Synopsis
‘Joint tenancy’ and ‘tenancy in common’ are two apparently similar sounding but diametrically opposite modes of jointly owning immovable property. The Indian Law in this respect is not codified and is derived from English Law and decisions. This Article examines these concepts, their difference, their termination and their use in Hindu Law, Income-tax Act, Succession Law, etc.
Introduction
Immovable Property may be acquired singly or jointly, i.e., two or more persons together acquire the property. While joint owners are commonly referred to as co-owners, when the property is joint, then a question arises whether the purchasers are owning the property as Joint Tenants or as Tenants in Common? Both these terms may appear similar but in Law, there is a vast difference between the two. Depending upon how a property has been acquired the succession to the same would be determined. It may be noted that although the terms may indicate that this applies only to tenanted properties, they are also used for ownership properties. Hence, it becomes very important while acquiring a property that the document very clearly specifies the manner in which it is being jointly acquired. It is very interesting to note that inspite of this being a matter of such significance, neither the Transfer of Property Act, 1882 nor any other Indian enactment deals with these concepts. These are very popular under English Law and hence, we need to refer to English as well as Indian judgments to understand their essence. These concepts have been impliedly or expressly applied in various Laws. Let us examine some of the facets of these two important concepts in Property Law.
Joint Tenancy
A joint tenancy has certain distinguishing features, such as, unity of title, interest and possession. Each co-owner has an undefined right and interest in property acquired as joint tenants. Thus, no coowner can say what is his or her share. One other important feature of a joint tenancy is that after the death of one of the joint tenants, the property passes by survivorship to the other joint tenant and not by succession to the heirs of the deceased coowner. For example, X, Y and Z are owning a building as joint tenants. Z dies. His undivided share passes on to X and Y. Joint Tenancy is generally resorted to in case of a house purchased by a husband and wife. Hence, after the death of the husband, the wife would become the sole owner, and not the heirs of the husband. This is very popular in England. Property owned by a Hindu coparcenary in which rights of family members pass by survivorship is an example of joint tenancy – Bahu Rani vs. Rajendra Bux Singh, AIR 1933 PC 72. In case of a Will, where property is bequeathed to two or more beneficiaries in an undefined share, then it may be treated as a joint tenancy.
Tenancy-in-Common
This is the opposite of joint tenancy since the shares are specified and each co-owner in a ‘tenancy-in– common’ can state what share he owns in a property. On the death of a co-owner, his share passes by succession to his heirs / beneficiaries under the Will and not to the surviving co-owners. If a Will bequeaths a property to two beneficiaries in the ratio of 60:40, then they are treated as ‘tenantsin- common’.
Section 26 of the Income-tax Act provides that where property consisting of building and land appurtenant thereto is owned by two or more persons and their respective shares are definite and ascertainable, then the income under the head House Property shall not be taxed as if it were an AOP but in their individual hands in accordance with their respective shares. The Supreme Court in Indira Balkrishna, 39 ITR 546 (SC) has held that co-widows inheriting property from their husband in equal shares would be assessed u/s. 26. This section is a recognition of the concept of tenancy-in-common. However, for section 26 to apply, the shares must be fixed or clear. In Sh. Abdul Rahman, 12 ITR 302 (Lahore), it was held that due to a litigation it was impossible to determine the shares of co-owners and hence, the provisions of this section could not be applied.
Transfer of Property Act
Section 45 of the Act provides that where immoveable property is purchased two or more persons and the consideration for the same is paid out of a common fund, their share in the property is in the same ratio as their contributions to the funds. This however, is subject to a contract to the contrary. For instance, A and B’s share in common funds is in the ratio of 55:45 for buying a land. Their shares in the land would also be in the same ratio. If they contribute through separate funds then their share would be in the proportion of their funds. However, if there is no indication as to their share in the fund, then they shall be presumed to be equally interested in the property. Thus, if the shares in the funds are not known, then A and B would be presumed to hold the land equally.
However, this section does not yet fully address the issue as to whether the transferees buy as joint tenants or as tenants-in-common. In cases where the property has been acquired out of a common fund and the intention of the co-owners to own the property as joint tenancy, then it may be treated as one. In cases, where their shares in the fund are clear and demarcated, it may be treated as an acquisition by tenants in common.
What Prevails in India?
