Joint Tenancy Vs Tenancy In Common: Pros Cons

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When you buy a residential or commercial property with one or more people, you will be asked to pick the ownership option. There are two popular types of residential or commercial property ownership in Singapore - joint occupancy and tenancy in typical.


This article discusses both residential or commercial property ownership key ins Singapore and their pros and cons. It also highlights the differences between the two types of joint ownership. It will make it possible for homebuyers to make a notified decision on the way of holding when purchasing a residential or commercial property with a co-owner. Furthermore, we will also go over how you can alter the ownership type.


So, let's begin with a quick intro of the ownership types with their pros and cons.


What is joint tenancy?


Joint occupancy is a kind 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 spouse 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 three 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 equal interest and rights, regardless of how much one owner adds to the residential or commercial property's purchase cost. So, one owner can't kick out the other co-owners in any scenario.


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


Joint occupancy is an appealing alternative for married couples or other relative who desire to own residential or commercial property together. Note that it is the 'default' holding alternative on the contract when a couple purchases their home.


Let's understand it much better with an example.


Suppose there are 3 adult brother or sisters and a $2 million residential or commercial property agreed upon joint tenancy among the parents and the eldest boy at the time of purchase. After their parents' death, the residential or commercial property is instantly transferred to the oldest kid given that he is the only survivor of the co-owners. Even if the moms and dads' will states otherwise, it ends up being irrelevant here.


Pros of joint tenancy


The right of survivorship. It is among the most significant benefits of joint tenancy. If the occasion one co-owner dies, his/her share of the residential or commercial property automatically passes to the making it through owner(s), despite whether there is a will or not.


It also helps prevent the delays and costs associated with probate. So, if you and your other half hold residential or commercial property together under a joint occupancy, she will immediately get the flat's ownership after your death.


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


Protection from financial institutions. In joint tenancy, each owner's share is safeguarded from their private lenders. It means that if one co-owner sustains a debt, their financial institutions can not seize the co-owner(s) share of the residential or commercial property.


Cons of joint occupancy


Lack of control. Under joint tenancy, all co-owners own the residential or commercial property rather than their private shares. It indicates all co-owners have the exact same rights over the residential or commercial property, even if there is a considerable distinction in the monetary contributions made by different owners.


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


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


Potential tax ramifications. Joint occupancy can have tax implications for the enduring co-owner(s) upon the death of one co-owner. It is due to the fact that the departed owner's share of the residential or commercial property to the enduring co-owner(s) is thought about 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 gift to relinquish their ownership entirely. The co-owner who has actually transferred their stake will be dealt with as a first-timer, as they no longer own the residential or commercial property.


This is typically the case when a couple wishes to own a second residential or commercial property without incurring Additional Buyers Stamp Duty (ABSD). For example, a wife can sell her share to her husband and purchase a 2nd residential or commercial property later on without paying ABSD. She can then utilize the conserved amount for other home-related purchases, such as home furnishings and/or home remodelling.


Why is it challenging to decouple a joint tenancy?


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


Note that decoupling is only possible for personal residential or commercial properties in most situations. For an HDB residential or commercial property, you should connect to the HDB to know whether you can or can not decouple it.


What is occupancy in common?


Tenancy in common is another type of ownership where each co-owner holds a specific portion share of the residential or commercial property, usually depending upon their contribution to the purchase price. For example, you might own 70% of the residential or commercial property while your sister (another financier) owns 30%.


Since the shares in the residential or commercial property are plainly divided, you may offer or mortgage your portion to a 3rd party without requiring the consent of other co-owners. You can likewise leave it for another person or third-party of your choice in your will.


Tenancy in typical is a popular alternative for business partners or buddies who wish to invest together in a residential or commercial property but still wish to maintain the freedom of selling or mortgaging their share of the residential or commercial property separately. Sometimes, couples who can not wed might likewise choose tenancy in typical.


Taking the same example as above, if the was concurred upon occupancy in typical, the youngest kid could challenge the eldest kid around what is in the will. In such a scenario, the residential or commercial property would be distributed according to the will.


What happens to a joint occupancy when a co-owner dies?


Upon the death of one owner, the shares of the co-owner(s) remain the very same. Unlike joint tenancy, there is no right of survivorship. This implies the departed owner's share will not instantly transfer to the making it through co-owner(s). It will be dispersed according to the instructions mentioned in the will.


If there is no will, the deceased's share in the residential or commercial property will be administered to the beneficiaries according to the arrangements of the Intestate Successions Act.


