Joint Tenancy Vs Tenancy In Common: Pros & Cons!

When you acquire a residential or commercial property with several individuals, you will be asked to pick the ownership alternative. There are two popular forms of residential or commercial property ownership in Singapore – joint tenancy and tenancy in common.

This article explains both residential or commercial property ownership key ins Singapore and their benefits and drawbacks. It also highlights the distinctions between the 2 types of joint ownership. It will allow property buyers to make an informed choice on the way of holding when purchasing a residential or commercial property with a co-owner. Furthermore, we will also discuss how you can change the ownership type.

So, let’s start with a quick intro of the ownership types with their advantages and disadvantages.

What is joint tenancy?

Joint tenancy is a type of ownership in which all co-owners of the residential or commercial property will have an equal stake in the residential or commercial property. For example, if you and your wife own a residential or commercial property together, you both will have a 50% share of the residential or commercial property. Similarly, if you co-own a residential or commercial property with 3 other co-owners, each will own a 25% share.

In joint occupancy, you or other co-owner(s) are considered a single legal entity. All co-owners will have equivalent interest and rights, despite how much one owner adds to the residential or commercial property’s purchase price. So, one owner can’t kick out the other co-owners in any scenario.

Under this kind of ownership, the residential or commercial property might only be offered or mortgaged as one unit. Therefore, neither you nor other co-owners can make a unilateral decision on issues like offering off or mortgaging the residential or commercial property.

Joint tenancy is an appealing option for couples or other family members who desire to own residential or commercial property together. Note that it is the ‘default’ holding option on the contract when a couple purchases their home.

Let’s understand it much better with an example.

Suppose there are three adult siblings and a $2 million residential or commercial property agreed upon joint occupancy amongst the parents and the eldest boy at the time of purchase. After their parents’ death, the residential or commercial property is immediately transferred to the oldest son given that he is the only survivor of the co-owners. Even if the parents’ will states otherwise, it becomes irrelevant here.

Pros of joint tenancy

The right of survivorship. It is one of the most significant benefits of joint occupancy. If the event one co-owner dies, his/her share of the residential or commercial property immediately passes to the surviving owner(s), no matter whether there is a will or not.

It likewise assists prevent the delays and expenses connected with probate. So, if you and your better half hold residential or commercial property together under a joint tenancy, she will automatically get the flat’s ownership after your death.

Simple and simple. This ownership structure is simple to comprehend, and the right of survivorship removes the need for complicated legal arrangements or estate planning.

Protection from lenders. In joint occupancy, each owner’s share is secured from their specific creditors. It implies that if one co-owner sustains a financial obligation, their financial institutions can not take the co-owner(s) share of the residential or commercial property.

Cons of joint tenancy

Lack of control. Under joint tenancy, all co-owners own the residential or commercial property instead of their specific shares. It means all co-owners have the same rights over the residential or commercial property, even if there is a considerable distinction in the financial contributions made by various owners.

So, you (being a co-owner) can not offer or mortgage your share of the residential or commercial property without the authorization of the other co-owner(s), even if you pay the major portion of the mortgage payments, bills or maintenance.

Limited estate planning. Under the right of survivorship, the residential or commercial property passes automatically to the enduring co-owner(s) without requiring a will or probate. This makes it tough to guarantee that the residential or commercial property passes to the desired recipients after the death of the surviving co-owner(s).

Potential tax ramifications. Joint tenancy can have tax ramifications for the making it through co-owner(s) upon the death of one co-owner. It is since the deceased owner’s share of the residential or commercial property to the enduring co-owner(s) is considered a gift for tax purposes.

What is decoupling?

Decoupling is when one co-owner buys over the share of another co-owner, or transfers their share to another co-owner by way of a present to relinquish their ownership completely. The co-owner who has actually moved their stake will be dealt with as a first-timer, as they no longer own the residential or commercial property.

This is often the case when a couple wishes to own a second residential or commercial property without sustaining Additional Buyers Stamp Duty (ABSD). For example, a spouse can sell her share to her other half and buy a second residential or commercial property later without paying ABSD. She can then use the saved amount for other home-related purchases, such as home furnishings and/or home restoration.

