Property ownership

Property ownership is the exclusive rights and control over property, which can be land or real estate, intellectual property etc. Ownership of land is also known as freehold ownership.

1. Ownership of Property After a Death

Ownership of property after death can be tricky because it depends on the circumstances. Contrary to popular belief, the surviving spouse does not automatically inherit the property. It depends on the terms of the will. If there is no will, it becomes a part of the deceased owner’s estate.  This often results in a family dispute resulting in decades-long legal battles.

Single ownership

In cases of single ownership, if the deceased has left a will, then the person mentioned inherits the property. Otherwise, the laws of the country (Laws of succession) apply. Usually, the property is divided between the spouse, the children, and the living parents.

Joint property ownership

Ownership of a property after the death of a joint owner depends on-

Tenants in common

Suppose two or more people purchase a property, but each person’s share is not specifically mentioned. In that case, it is assumed to be an equal share or a ‘tenancy-in-common.’ All the co-owners can use the entire property. 

If one of the house owners dies, the share in the property does not pass to the other co-owners. Instead, it passes to the legal heir or the person mentioned in the will of the deceased. The heir becomes a co-owner along with the other surviving co-owners. This usually happens when siblings buy property together.

Joint tenancy

 It is similar to tenants-in-common. However, in joint tenancy, it is required for all the house owners or co-owners to take possession of the property at the same time in the same deed and with equal share. Also, when one joint tenant dies in joint tenancy, the share automatically passes on to the surviving joint tenants. 

Tenancy by entirety

 This special form of joint ownership by a married couple, each owning 50% of the property. Neither spouse can sell the property without the consent of the other. Similar to joint tenancy, the house owners must acquire the property simultaneously and in the same deed, and the two co-owners must also be married. On the death of the co-owner, the share automatically passes on to the surviving co-owner.  This type of joint ownership can be terminated by divorce or mutual agreement of both spouses. However, such a termination will change the type of ownership to ‘tenancy-in-common.’

The best way to avoid legal hassles is to ensure that the owner of a property makes a will noting who owns what and who the designated beneficiary will be.

2. Types of Property Ownership with Pros & Cons

There are different types of property ownership. Each type has its advantages and disadvantages.  There are different tax and liability treatments, so it is important to understand which type is most beneficial. 

a) Sole Ownership

Sole ownership is when only one person owns full title to property. The sole owner of a property has the full decision making power for the property, such as how to use, rent, renovate or sell. 

Pros-

In case the owner wants to sell/renovate the property, they can do so without requiring any approval.  In joint ownership, property decisions can take a long time because approval is required from co-owners. 

Cons-

Only one person has to pay the money (while purchasing) in a sole ownership, which can be financially challenging. Also, a sole ownership may cause future legal disputes on property ownership if the owner dies without a will.

Joint Ownership

There are various types of joint property ownership. The co-owners are entitled to equal rights, income, and use of the property.

b) Joint Tenancy

Joint tenancy is when two or more persons share equal interests in the property. This type of tenancy is very common between spouses though not limited to married couples only. Joint tenancy agreements give the right of survivorship to house owners. 

Pros-

If one of the co-owners dies, the ownership passes on to the surviving co-owners. This allows property ownership to be passed on easily. The property deed must clearly state that it is a joint tenancy and mention the rights of survivorship are applicable.

Also, the co-owners are protected from any unauthorised sale by any of the co-owners.

Cons-

If one of the co-owners has any debts, then a creditor is legally allowed to collect the dues by forcing the asset to be sold. In a sale, each co-owner has to consent to the sale, which becomes time-consuming.

c) Tenancy in Common

This happens when a property is owned by two or more persons at the same time. But the joint property ownership may be divided into different ratios. Therefore, the share of use, rights, or income may vary.

The rights of survivorship are not included here. If one of the co-owners dies, the deceased’s share passes to the legal heir. The legal heir enters into a tenancy-in-common agreement with the other co-owners. 

This is commonly found in commercial property and land ownership.

Pros-

The co-owners are protected from any unauthorised sale/changes by any co-owners as everyone has to approve.

Cons-

In any sale/renovation, each co-owner has to approve, which becomes time-consuming.

d) Property ownership by Corporation/Trusts

Companies have separate legal entities and can hold title to property.

In the case of a trust, a designated trustee manages the property ownership under the instruction of a trustor. If the trustor dies, then their interest is passed on to the designated beneficiaries.

Pros-

The company can earn rental income or use it in the business. Income earned from such properties ultimately goes to the shareholders. 

Cons-

The property is an asset of the company, and it can be forced sold by creditors to collect debts. Also, if anyone suffers an injury on the premises, the company can be sued.

e) Freehold and leasehold property ownership

Freehold ownership means any property which is “free from hold” of anyone other than the owner. The owner has absolute rights over the building and the land.