Unless a contrary intention appears from the Agreement, the Courts in India always lean in favour of tenancy in common and against joint tenancy. This is so whether the acquisition is by way of an Agreement or under a Will. The main clauses must make it very clear that the property is to be held as joint tenants or else the contrary would always be presumed – Mahomed Jusab Abdulla vs. Fatmabai Jusab Abdulla, 1947 BCI (O) 4 (Bom); Konijeti Venkayya vs. Thammana Peda Venkata Subbarao, 1955 AIR 1957 AP 619.
The Supreme Court in Boddu Venkatakrishna Rao vs. Boddu Satyavathi, 1968 SCR (2) 395 has held as follows in relation to a bequest under a Will to more than one beneficiary:
“The principle of joint tenancy appears to be unknown to Hindu law, except in the case of coparcenary between the members of an undivided family……………………..that there were indications in the will that the intention of the testatrix was that the foster children should take as joint tenants and that this was apparent from the clause in the will which provided that “the entire property should be in possession of both of them and that both of them should enjoy throughout their lifetime the said property and that after their death the children that may be born to them should enjoy the same ……
We do not think that from this one can spell out a joint tenancy which is unknown to Hindu law except as above stated. The testatrix did not expressly mention that on the death of one all the properties would pass to the other by right of survivorship. We have no doubt on a construction of the will that ‘the testatrix never intended the foster children to take the property as joint tenants. The foster children who became tenants in common partitioned the property in exercise of their right.”
The above position of HUF coparcenary property being joint tenancy property is subject to one important exception introduced by section 30 of the Hindu Succession Act, 1956. According to this section, any Hindu may dispose of by a Will his undivided interest in the coparcenary property. Under the uncodified Hindu Law, no karta/coparcener could dispose of his undivided share in the coparcenary property. His share passed by survivorship and not by succession (as is the case with all joint tenancies). Now, section 30 permits a coparcener to make a Will even for such joint property – Jayaram Govind Bhalerao vs. Jaywant Balkrishna Deshmukh 2008(3) Bom. CR. 585; CWT vs. Sampatrai Bhutoria & Sons, 137 ITR 868 (Cal). The Supreme Court in the case of Shyam Lal vs. Sanjeev Kumar (2009) 12 SCC 454, has held that:
“…In so far as the question whether under the custom governing the parties, a Will could be executed in respect of ancestral property is concerned, the same is no more res integra. ………in view of section 30 read with section 4 of the Hindu Succession Act, 1956 a male Hindu governed by Mitakshara system is not debarred from making a Will in respect of coparcenary/ancestral property….”
Even if there is anything contrary in the Act or any other custom, the interest in Mitakshara coparcenary property is capable of being disposed of by way of Will. The bar created by way of custom that the coparcenary property is not capable of being alienated by executing a will by one of the coparceners is taken away and rule of survivorship is finished to a limited extent. But the limitation continues to apply in the case of gift and other alienations which are inter vivos – Kartari Devi vs. Tota Ram, 1992(1) SLC 402 (HP).
After the 2005 Amendment to the Hindu Succession Act, even daughters who are coparceners can make a Will for their coparcenary property since they are now at par with sons.
The Indian Succession Act, 1925 states that where a legacy under a Will is given to two persons jointly and one of them dies before the person making the Will, then the other legatee takes the property in its entirety. But if the intention of the testator was to give them distinct shares (i.e., as tenants in common), then the surviving legatees gets only his share. These provisions even apply to a Will by a Hindu – Krishnadas Tulsidas vs. Dwarkadas aliandas, 1936 BCI (O) 47. Thus, unless the Will is very clear that the legatees must not have a determinate share, they will get their bequest as tenants in common.
