When you purchase a property with one or more people, you will be asked to choose the ownership option. There are two popular forms of property ownership in Singapore – joint tenancy and tenancy in common.
This article explains both property ownership types in Singapore and their pros and cons. It also highlights the differences between the two types of joint ownership. It will enable homebuyers to make an informed decision on the manner of holding when buying a property with a co-owner. Furthermore, we will also discuss how you can change the ownership type.
So, let’s start with a quick introduction of the ownership types with their pros and cons.
Joint tenancy is a type of ownership in which all co-owners of the property will have an equal stake in the property. For example, if you and your wife own a property together, you both will have a 50% share of the property. Similarly, if you co-own a property with three other co-owners, each will own a 25% share.
In joint tenancy, 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 contributes to the property’s purchase price. So, one owner can’t kick out the other co-owners in any situation.
Under this type of ownership, the property could only be sold or mortgaged as one unit. Therefore, neither you nor other co-owners can make a unilateral decision on issues like selling off or mortgaging the property.
Joint tenancy is an attractive option for married couples or other family members who want to own property together. Note that it is the ‘default’ holding option on the contract when a couple purchases their home.
Let’s understand it better with an example.
Suppose there are three adult siblings and a $2 million property agreed upon joint tenancy among the parents and the eldest son at the time of purchase. After their parents’ death, the property is automatically transferred to the eldest son since he is the only survivor of the co-owners. Even if the parents’ will states otherwise, it becomes irrelevant here.
The right of survivorship. It is one of the most significant advantages of joint tenancy. If the event one co-owner passes away, his/her share of the property automatically passes to the surviving owner(s), regardless of whether there is a will or not.
It also helps avoid the delays and costs associated with probate. So, if you and your wife hold property together under a joint tenancy, she will automatically get the flat’s ownership after your death.
Simple and straightforward. This ownership structure is easy to understand, and the right of survivorship eliminates the need for complicated legal arrangements or estate planning.
Protection from creditors. In joint tenancy, each owner’s share is protected from their individual creditors. It means that if one co-owner incurs a debt, their creditors cannot seize the co-owner(s) share of the property.
Lack of control. Under joint tenancy, all co-owners own the property rather than their individual shares. It means all co-owners have the same rights over the property, even if there is a significant difference in the financial contributions made by different owners.
So, you (being a co-owner) cannot sell or mortgage your share of the property without the consent of the other co-owner(s), even if you pay the major portion of the mortgage payments, bills or upkeep.
Limited estate planning. Under the right of survivorship, the property passes automatically to the surviving co-owner(s) without needing a will or probate. This makes it difficult to ensure that the property passes to the intended beneficiaries after the death of the surviving co-owner(s).
Potential tax implications. Joint tenancy can have tax implications for the surviving co-owner(s) upon the death of one co-owner. It is because the deceased owner’s share of the property to the surviving co-owner(s) is considered a gift for tax purposes.
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 completely. The co-owner who has transferred their stake will be treated as a first-timer, as they no longer own the property.
This is often the case when a couple wants to own a second property without incurring Additional Buyers Stamp Duty (ABSD). For example, a wife can sell her share to her husband and buy a second property later without paying ABSD. She can then use the saved amount for other home-related purchases, such as furnishings and/or home renovation.
In Singapore, decoupling under a joint tenancy is a bit complicated. To decouple, you must go through a legal severance, usually a divorce. You will need to reach out to a 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 private properties in most scenarios. For an HDB property, you must reach out to the HDB to know whether you can or cannot decouple it.
Tenancy in common is another form of ownership where each co-owner holds a specific percentage share of the property, typically depending on their contribution to the purchase price. For example, you could own 70% of the property while your sister (another investor) owns 30%.
Since the shares in the property are clearly divided, you may sell or mortgage your portion to a third party without needing the consent of other co-owners. You can also leave it for another person or third-party of your choice in your will.
Tenancy in common is a popular option for business partners or friends who want to invest together in a property but still want to retain the freedom of selling or mortgaging their share of the property independently. Sometimes, couples who cannot marry may also go for tenancy in common.
Taking the same example as above, if the residential property was agreed upon tenancy in common, the youngest son could challenge the eldest son around what is in the will. In such a situation, the property would be distributed according to the will.
Upon the death of one owner, the shares of the co-owner(s) remain the same. Unlike joint tenancy, there is no right of survivorship. This means the deceased owner’s share will not automatically transfer to the surviving co-owner(s). It will be distributed according to the instructions stated in the will.
If there is no will, the deceased’s share in the property will be administered to the beneficiaries as per the provisions of the Intestate Successions Act.
More flexibility. Unlike joint tenancy, tenancy in common allows each co-owner to own a specific share of the property and thus allows greater flexibility in terms of financing and ownership arrangements. This type of ownership allows each owner to distribute or transfer their share of the property to whomever they want by stating it in their will.
Freedom to sell or mortgage. This type of ownership allows each co-owner to sell or mortgage their share of the property independently without needing permission or consent from the other co-owners.
With tenancy in common, you can also ensure that your share of the property will go to a specific person or third-party and not your co-owners by default. This allows you to prioritise your children or sibling to inherit your share over your spouse after you pass away.