In a leasehold property, the house belongs to the owner but not the land. After the term is over, the property goes back to the freehold owner. Practically, such terms are usually for 99 years and are renewed similarly. 

Pros-

The leasehold property owner does not have to pay upfront for the land, which is a huge saving.

Cons-

If the freehold owner of the land does not plan to continue the lease, it may result in a legal dispute.

3. Transfer of property ownership in India with regulations

There are 2 main ways of transferring ownership of property in India-

• Voluntary Transfer- This is when the owner of property transfers it willingly. It can be done as a sale or by gift, or through a will.
• Involuntary transfer- This happens if the court attaches the property of a person. This may be done in the case of unpaid debts. The property is sold to pay the creditors.

Voluntarily the owner of a property can transfer the title to the property in 5 ways

1. Sale- This is the most common form of transfer. The owner of a house or any other property sells the property for money. You need to enlist the sale deed in the Sub-Registrar’s office.
2. Gift- A gift, as the name says, is when any transferring ownership of property happens without any money, through a Gift Deed. This is generally used to transfer property to relatives. The owner of the land must register the Gift Deed when transferring the title to property. The gift is an inexpensive way to transfer property and avoid costly legal disputes later.  However, you must remember that transfer by gift is permanent. You cannot later reverse the transfer or ask for money.
3. Will/ Inheritance- The property ownership can be transferred through inheritance or a will. If the owner of a property dies, then the property is transferred according to the Laws of Succession. The owner can change the inheritance or will during their lifetime. The beneficiary will get the title to the property only after the death of the owner. 

If the heir receives the property ownership through a will or inheritance, then it is not required to enrol the land in his name.

However, the heir must contact the relevant civil authorities with a copy of the will, Succession Certificate and death certificate to complete changing property ownership to their name.

4. Relinquishment of the property in a land- This can happen when there is joint property ownership. If one co-owner wishes to transfer their share to another co-owner, a Relinquishment Deed can be done. It is an inexpensive way of transferring property only between co-owners. The transfer can be with or without money (similar to a gift). Like a gift deed, transferring property ownership through a Relinquishment deed is also permanent. 
5. Partition Deed- A partition deed is used in joint property ownership, usually when selling to a third party. The deed clearly defines each joint owner’s share. This deed is required to be registered to be effective. 

In a Settlement Deed, the property is owned by a person and settled for individuals who do not have any past share in the property. 

4. What are the two types of property ownership?

The major two types of property ownership–

Sole ownership

In a sole ownership, there is only one owner. The sole owner of a property has the full decision-making power for the property, such as using, renting, renovating, or selling. There is no approval required from anybody. So any decisions regarding the property are taken faster.

Joint Ownership

As the name suggests, this occurs when there is more than one owner, i.e., the property is registered in the name of more than one person. The persons holding the title to property are called joint owners or co-owners. The co-owners are entitled to rights, income, and use of the property as defined in the agreement. 

Various types of joint property ownership can have different rights for the co-owners.  Please refer to our section on types of property ownership for house owners with Pros & Cons to know more details and understand which is more suited for you.

5. What is the legal concept of property ownership?

The legal concept of property ownership is a bundle of four rights-

• Right to use 
• Right to exclude others from using the property
• Right to disposal of the property (sale or transfer)
• Right to destroy the property

Ownership is permanent, i.e., there is no time limit or duration of ownership. Commonly we interchange the terms ownership and possession, but legally possession is different from ownership.

A simple example is renting a house. By the rental agreement, you can stay in the house, i.e., you have the right of possession. Nobody can force you to vacate the property during the term mentioned in the rent agreement. But you do not have the right of ownership, i.e., you cannot sell the house.

6. Commercial Property Ownership Structures

Commercial property is a property that is used only for business purposes and not for any residence. Commercial property can include various properties such as office space, hotels & resorts, malls, restaurants, hospitals etc. 

Common commercial property ownership structures are-

• Sole ownership
• Joint ownership
• Ownership through a company
• Fractional ownership

Fractional real estate

This is becoming very popular in India. Under this concept, an investor can purchase a portion of the property (like a share in a company). This way, you can own a portion of very high-value properties which are generally beyond the reach of ordinary people. For example, an investor can buy 2% of a vacation home for, say, an amount of ₹2 lakh. They can use it for their holiday trips and also rent it out to others. 

Different house owners form a particular purpose vehicle (SPV), which buys the property. The owners get a share in the property depending on the proportion of their investment in the SPV. When the investor wishes to exit, they can sell their share to other investors. 

7. Legal Entity Ownership of Real Property

Legal entities are companies or partnerships and do not include individuals. A company is a legal entity where shareholders own the company. A partnership is usually on a smaller scale when two or more people carry on business as co-owners. Partnerships can also be structured as limited liability partnerships (LLPs), somewhat similar to a company owned by shareholders. In an LLP, the partners have liability limited to their share.