Terminating Joint Tenancy
Joint tenancy can come to an end by any one of the following modes:
(a) One of the co-owners selling his undivided share to an outsider;
(b) Mutual Agreement amongst all the co-owners;
(c) Partition of joint tenancy
(d) A manner of dealing/conduct by all co-owners which indicates an end of joint tenancy
(e) Property vesting in the last surviving co-owner after which it becomes his sole property
Termination of joint tenancy by mutual agreement along with termination by conduct require special attention. Various old as well as very recent English decisions have dealt with this issue of termination of joint tenancy. Once joint tenancy comes to an end, the co-owners continue to hold the property as tenants in common. Some of the landmark English decisions in this respect are as follows:
(a) Williams vs. Hensman, 1861 EWHC Ch J87 / 70 ER 862 This is the most important decision which has laid down how joint tenancy can be severed. The High Court of Chancery held as follows:
“A joint-tenancy may be severed in three ways: in the first place, an act of any one of the persons interested operating upon his own share may create a severance as to that share. The right of each joint-tenant is a right by survivorship only in the event of no severance having taken place of the share which is claimed under the jus accrescendi. Each one is at liberty to dispose of his own interest in such manner as to sever it from the joint fund –losing, of course, at the same time, his own right of survivorship. Secondly, a joint-tenancy may be severed by mutual agreement. And, in the third place, there may be a severance by any course of dealing sufficient to intimate that the interests of all were mutually treated as constituting a tenancy in common………………for it must be borne in mind that a joint-tenancy is a right which any one of the joint-tenants may determine when he pleases; and, if all continue to deal on the footing of their interests not being joint, it would be most inequitable to treat it as a joint-tenancy when all the parties, whether in ignorance or not, have dealt with their interests as several.
I am of opinion, therefore, that the continuance of a joint-tenancy is not reconcilable with the covenant of indemnity to which I have referred; and I must, therefore, hold that all the shares were severed.”
(b) Rugh Burgess vs. Sophia Rawnsley, (1975) EWCA Civ 2
In this case, it was held that even if an agreement terminating joint tenancy was not in writing and was not specifically enforceable, yet it was sufficient to effect a severance. All that is required is a clear evidence of intention by both parties that the property should henceforth be held in common and not jointly.
(c) Wallbank vs. Price (2007) EWHC 3001 (Ch)
The essence of a joint tenancy in equity is that each joint tenant holds the whole of the beneficial interest jointly and holds nothing separately. In this case a declaration by a mother that her daughters should receive her ‘half share’ either on the disposal of the property or at the discretion of the father, was
treated as sufficient evidence to indicate severance of joint tenancy.
(d) Davis vs. Smith, (2011) EWCA Civ 1603
A married couple intended to serve on each other, a notice of severance of joint tenancy over their marital house, but did not. The Court held that, on carefully examining the correspondence between the parties’ solicitors, their conduct and actions, joint tenancy was severed through their course of dealings. The Court added that the conclusion of a split was inevitable and only appropriate considering the course of dealings between them. This is a very important decision since it held that even though there was no formal severance, tenancy-in-common can be created.
Termination of Tenancy in Common
Tenancy in Common can be terminated by any one of the co-owners buying out the shares of the other co-owners. Thus, after this the property becomes sole ownership. This is usually done by way of a Release Deed, under which the releasers release their share in favour of a co-owner, usually for some consideration.
The decision of the supreme Court in TN Aravinda Reddy, 120 IR 46(SC) dealt with a case of termination of a HUF’s joint tenancy property by way of a partition. By way of a partition deed, the HUF property was held by four brothers as tenants-in-common, with each having a 25% interest in the same. Subsequently, three brothers executed a release deed for their respective 25% share for a consideration in favour of the fourth brother, thereby making him the sole owner. The Court held that the acquisition of the shares by way of a release deed amounted to a purchase u/s. 54 of the Income-tax Act by the fourth brother.
In Maharashtra, a release deed attracts stamp duty as on a conveyance on the fair market value of the share released. However, if the property released is ancestral property and it is released in favour of certain defined relatives, then the stamp duty is only Rs. 200. Further, in case of a release of property without consideration, the provisions of section 56(2)(vii) of the Income-tax Act, must also be considered in all cases where the parties are not “relatives” within the meaning of the section. Conversely in cases where release is for consideration, capital gains tax incidence on the releaser must be kept in mind.
Tenancy in common can also be converted into joint tenancy by throwing such a property into the joint HUF hotchpotch after which date it would be treated as HUF property where no one member would have a determinate share. However, in such a case, the clubbing provisions u/s. 64(2) of the Income-tax Act should also be factored.
Conclusion
The Law in respect of jointly acquired immovable property is quite multi-faceted and complex. Since in India, it is entirely case law made, it becomes all the more unique. It would be advisable that while making an agreement for purchasing a property, making a Will, etc., the provisions relating to manner of joint acquisition is very clearly specified. If the intention is, for any reason, to acquire it as joint tenancy, then the wordings should be very clear.
