Real estate is a valuable immovable asset that finds investments flowing into its value. It is tangible and comprises land, buildings, improvements made to the above, the flora and fauna found on that land, the cultivated crops attached to the land, livestock, water and the mineral deposits. It is a type of real property accompanied by all the ownership, usage and possession rights that come with such property. Transfer of immovable property like land and buildings is regulated by the provisions of the Transfer of Property Act, 1882.
Renters and leaseholders cannot be said to possess real estate rights because they have the right to inhabit and use the land and buildings, they have rented or leased but these rights are subservient to that of the landlord or lessor. Also, real estate is known to be of these types; residential real estate, commercial real estate and industrial real estate. This article seeks to explain some valid concepts of real estate and the types of ownership in real estate.
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Types of ownership in real estate
There are seven types of real estate and are the following:
When a single individual holds all the ownership rights in the real estate property, the type of ownership is called sole ownership. It can be specifically owned by one individual, be it a man or woman and in the case of married couples, the property may be registered in the name of any one of the spouses. Also, title insurance may be availed at the name of this single owner.
- A major advantage of sole ownership in the property is that all the decisions related to the property are taken by the sole owner.
- The sole owner can enter into transactions like sale, gift, exchange etc.with respect to the property on his/her own without the approval or permission of others.
- S/he has exclusive rights of use and enjoyment in the property.
- There are legal issues that arise over the transfer of ownership to the sole owner’s legal heirs after his/her death or incapacitation. Unless testamentary evidence exists, the devolution of property to the heirs may be problematic.
Joint tenancy is the type where the property is owned by two or more tenants who own equal shares in the property. Under Indian law, joint tenancy does have the right of survivorship. It means that if a joint tenant were to die, his/her share would be transferred to the surviving tenant and not the legal heirs of a deceased joint tenant. Also, joint tenants may occupy the entire property subject to the individual shares of the respective joint tenants. This may be entered into by agreement.
- Joint tenancy under Indian law has the right of survivorship which enables the surviving tenant to receive the share of the property of the deceased tenant. Thus it allows for easy transfer of ownership.
- Joint tenants have equal shares in the property and may access the whole property.
- Decisions in matters of the shared property can be implemented only if the approval of both the tenants is present.
- Also, this property cannot be transferred by will and joint tenants have to petition the court to divide the property or sell it to be free from the joint title.
- If a creditor wants to recover the debts owed by one joint tenant, s/he can petition the court to order for the forced sale of the entire property to recover the debt out of the sale proceeds. Thus, one joint tenant is bound to be affected by the other tenant’s actions.
Tenancy in common (TIC):
Tenancy in common is when two or more tenants hold ownership in a property at the same time. However, unlike joint tenancy, these tenants own their respective fractional interest in the property which need not be equal to the other tenant/s. Also, there is no right of survivorship in a tenancy in common. This may be entered into by agreement.
- Every tenant can take decisions regarding his/her share without consulting the other tenants. The respective tenant can use his portion as collateral in financial transactions.
- A tenant’s property will devolve to his/her legal heir after the death of the tenant for there is no right of survivorship.
- In a tenancy in common, there is no right of survivorship and thus the property devolves to the legal heirs by the laws of intestacy.
- However, for a total transfer of property, if there are more than one liens on the property, they will all have to be sorted out before the transfer can be effected.
Tenants by Entirety:
Tenants by entirety applies when the tenants who have ownership rights in the property are legally married. For legal purposes, the tenant couple with ownership interests in the property is presumed to be one person.
- There is no requirement of probate, will or any other legal instrument to transfer property from one spouse to another after the spouse’s death for the entire property vests in the surviving spouse.
- In the event of conveyance of property, the property cannot be subdivided and such conveyance has to be done by the couple together.
- In the event of a divorce, the tenancy in entirety converts to a tenancy in common with the shared ownership advantages extinguished.
In this type of ownership, a designated trustee manages or administers the property under the direction of a trustor and on behalf of a beneficiary or beneficiaries. An individual or organization can be designated and act as a trustee. In the event of trustor’s death, he property devolves to the beneficiaries. The trustee is tasked with administering the property for the benefit of the beneficiary. This can also be called ostensible ownership.
The advantage of this ownership is that the person behind the trust can remain anonymous and keep his interest confidential if the property on paper is owned by the trust.
The different types of ownership have different advantages and disadvantages of their own. The enjoyment of real estate is subject to title and is for the benefit of the owner. Transfers of property can be executed by owners, co-owners and in some cases the ostensible owners for the benefit of the beneficiaries.
After the purchase of a property, choosing an ownership type should be an informed choice where you consider all the required legal factors before making the choice. It could save money and have tax, legal and practical benefits.
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