Pros of occupancy in typical


More flexibility. Unlike joint tenancy, tenancy in common permits each co-owner to own a specific share of the residential or commercial property and hence allows higher versatility in regards to financing and ownership plans. This type of ownership allows each owner to distribute or transfer their share of the residential or commercial property to whomever they desire by stating it in their will.


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


With occupancy in common, you can also guarantee 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 brother or sister to acquire your share over your spouse after you die.


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


All you require 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 second residential or commercial property later on, it is advised to split the residential or commercial property 99-1 to save money on the Buyer's Stamp Duty (BSD) payable upon moving your share to another co-owner.


Right to survive on the residential or commercial property. You may believe 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 does not work like that.


Under occupancy in common, all the co-owners have the right to reside in the residential or commercial property regardless of the size of their share. All legal decisions related to the residential or commercial property must be made jointly, even if a co-owner holds a little share.


Cons of occupancy in typical


No security from lenders. Unlike joint tenancy, tenancy in common does not safeguard the co-owners from the financial institutions of individual owners. This means that if one owner incurs a debt, your share in the residential or commercial property can likewise be taken by their financial institutions.


Potential for Conflict. Tenancy in common can develop dispute in between the co-owners. Since each owner has the capability to sell or mortgage their share of the residential or commercial property as they want, it can lead to arguments over the use and management of the residential or commercial property.


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


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


For personal residential or commercial property, homeowners can get details about the kind of ownership by paying $5.25 for "Residential Or Commercial Property Ownership Information" by means of Integrated Land Information Service (INLIS).


HDB homeowners are permitted to examine their way of holding totally free of cost by logging into My HDBPage.


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


The table listed below highlights the crucial differences in between the two types of co-ownership of residential or commercial property in Singapore:


How does the ownership type impact your mortgage mortgage?


If you have taken 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 residential or commercial property.


When figuring out mortgage eligibility, banks are just concerned about your Total Debt Servicing Ratio (TDSR) and Mortgage Servicing Ratio (MSR). The ownership type - be it joint occupancy or tenancy in typical - does not impact your mortgage approval.


Note that what percentage of mortgage payment each co-owner is paying is a private agreement between the co-owners or customers. The manner of holding makes little distinction when it pertains to mortgage loans.


Can I change from joint tenancy to tenancy in typical?


What if you currently have a joint occupancy but desire to decouple it? Decoupling is rather made complex under joint occupancy. But here is the great news: you can convert the way of holding from joint tenancy to occupancy in typical, and vice-versa.


Note that if you want 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 spouse are co-owners however wish to switch to tenancy in common, then every one of you will have to own/hold a 50% share of the residential or commercial property upon severance, despite just how much more you had paid in the residential or commercial property's purchase rate.


Conversely, you can switch from an occupancy in typical to a joint occupancy just if the share split is already 50-50. This means you might be required to transfer part of your interest to the other co-owner(s) in order to make the shareholdings equal.


For instance, if the ownership is split into 60-40, you need to move shares to make it 50-50 before you can use to change to a joint occupancy. Note that this ownership transfer may attract payment of stamp responsibilities too.


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


The lender bank has the right to not give permission for the conversion. In such a scenario, you need to settle the outstanding loan amount before applying again for conversion in the manner of holding.


How can you transform the manner of holding in Singapore?


In Singapore, the "conversion" of joint tenancy to occupancy in common is done by lodging and registering a copy of the Instrument of Declaration with the SLA. All the existing co-owners will need to sign a statutory declaration before a Commissioner for Oaths to mention their objective to hold the residential or commercial property as joint occupants.


When the conversion is concurred upon by all co-owners, they will sign the Instrument of Declaration specifying their intent to change the way of holding.


Note that this will sustain legal charges, typically 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 declaration mentioning their objective as such. The solicitor will then duly serve the Instrument of Declaration on the other unwilling co-owner(s).


For personal residential or commercial property, you need to speak with a law practice or residential or commercial property attorney given that the subsequent treatment and steps can be intricate.


For an HDB residential or commercial property, you need to either select your own lawyer or seek support from HDB straight to alter the way of holding.


Which kind of ownership is best 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 factor you are buying the residential or commercial property. If you are getting a home with your spouse to remain in it with your family, both types of ownership should be adequate.


But if your goal behind buying a residential or commercial property with a spouse or relative is to ensure the residential or commercial property passes flawlessly to the enduring co-owner(s) in case one of the owners passes away, joint tenancy might be the very best choice for you.


On the other hand, if you are an investor or acquiring the residential or commercial property with another financier or pal for higher versatility and producing rental income or offering for gains, then tenancy in typical might be more apt. Moreover, if you ever need to sell your share of the residential or commercial property to satisfy any monetary need, you will be totally free to do so.