How To Prevent Property Co-Ownership Complications
Property co-ownership is beneficial in many ways. For one, it makes you eligible for a higher loan amount. In a joint loan, the co-applicant and you can both enjoy tax exemptions, too. But this comes at a cost.
- Co-owners are jointly liable to re-pay the loan amount; a default by one applicant forces the other to discharge the liability.
- The credit rating of both the applicants get affected even if the default is attributable to only one.
- The highest amount of loan a person can avail of is limited. So, if you are a co-applicant in a home loan, your chances of getting another loan of a high amount becomes bleak.
- In case you do not specify your and your partner's respective shares in the property in your sale deed, it is presumed that both have an equal share. In case of a dispute between the two of you, this might become a bone of contention. It is further complicated if you and your partner agree to divide the property. For bungalows and buildings with many floor this might be possible. But, for apartment units, doing so becomes a problem.
- In case you are in the middle of a financial crisis and want to sell your property to get some cash, you will not be able to do so without your partner's approval.
- A co-owner also has the right of preemption. This means if you are selling your share of the property, your partner has the first right to be the buyer. To sell it to an outsider, you will need your partner's approval in the form of his refusal to buy your share.
The way out
In most cases, one goes for co-ownership of a property because of financial reasons. If this has to be done, you and your partner should enter into an agreement at the very outset and insert some terms & conditions in the purchase agreement. You and your partner could then go for arbitration in case of a dispute in future. This would protect you from long-drawn court cases.
Also, before you decide to go for co-ownership of a property, make sure your partner is someone you trust. This would help you avoid any unpleasant situation in future. Don't forget to specify your respective shares, rights and liabilities with respect to the property, to avoid any conflict.