Allows decoupling. Unlike joint tenancy, decoupling is a straightforward process for tenancy-in-common. Decoupling allows co-owners or borrowers to buy a second property without paying ABSD.
All you need to do is sell your share of the property to the other co-owner(s) or a third-party, and the decoupling is complete. If you already have plans to buy a second property later, it is advised to split the property 99-1 to save on the Buyer’s Stamp Duty (BSD) payable upon transferring your share to another co-owner.
Right to live on the property. You might think that if an owner has more share in the property, they can kick your or the other co-owners out of the house in a dispute. However, it doesn’t work like that.
Under tenancy in common, all the co-owners have the right to live in the property irrespective of the size of their share. All legal decisions related to the property must be made jointly, even if a co-owner holds a small share.
No protection from creditors. Unlike joint tenancy, tenancy in common does not protect the co-owners from the creditors of individual owners. This means that if one owner incurs a debt, your share in the property can also be seized by their creditors.
Potential for Conflict. Tenancy in common can create conflict between the co-owners. Since each owner has the ability to sell or mortgage their share of the property as they wish, it can lead to disagreements over the use and management of the property.
For example, if a co-owner wants to sell his/her share of the property to someone else or will it to their business partner, there is nothing you can do about it.
For private property, homeowners can obtain information about the type of ownership by paying $5.25 for “Property Ownership Information” via Integrated Land Information Service (INLIS).
HDB homeowners are allowed to check their manner of holding free of cost by logging into My HDBPage.
The table below highlights the key differences between the two types of co-ownership of property in Singapore:
|Right of Survivorship
|Applies; no estate duty incurred for the transfer of ownership to existing co-owner
|Does not apply; estate duty may apply for the transfer of stake to the beneficiary
|Effectiveness of Will
|No will is required for the transfer of ownership
|Transfer of ownership depends on what is stated in the will
|Complicated process; one may need to convert the manner of holding
|Straightforward; simply sell your share to another co-owner
|All co-owners have 100% interest/stake in the property
|Can be split based on interest/stake in the property
|Stake selling or mortgage
|Cannot sell or mortgage stake in the property without the consent of other co-owners
|Stake in individual ownership can be sold off or mortgages without affecting co-owners
|Control of ownership
|Property can only be transferred to co-owners(s) selected at the time of property purchase
|No control of existing co-owners over new co-owners coming aboard
|For spousal relationships
|For unrelated parties engaging in crowdfunding or shared financing of properties
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 passes away, the other co-owner(s) are still liable to repay the mortgage, or the bank will foreclose on the property.
When determining home loan eligibility, banks are only concerned about your Total Debt Servicing Ratio (TDSR) and Mortgage Servicing Ratio (MSR). The ownership type – be it joint tenancy or tenancy in common – does not affect your home loan approval.
Note that what proportion of mortgage payment each co-owner is paying is a private agreement between the co-owners or borrowers. The manner of holding makes little difference when it comes to mortgage loans.
What if you already have a joint tenancy but want to decouple it? Decoupling is somewhat complicated under joint tenancy. But here is the good news: you can convert the manner of holding from joint tenancy to tenancy in common, and vice-versa.
Note that if you want to convert your holdings from joint tenancy to tenancy in common, both owners must have a 50-50 share—no more, no less. For example, if you and your spouse are co-owners but want to switch to tenancy in common, then each one of you will have to own/hold a 50% share of the property upon severance, regardless of how much more you had paid in the property’s purchase price.
Conversely, you can switch from a tenancy in common to a joint tenancy only if the share split is already 50-50. This means you may be required 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 split into 60-40, you must transfer shares to make it 50-50 before you can apply to switch to a joint tenancy. Note that this ownership transfer might attract payment of stamp duties as well.
If the property is still under a mortgage, you will need the permission of the lender bank before changing the manner of holding in the property.
The lender bank has the right to not give consent for the conversion. In such a scenario, you must pay off the outstanding loan amount before applying again for conversion in the manner of holding.
In Singapore, the “conversion” of joint tenancy to tenancy 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 state their intention to hold the property as joint tenants.
When the conversion is agreed upon by all co-owners, they will sign the Instrument of Declaration stating their intention to change the manner of holding.
Note that this will incur legal fees, usually between $1,000 and $1,500.Otherwise, the co-owner(s) wishing to hold the property as tenants in common will sign the statutory declaration stating their intention as such. The solicitor will then duly serve the Instrument of Declaration on the other unwilling co-owner(s).
For private property, you should consult a law firm or property lawyer since the subsequent procedure and steps can be complex.
For an HDB property, you must either appoint your own solicitor or seek assistance from HDB directly to change the manner of holding.
Both joint tenancy and tenancy in common have their own pros and cons. What will work better for you depends on your personal circumstances and the reason you are buying the property. If you are getting a home with your spouse to stay in it with your family, both types of ownership should suffice.
But if your objective behind buying a property with a spouse or family member is to ensure the property passes seamlessly to the surviving co-owner(s) in case one of the owners dies, joint tenancy may be the best option for you.
On the other hand, if you are an investor or purchasing the property with another investor or friend for greater flexibility and generating rental income or selling for gains, then tenancy in common could be more apt. Moreover, if you ever need to sell your share of the property to meet any financial need, you will be completely free to do so.
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