Why is it hard to decouple a joint tenancy?

In Singapore, decoupling under a joint occupancy is a bit complex. To decouple, you need to go through a legal severance, typically a divorce. You will need to connect to a residential or commercial property legal representative to sign an Instrument of Declaration and then lodge it with the Singapore Land Authority (SLA).

Note that decoupling is only possible for private residential or commercial properties in the majority of circumstances. For an HDB residential or commercial property, you need to reach out to the HDB to understand whether you can or can not decouple it.

What is occupancy in typical?

Tenancy in common is another kind of ownership where each co-owner holds a particular percentage share of the residential or commercial property, usually depending upon their contribution to the purchase price. For example, you could own 70% of the residential or commercial property while your sis (another investor) owns 30%.

Since the shares in the residential or commercial property are clearly divided, you may offer or mortgage your part to a third celebration without requiring the approval of other co-owners. You can also leave it for another person or third-party of your option in your will.

Tenancy in typical is a popular alternative for service partners or friends who wish to invest together in a residential or commercial property however still wish to maintain the liberty of selling or mortgaging their share of the residential or commercial property independently. Sometimes, couples who can not marry may likewise choose occupancy in common.

Taking the exact same example as above, if the residential property was concurred upon tenancy in common, the youngest kid might challenge the eldest child around what is in the will. In such a circumstance, the residential or commercial property would be distributed according to the will.

What occurs to a joint tenancy when a co-owner passes away?

Upon the death of one owner, the shares of the co-owner(s) stay the same. Unlike joint tenancy, there is no right of survivorship. This suggests the departed owner’s share will not automatically move to the enduring co-owner(s). It will be dispersed according to the guidelines stated in the will.

If there is no will, the deceased’s share in the residential or commercial property will be administered to the recipients as per the provisions of the Intestate Successions Act.

Pros of tenancy in typical

More flexibility. Unlike joint occupancy, tenancy in typical allows each co-owner to own a specific share of the residential or commercial property and therefore permits higher versatility in regards to financing and ownership plans. This kind of ownership allows each owner to distribute or move their share of the residential or commercial property to whomever they want by stating it in their will.

Freedom to offer or mortgage. This kind of ownership enables each co-owner to offer or mortgage their share of the residential or commercial property separately without requiring approval or consent from the other co-owners.

With occupancy in common, you can likewise make sure that your share of the residential or commercial property will go to a specific individual or third-party and not your co-owners by default. This enables you to prioritise your kids or sibling to acquire your share over your spouse after you die.

Allows decoupling. Unlike joint occupancy, decoupling is an uncomplicated procedure for tenancy-in-common. Decoupling allows co-owners or customers to purchase a 2nd residential or commercial property without paying ABSD.

All you need to do is offer your share of the residential or commercial property to the other co-owner(s) or a third-party, and the decoupling is complete. If you currently have plans to purchase a 2nd residential or commercial property later on, it is encouraged to split the residential or commercial property 99-1 to minimize the Buyer’s Stamp Duty (BSD) payable upon transferring your share to another co-owner.

Right to live on the residential or commercial property. You might think that if an owner has more share in the residential or commercial property, they can kick your or the other co-owners out of the home in a dispute. However, it doesn’t work like that.

Under occupancy in common, all the co-owners deserve to live in the residential or commercial property regardless of the size of their share. All legal decisions related to the residential or commercial property needs to be made collectively, even if a co-owner holds a little share.

Cons of tenancy in common

No protection from lenders. Unlike joint occupancy, occupancy in common does not secure the co-owners from the financial institutions of specific owners. This indicates that if one owner incurs a financial obligation, your share in the residential or commercial property can likewise be seized by their financial institutions.

Potential for Conflict. Tenancy in common can produce conflict in between the co-owners. Since each owner has the ability to offer or mortgage their share of the residential or commercial property as they wish, it can result in arguments over the use and management of the residential or commercial property.

For instance, if a co-owner wants to offer his/her share of the residential or commercial property to someone else or will it to their company partner, there is nothing you can do about it.

How do I examine the kind of ownership of my residential or commercial property?

