Selling a house with co-owners is a difficult process because everyone having a share has to firstly agree for the sale and secondly comply with all the rules necessary for the sale. If a property has 3 co-owners and one of them sells the property without the knowledge of the other two, is the transaction valid and legal? In this guide, we tell in detail about how you can sell a house with co-owners and the difficulties that one may encounter.
What is co-ownership of a property?
This is the legal status for all the people who come together to own a property. This is also known as joint-ownership. In India, there is no upper mark on the number of people who can be co-owners of a property.
Who can be the co-owners?
According to the Indian law, there are no set rules on who can be co-owners of property in the country. Any one – parent and child, siblings, spouses, business partners etc. can come together to buy a property and co-own it.
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 owner rights with an undivided interest in the property. This type includes the right of survivorship where if one co-owner passes away, his share gets passed equally to all the surviving co-owners.
2) Tenancy in common: In this type of ownership, all co-owners have specifically mentioned a share of the property. So, a co-owner can mortgage, transfer or sell his share of the property whenever he wants. In case, the co-owner passes away, his share is passed to his family.
3) Tenancy by the entirety: Under this, married couples own equal share in a property and they are given rights for survivors. In case of death of one of the spouses, the other one gets control of the entire property.
4) Community property: Under this, the assets that have been acquired during marriage belong to both spouses irrespective of who acquired the property.  
When can a person sell a co-owned property?
A person can sell a co-owned property if
1) Â All the co-owners agree to terms and conditions 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 can sell their portion of a co- owned property without the consent of the others. However, in case individual shares of the property are not specified, it is mandatory to have other co-owner’s permission to sell a jointly owned property.
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How to sell property with co-owners?
Mentioned are steps to follow to sell a property with co- ownership:
Get consent of all owners
Consent of all owners is important when you sell a property. One cannot sell a property without consent of the co-owners unless he is allowed legally to do so. In fact attempting this is a waste of time as the SRO during verification may identify this. The buyer can file a case of fraud against the sellers and they may have to face a heavy penalty.
Decide on the property selling price
To know the selling price of market value of the property, get it valued by a registered valuer. Once this is done, all co-owners should agree on the price and start with the sale process. You can sell a property with or without the help of a real estate agent. While the agent may cost a percentage of the property sale value as his commission, he has good contacts in the market and may culminate the sale process faster by finding potential buyers and negotiating on the sale price. Also, an agent is helpful in doing all the documentation work during sale of property as sale of a co-ownership property with several owners may be slightly tricky as compared to sale of a property with a single owner.
Check for any financial dues on the property
A property can be sold only after getting the no-objection certificate (NOC). No property will get an NOC from the society or the municipal body if there are dues such as maintenance charges, pipeline gas bill, electricity bill, property tax etc. that are not paid. Evaluate any such pending due, divide it among the co-owners according to the share they own, make the payment, get the acknowledgement receipt and the NOC.
Another important point is to check the original sale deed if there are any dues related to the property itself- such as if the property has been mortgaged and is there any existing loan on the property. Intimating this to the buyer is very important to avoid any kind of dispute.
Determine ownership share and the division of proceeds
All the co-owners should agree on the price at which the property will be sold and the expenses that will be incurred during the sale of the property. Also, it is important for all co-owners to know the share of the money that they will get from this transaction, based on the percentage of property that they own. This is mentioned in the sale deed agreement of the property that the person has with co-owners.
Find a buyer
The next step is to find a buyer who agrees to purchase the joint-ownership property at the price that has been quoted. While the buyer may do his due-diligence on the property and the owners, the sellers (co-owners) should also do due diligence so that the buyer is not a fraud who may not pay the entire amount of money agreed and later harass the owners on transferring ownership.
Once all are verified, an agreement of sale should be drafted and signed by all co-owners and the buying party. This should include terms of the property sale including the price at which it will be sold, payment terms and responsibilities of each joint-owner.
The token money taken for this transaction from the buyer should be divided among all the owners, according to the share they own in the property.
Signing sale deed
Once all the documentation is done, the property has to be transferred to the buyer. The buyer has to pay stamp duty and registration charges to register the property in the legal book of records. Then a sale deed agreement that mentions all co-owner names and signatures, the buyer’s name and the property details should be signed at the sub-registrar office.
Division of proceeds of sales
Once the property is sold and funds received, this has to be divided among the co-owners based on the percentage of share that they own in the property. In case of any dispute, one can approach the court which will take the decision based on the evidence provided by each co-owner.
Capital gains tax
Once the property is sold, the co-owners may be liable to pay capital gains tax based on the share of property they hold. Note that for all properties registered before July 23, 2024, the tax payer has the option of paying capital gains tax at 20% with indexation benefits or 12.5% without indexation benefits.
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What are the documents required for sale of a joint-ownership property?
Documents required by co-owners to sell 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 house without the consent of other co-owners?
A family-owned home has been acquired using the efforts of all co-owners and under the Hindu Family Law, it is illegal to sell it without consent of all other family members. Note that a family-owned property need not necessarily be an ancestral property.
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What can be done if the co-owner sells property without consent of other co-owners?
File a court case: The other co-owners can file a court case against the erring one. The court will first stay the sale of the property and on further investigation will pronounce its ruling.
File a criminal case: The co-owners can file a criminal case against the erring co-owner and press charges of fraud by selling property that belonged to all of them without anyone’s consent.
Housing.com POV
Believed to be part of the joint family trend, co-ownership has advantages such as sharing home loan, maintenance of the house, property tax payment, availing tax benefits, income generation through rental etc. However, there are many disputes within the family also because of property ownership, particularly co-owned property. One of the prime ones is selling the property without knowledge of other co-owners. It is in the best interest of all people to exercise their rights fairly and sell a co-owned property with consent of everyone concerned.
FAQs
While both are similar, in joint-ownership if a co-owner dies, his share of property will be divided by the remaining joint owners.
No. If a co-owner's share details are mentioned, he can sell his share of the property.
Under Section 44 of the Transfer of Property Act of 1882, a property’s co-owner can only transfer his share to another party without other co-owners’ consent. Are co-owners and joint-owners the same?
If a person’s shares are mentioned in the sale deed, does he still need consent of other co-owners to sell the property?
Can a co-owner make a transfer without the consent of other co-owners?
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