1 Answer
Dear Client, this is a common question people have, and the good news is that partitioning a mortgaged property through a partition deed is legal, as long as it is done in a careful manner and the correct order, otherwise complications may arise in a serious way. The first and most important thing to understand is that the bank's interest in a mortgage will not go away just because you decided to partition the property. The mortgage will stay in place, and the bank must be involved in the process before anything can be signed or registered. Once that is done, you will need to formally contact your bank and explain to them that all the co-owners want to execute a Partition Deed and request a No Objection Certificate from them.
Banks generally agree to this provided the loan repayment arrangement is clearly worked out and their security is not weakened.
Once the bank gives its NOC, your advocate must draft the partition deed very carefully. It must mention the existing mortgage openly the lender's name, the outstanding loan amount, and most importantly, exactly how the loan liability will be shared between the co-owners after the partition is done. This last part is critical. If it is left vague, one co-owner could end up bearing the full burden of the loan even though they only took one portion of the property, which leads to serious disputes later.
After the deed is drafted and all co-owners agree to its contents, all parties must appear together at the Sub-Registrar's Office where the property is located, along with the original title documents, encumbrance certificate, identity proofs, and the bank's NOC.
After the deed has been signed and the stamp duty has been paid, and the deed has been filed with the Registry Office, the co-owners will each receive legal title to their portion of the property. However, each co-owners legal title will be subject to the mortgage liability to the extent of the allocation contained in the deed itself.
In summary, you can do this, but you must get a NOC from the bank prior to doing this; you should clearly allocate liability in the deed; you need to have an attorney draft the deed properly. You should not cut corners in any of these three areas or the partition may be challenged later.