I am buying a Joint Property with Parents, what all points i should take care. I was in a fix what to say and what not to say :). It’s hard to answer such queries of my clients. Buying a Joint Property with Parents is quite an emotional decision for a buyer. As a consultant, i have to be extra cautious in selection of words to answer these queries. Despite being extra careful, sometimes the client gets hurt. The biggest problem in India is that people are not open to discussing inheritance and emotional issues. The buyer becomes too sensitive to discuss such topics in a professional way.
As a buyer, we can avoid these discussions today but in future when we face practical and legal issues then we regret our past decision. Yesterday, i was discussing this topic of buying a joint property with parents in ref to one of my clients. I shared my concerns with my wife, and she gave me an excellent idea of posting a blog on this topic. How dumb on my part this thought never ran across my mind :). On a lighter note, if i will put everything on my blog then no one will consult me :). I can share my thoughts freely through this blog without hurting the feelings of my clients. For simplicity purpose, in this post, i will discuss Buying a Joint Property with Parents. I also receive queries from clients who are holding a joint property with parents. I will address it in one of a future post.
Buying a Joint Property with Parents -What is the objective?
If you are buying a Joint Property with Parents, the first and foremost question you should ask yourself is what is the objective. Until unless the objective is clear, this query cannot be answered. Some of the common objectives that i came across are
1. Parents are pooling money for purchase
2. One of the parents is a co-applicant of Home Loan to increase home loan eligibility. In such cases, either parent or bank insist that a parent should be co-owner
3. Parents will be staying in the property: In this case, the buyer can buy the property in his/her name, and no one is stopping him to allow his parents to stay in his house. In some cases, parents insist inclusion as a co-owner as they fear that maybe in future their child might not allow them to stay in the house.
4. Parents can easily manage, maintain and sell/rent the property: This objective is mostly given by NRI clients.
There is a long list of goals but in most of the cases, the decision of Buying a Joint Property with Parents is purely emotional. Let me clarify that i am not against or for the joint purchase. It is a purely personal decision of the buyer. The objective of this post is only to create awareness on certain points. These points may impact you financially in future. As i always believe that any financial decision should be well thought through. The final decision is of a buyer. My clients ask me what will be your decision in this situation. On the personal front, my decision of buying a Joint Property with Parents is known to my parents, and they are happy with the same :).
Buying a Joint Property with Parents – 5 Important Points
1. Inheritance: Not many buyers are aware that until unless an owner of the property leaves a WILL behind him/her, all class I legal heirs have an equal stake in the assets. In one of the case, a person A bought joint property with his father. He has four siblings. The father had 50% share in his property. After the death of property under Hindu Succession Act, the revised share of Person A in the property was 60%. All other siblings had 10% share each in his property. There was a legal dispute, and though 100% money was pooled by person A court delivered a decision for siblings.
2. Home Loan EMI: It’s a biggest misconception that if the person is paying 100% Home Loan EMI, then he can claim entire property. In this case, person B decided Buying a Joint Property with Parents. He took a home loan and was paying 100% EMI. After some time, the differences cropped up between person B and his parents. His parents decided to inherit their share in the property of person B to their daughter because of disagreements with son i.e. person B. Person B challenged the WILL of his parents, and the court ruled for parents. Therefore just because i am paying the EMI of the property does not mean that i own the share of my parents in the property.
3. Unfortunate Event: I will take a hypothetical example of myself. Suppose after Buying a Joint Property with Parents on loan, i die in an accident. I bought a property in joint ownership with my mother. In this case, after my death revised shareholding under Hindu Succession Act will be 66.66%, 16.66% and 16.66% respectively of my mother, my wife and my child. The biggest question is who will clear my home loan liability in this case :).
As a good husband and father, i bought term insurance to cover my home loan amount. But after my death, my wife will refuse to clear the home loan from term insurance claim. She will say that she and her child’s share is only 33.33% in the property then why she should clear the home loan. The same logic can be given by my mother. Normally such cases are impossible to resolve due to lack of trust factor. It’s a hard reality of today.
4. Old Parents: The decision of Buying a Joint Property with Parents is usually taken by a buyer at the age of 35 years. Typically parents are 60+. In few cases, i observed to safeguard financial interests buyer included parents as co-owner but also executed WILL in his favor. Trust me out of 10 times, the authenticity and legality of the WILL were challenged eight times. My clients are still fighting a legal case. In one of the case, the court ordered to share the rent with claimants i.e. class I legal heirs. Also, remember that in this instance also 100% contribution was made by my client.
One of the safeguards that my client would have taken was to get medical fitness certificate before execution of WILL. A medical certificate from CMO certifies that executor is mentally and physically fit to execute the WILL.
We also know that if any property goes under dispute, then it is always tagged as discounted property and sold at a substantial discount.
5. Time and Cost Involved: Buying a Joint Property with Parents is a good decision but as a buyer it also comes at a cost and is time-consuming. In joint property, all the transfers are in a joint name like electricity bill, water bill, property tax, etc. You may need to take your parents along for all formalities. In the case of inheritance, changing & transferring back is again enormous cost. It is also time-consuming exercise. You may need to fork out stamp duty or other misc charges.