For personal residential or commercial property, homeowners can obtain information about the type of ownership by paying $5.25 for “Residential Or Commercial Property Ownership Information” through Integrated Land Information Service (INLIS).

HDB house owners are permitted to examine their way of holding totally free of expense by logging into My HDBPage.

What is the distinction between a joint occupancy and a tenancy in typical?

The table below highlights the essential distinctions between the 2 kinds of co-ownership of residential or commercial property in Singapore:

How does the ownership type affect your mortgage mortgage?

If you have used up a mortgage loan to finance your home purchase, all co-owners have joint liability for the mortgage. If one owner dies, the other co-owner(s) are still accountable to repay the mortgage, or the bank will foreclose on the or commercial property.

When determining mortgage eligibility, banks are just worried about your Total Debt Servicing Ratio (TDSR) and Mortgage Servicing Ratio (MSR). The ownership type – be it joint tenancy or occupancy in common – does not impact your mortgage approval.

Note that what percentage of mortgage payment each co-owner is paying is a personal agreement between the co-owners or debtors. The manner of holding makes little difference when it comes to mortgage loans.

Can I switch from joint occupancy to occupancy in typical?

What if you currently have a joint tenancy however wish to decouple it? Decoupling is somewhat complicated under joint tenancy. But here is the excellent news: you can convert the way of holding from joint tenancy to tenancy in common, and vice-versa.

Note that if you wish to transform your holdings from joint tenancy to tenancy in typical, both owners should have a 50-50 share-no more, no less. For example, if you and your partner are co-owners but want to change to tenancy in typical, then each one of you will need to own/hold a 50% share of the residential or commercial property upon severance, regardless of just how much more you had paid in the residential or commercial property’s purchase price.

Conversely, you can change from a tenancy in common to a joint occupancy just if the share split is already 50-50. This suggests you might be needed to transfer part of your interest to the other co-owner(s) in order to make the shareholdings equal.

For example, if the ownership is divided into 60-40, you should move shares to make it 50-50 before you can apply to change to a joint occupancy. Note that this ownership transfer might bring in payment of stamp duties also.

If the residential or commercial property is still under a mortgage, you will require the consent of the lender bank before changing the way of holding in the residential or commercial property.

The lender bank can not offer permission for the conversion. In such a situation, you need to pay off the exceptional loan amount before applying once again for conversion in the manner of holding.

How can you transform the manner of keeping in Singapore?

In Singapore, the “conversion” of joint occupancy to tenancy in typical is done by accommodations and registering a copy of the Instrument of Declaration with the SLA. All the existing co-owners will require to sign a statutory declaration before a Commissioner for Oaths to mention their intention to hold the residential or commercial property as joint tenants.

When the conversion is concurred upon by all co-owners, they will sign the Instrument of Declaration mentioning their objective to alter the manner of holding.

Note that this will sustain legal fees, usually in between $1,000 and $1,500. Otherwise, the co-owner(s) wishing to hold the residential or commercial property as tenants in typical will sign the statutory statement mentioning their intent as such. The solicitor will then appropriately serve the Instrument of Declaration on the other reluctant co-owner(s).

For private residential or commercial property, you ought to consult a law practice or residential or commercial property lawyer because the subsequent treatment and steps can be complex.

For an HDB residential or commercial property, you must either designate your own lawyer or seek assistance from HDB straight to change the manner of holding.

Which kind of ownership is right for you?

Both joint tenancy and tenancy in typical have their own pros and cons. What will work better for you depends on your individual circumstances and the reason you are buying the residential or commercial property. If you are getting a home with your partner to remain in it with your household, both kinds of ownership must be adequate.

But if your goal behind buying a residential or commercial property with a partner or member of the family is to ensure the residential or commercial property passes effortlessly to the surviving co-owner(s) in case among the owners passes away, joint tenancy may be the very best option for you.

On the other hand, if you are an investor or purchasing the residential or commercial property with another investor or pal for greater versatility and creating rental earnings or offering for gains, then occupancy in typical might be more apt. Moreover, if you ever require to sell your share of the residential or commercial property to satisfy any monetary requirement, you will be totally complimentary to do so.