8. The Natural Law Duty to Recognize Private Property Ownership

The Indian constitution recognises the property right.  No one has the power to take away that right except as allowed by law. The Government may acquire a person’s property for a public purpose after making monetary compensation. Though the compensation may not be the property’s market value, it should not be completely disproportionate. 

9. Forms of Land Ownership

There are different forms of land ownership. The form of freehold ownership will determine who is the owner of land, sale/ transfer, taxes and share of incomes and expenses. 

• Individual Ownership: There is only a single owner of land. The owner decides to sell/transfer or decides who will inherit in the will.
• Joint Tenants: The joint ownership of land is held equally by two or more people. On the joint owner’s death, their share of the land automatically transfers to surviving joint owners.
• Tenants in Common: Property ownership is by two or more persons in a clearly defined share. If one owner dies, their share passes to the legal heir as per the will.
• Company: The title to property is held by a company. The shareholders own the company. 
• Common Forms of Property Ownership

10. Common Forms of Property Ownership

The common forms of property ownership are as follows-

Sole ownership

This is when only one person owns the full title to property. The property owner decides to rent, sell or use the property without requiring any approval from anybody.

Joint Tenancy

This happens when two or more persons share equal interests in the property. It is usually the type of joint ownership of property husband and wife. 

The major benefit to this type of tenancy is that if one of the co-owners dies, the ownership passes on to the surviving co-owners. This allows property ownership to be passed on easily. The title deed must mention joint tenancy,

Tenancy in Common

This is also when a property is owned by two or more persons. Here, the joint property ownership may be divided into different ratios, usually in the proportion of the money contributed while acquiring the house. Therefore, the share of use, rights, or income may change according to the agreement.

If one of the co-owners dies, the deceased’s share passes to the legal heir.

Property ownership by nomination

The owner of a property can nominate someone to have the title to property after his death. However, the nominee does not become the legal owner of the property. He only represents the legal heirs of the deceased owner. This is commonly seen in cooperative housing societies, where members must nominate a person at the time of getting a membership. When purchasing a flat in a cooperative housing society, you must ensure that the seller is the actual house owners and not the nominee.

Please refer to our section on types of property ownership with Pros & Cons to know more details and understand which is more suited for you.

11. Legal ownership of property

It is essential to have proof of the legal ownership of the property; otherwise, others may claim it. The following documents help to establish your legal ownership of the property.

• Deed to property- Make sure that you have a title of deed. Ensure that the deed of ownership is filed with the local authorities. If you have lost your copy, you can still find a copy at the local office. 
• Other purchase documents- Even if you do not have a title of deed, the sale contract when you purchased the property will prove ownership. 
• Third-party receipts- Property tax receipts, loan agreement, loan repayment records, electricity bills etc., also help to prove legal ownership.

 Other documents such as will, deed of partition, gift deed, revenue records (in case of land), land rights certificate also establish legal ownership of property.

12. Types of property ownership in India

There are mainly two types of property ownership in India-

• Sole ownership– When only one person owns full title to a property.
• Joint Ownership- When there is more than one owner

13. Ownership of property meaning

Ownership is the exclusive rights and control over a property. Ownership involves multiple rights as follows: –

• Right of possession  
• Right to control and use
• Right to privacy and to exclude others
• Right to sale /transfer/licenses/lease the property to someone else 
• Right to use the property as a collateral while taking a loan

Ownership is permanent, i.e., there is no time limit.

Remember, possession and ownership is not the same. The following example will make it clear. 

You have let out the ground floor of your house for 1 year. By the rent agreement, your tenant can stay on the ground floor only, i.e., they have possession rights. You cannot force your tenant to vacate the property for one year. Your tenant has the right to live quietly and peacefully without any disturbance.  But your tenant does not have the right of ownership, i.e., they cannot sell the house or do significant renovations (such as sealing an entrance).

14. Property ownership in real estate

Traditionally Indians have always invested in gold or real estate. Real estate, especially land, is one asset that always appreciates. Many Indians tend to prefer real estate as a safety net for old age or unforeseen circumstances. Real estate also provides steady income in the form of rent.

Further, real estate owners can enjoy various tax deductions such as interest paid on loans, repairs and maintenance.

Banks offer many lucrative home loans, especially to first-time buyers. The Indian Government also has many affordable housing schemes targeted towards the middle class to encourage homeownership.

15. Property ownership certificate

In the case of land, a Land Ownership Certificate is a formal document or a certificate issued to the owner of land by the relevant authorities. This proves that the particular person is the owner of the land. It also proves that there is no dispute related to the ownership of the land. 

In the case of a flat owner, the sale deed or will (in case of inheritance) or Gift deed acts as the Property ownership certificate.

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