Words of Wisdom: Again i clarify that decision of Buying a Joint Property with Parents should be taken with a particular objective. It should be well thought through. A buyer should discuss with the siblings, and it should be with mutual consent and understanding of entire family. All the points should be discussed with the family to avoid any future dispute. If parents are pooling money, then it is advisable that property should be in their name only. If you are buying from the own fund, then you buy in your name. If there is fund pooling, then it is advisable all the class I heirs of your parents should pool in the proportion of ownership.
Each case is unique in nature. I tried to cover all general scenarios, but one shoe doesn’t fit all. It is important to discuss and deliberate such matter before decision making. After all buying a Joint Property with Parents is an emotional decision as i mentioned earlier.
Copyright © Nitin Bhatia. All Rights Reserved.
Great Post Nitin.
Thanks :)
Dear Nitin;
Thanks for posting such a nice post, it is same situation in my case, I have bought a property jointly with my mother coz she had funded me that time.now I am soly paying EMI of that property.now I wanted to remove her name from the property title for future implications. I have discussed this things with my mother and she is also agreed to remove her name from property..
so can u please suggest 1) what is the procedure to remove her name from property 2) Dose it have any cost ? 3) I have loan from axis bank so all documents are with them so what is the right way.
As the property is mortgaged therefore you cannot change ownership of the property till title is free from encumbrance. Therefore, only solution in your case is that you mother can execute WILL in your favor. Once your home loan is over, she can execute gift deed in your favour.
Dear Nitin,
Very Nice information.
Dear Nitin,
Very Nice information. I have a query:
As you said well, there is a objective to buy jointly. In my case, my wife has left me 2 years back, no signs of mutual separation. I have to move on in life, I’m planning to buy a flat for own use with joint funds from me & my parents. I want to co-own flat with my mother, so that my wife should not claim rights in it. So shall I :
1. Be the first applicant/owner & my mother second or
2. she’ll be first & me second or
3. let my mother be sole owner ?
I have no kids, a married sister, no plan of loan. So no worry if my sister gets the property after my demise. the only thing is my wife shouldn’t get anything.
Thanks in advance for your answer
Any property bought by you even jointly with your mother, your wife will have stake in the same till the separation process is completed. Secondly, if your mother buy in her name and you pay for it as a gift then also you need to explain in court and your contribution will be included in your estate. The court call for all bank statements and other details. Unfortunately there is no escape. The best solution is to wait till separation process is completed.
Thank you Sir.
Dear Sir
I want to buy new flat by selling the one which own by parents. Since the cost of new flat is high i am taking the Home Loan to cover the cost. I also own a flat in the same city jointly with wife (Self occupied)
Now My queries are
1) Can I registered the new Flat jointly with parents & who should be the first owner?
2) If i gave the new flat on rent then can i take the rent in the name of Parents to avoid Tax?
3) Can i claim tax benefits under 80c against home loan.
Thanks in advance….
1. It depends on the objective. You also need to check the capital gain liability. You can buy jointly with your parents. 1st, 2nd or 3rd owner does not matter. If the proportion of ownership is not mentioned then all the owners will be have equal share in new property
2. Rent will be in proportion of ownership in property.
3. You can claim tax deduction u/s 80C.
Hello Nitin sir,
My family is planning to buy a 1 BHK flat in Virar, Palghar. The agreement value of the house is 25 lakh and out of which we have got 99% loan from India Bulls. The EMI will be 22,000 rupees for 20 years. Stamp dury, registration, VAT, service tax will be paid by my father’s savings.
My father has got only 3 years and 6 months of service so this much loan was not possible for him. So we decides to get loan from my sister (age 23) and it will be my father only who will pay monthly EMI (in name of my sister, of course). She will get married next year. So before and even after her marriage, the whole EMI will be paid by my father only. After his retirement (3yr 6m), he will get around Rs.10-15 lakh as he is a government employee and this amount will be used as prepayment of the loan, so the tenure will get reduced to 12 years aprox (according to loan calculator). The remaining loan will be paid by me (his son) in further years.
So my question is, can we register this flat in the name of my father only, even if loan is sanctioned by sister’s name? The estate agent said flat will be registered on sister’s name only as she is getting loan.
Or else, is co-ownership is possible in our case as per government laws? In our case, my sister is only a way to get loan. The whole EMI will be paid by my father and me.
We don’t want to register her name as flat owner because after 1 year, when she will be married, her husband may refuse to pass the ownership to us even if we have paid all the EMIs. Even if my sister want to change ownership, her husband may force her not to do so. He may, in worst case, ask us to vacant home. Thus, for safety, we and even my sister want to register flat by name of my Father. Is this possible in Virar (Palghar, Maharashtra)?
Also the agreement paper will be given to India Bulls as they are giving loan. Can we change ownership before completion of loan payment period, say after 5 years? Or else can we make some court agreement that sister will give up ownership to father after certain number of years?
Please help me. I am in big trouble regarding this issue.
1. Property can be registered only in your father’s name. Your sister can be only home loan guarantor and your father being primary borrower.
2. Ownership cannot be changed during home loan period as the property will be mortgaged.