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Partnership and co-ownership of property: what these legal terms mean
Source: Ashish Gupta, The Economic Times Apr 04, 2010
Partnership is a legal relationship brought about through an agreement or contract between persons. The elements of a partnership are provided under the provisions of the Indian Partnership Act 1932. It is to be noted that a legal relationship between the members of a Hindu Joint Family and the mutual rights, obligations and responsibilities arise out of the legal status as provided in the Hindu Law. There is no partnership between the members of a Hindu Joint Family.

In order to ascertain whether a group of persons have joined together to form a partnership or not, the intentions of the parties and the real legal relationship the parties desire to enter into are to be determined. The legal relationship of a partnership is based on an agreement between persons to share the profits of a business carried on by all or any of them acting for all. The relationship is based on an agreement. The partnership is also governed by the provisions of the Indian Contract Act.

The right of a partner in a partnership property crystallises only when there is a division of properties and assets between partners in the event of a reconstitution of partnership or dissolution of the partnership firm. Till then, no partner has any specific right to any specific property of the firm. It is to be noted to that in respect of properties owned by a partnership firm, the partners do not have any co-ownership rights whatsoever.

What is Co-ownership or joint ownership?

Co-ownership , or joint ownership, is when two or more persons hold title to the same property. In case of co-ownership of property, two or more persons jointly own a property with a right to common possession and use. In such a case, each of the persons is called a coowner . The share of a coowner is specified. However, it will be held in an undivided state only. In case of coownership of a property by four persons, each person owns one-fourth undivided share and interest in the entire property.

A co-owner's share is transferable. Also, a coowner's share is inheritable independently and is capable of being mortgaged, encumbered or offered as a security.

In the absence of specific reference to the extent of coownership in any document, the extent of undivided share, interest, right and title will be in proportion to the share of the co-owner's contribution to the total consideration paid for the acquisition of the whole property.

The individual rights and interests of co-owners are properties by themselves. These are governed by the provisions of property laws like the Transfer of Property Act 1882.

In case there is just sharing of receipts by co-owners from the co-ownership properties , it will not make it a partnership. Similarly, a relationship between a lender of funds and loan amount paid towards interest to him does not create a partnership.

Joint tenancy is a form of co-ownership

When two or more people buy a property but do not specifically mention the share that each has in the property, a 'tenancy-in-common' exists. All the co-owners can use the entire property and every co-owner is deemed to be having an equal share in it. Upon the death of one of the co-owners , the interest in the property does not pass to the other co-owners but to the person named in the Will of the deceased, who will then become a tenant-in-common with the surviving co-owners.

Joint tenancy is a form of co-ownership where property is owned by two or more persons at the same time in equal shares. This type of tenancy provides rights to ownership of the property for the co-owners who outlive other co-owners . When one joint tenant dies, his interest automatically passes on to the surviving joint tenants.

In a tenancy by entirety, the joint tenants are a husband and wife, with each owning half. Neither spouse can sell the property without the consent of the other. In this type of tenancy also the share of ownership of one co-owner automatically passes on to the co-owner who outlives the other.

According to the Transfer of Property Act, every joint or co-owner has a proprietary right to the entire property. Hence, any sale has to be done with the consent of all co-owners involved.

Tag: India Real Estate, Pertnership
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