring ownership.
After everything is verified, an agreement of sale should be draughted and signed by all co-owners and the purchasing party. This should include the property’s sale terms, such as the price, payment terms, and joint-owner responsibilities.
The buyer’s token money for this transaction should be divided among all of the owners in proportion to their ownership stake in the property.
Signing sale deed
Once all of the documentation is completed, the property must be transferred to the buyer. To register the property in the legal book of records, the buyer must pay stamp duty and registration charges. Then, at the sub-registrar’s office, sign a sale deed agreement that includes all co-owner names and signatures, as well as the buyer’s name and property details.
Division of proceeds of sales
Once the property is sold and the funds are received, they must be divided among the co-owners in accordance with their percentage ownership of the property. In the event of a dispute, one can approach the court, which will make a decision based on the evidence presented by each co-owner.
Capital gains tax
Once the property is sold, the co-owners may be required to pay capital gains tax based on their share of the property. It should be noted that for all properties registered before July 23, 2024, the taxpayer can choose to pay capital gains tax at 20% with indexation benefits or 12.5% without indexation benefits.
What documents are required for the sale of a joint ownership property?
Documents needed by co-owners to sell the property
Title deed
Previous agreement of sale
Property tax receipts
Mutation records
Encumbrance certificate
No-objection certificate (NOC)
Can a co-owner sell a family-owned home without the approval of the other co-owners?
A family-owned home was acquired through the efforts of all co-owners, and it is illegal under Hindu Family Law to sell it without the consent of all other family members. It’s worth noting that a family-owned property does not have to be ancestral.
What can you do if a co-owner sells property without the consent of the other co-owners?
File a court case: The remaining co-owners have the option of filing a lawsuit against the wrongdoer. The court will first stay the property’s sale and then issue a ruling based on further investigation.
File a criminal case: The co-owners can file a criminal case against the erring co-owner, accusing him of fraud for selling property that belonged to all of them without anyone’s permission.
Conclusion
Co-ownership, which is considered part of the joint family trend, has benefits such as sharing a home loan, house maintenance, property tax payment, tax benefits, income generation through rental, and so on. However, many family disputes arise as a result of property ownership, particularly co-owned property. One of the most common is selling the property without the knowledge of the other co-owners. Everyone benefits from exercising their rights fairly and selling a co-owned property with everyone’s consent.
