It is very common to purchase a property with family members or friends. In Singapore, Joint Tenancy and Tenancy-in-Common are the TWO manners of holding for property co-ownership. In this article, we will go through the differences between these 2 forms of co-ownership.
1. Joint Tenancy
In a joint tenancy manner of holding the property, each co-owner has 100% right to the entire interest in the property. There are no distinct shares of ownership as each owner has the same interest in the property.
One of the most important features of joint tenancy is the right of survivorship. This means that regardless of whether the deceased joint owner has a will on who should inherit the property, his/her interest in the property would be passed on to the remaining joint owners.
If there are only 2 co-owners in a joint tenancy, the survivor will automatically be in legal possession of the whole property after the demise of the other co-owner. In the case where there are more than 2 co-owners, the survivors will continue to hold the property as joint tenants after the demise of one of the co-owner.
A joint tenancy can change the manner of holding to tenancy-in-common either by one joint tenant or all the joint tenants. Any change in beneficial interest is subject to applicable stamp duties’ payment.
2. Tenancy-in-Common
In a Tenancy-in-Common manner of holding the property, each co-owner holds a distinct share of the property. For example, one of the owners can have an 80% interest in the property, and the other owner would hold a 20% interest in the property.
However, in Tenancy-in-Common, the right of survivorship does not apply to this manner of holding. As each co-owner holds distinct shares of the property, his/her share would be inherited according to the deceased’s will, or according to the Intestate Succession Act (ISA) if there is no will. If the deceased co-owner was a Muslim, the distribution of the property will be according to the Administration of Muslim Law Act (AMLA).
3. Joint Tenancy or Tenancy-in-Common?
Besides practicing financial prudence, another important consideration in purchasing a property in Singapore is to determine your intention of buying the property.
Holding the property in the manner of joint tenancy would be more suitable for married couples with the purpose of buying a matrimonial home. The main advantage is that the property will automatically transfer to the surviving joint tenant in the unfortunate event of the death of the other co-owner. This regulation will also apply even if there is no will drafted by the deceased.
On the other hand, if the buyers have the intention of purchasing another residential property in the future, the manner of holdings for the first property under tenancy-in-common would be more beneficial to the owners. It would be more tax-efficient when you are ready to perform the decoupling of the first property and purchase your second property in the future. Do contact us if you want to understand a more tax-efficient way to own TWO properties in Singapore.
4. Down payment and Sale Proceeds for Joint Tenancy and Tenancy-in-Common
Joint Tenancy and Tenancy-in-Common do not affect the proportion of payments towards the purchase of the property. For example, the co-owner that holds 1% of the property may very well contribute more than 1% towards the purchase of the property. This rule applied in relation to mortgage repayments to the financial institution.
With regards to the apportionment of the sales proceeds, co-owners can decide the apportionment. The sales proceeds may be distributed according to a manner to which the co-owners have agreed to.
5. Change of manner of property holding
Basically, the manner of holding can be changed and will be subject to stamp duties.
Tenancy-in-common must hold the property in equal shares, before being able to change the manner of holding to a joint tenancy.
If co-owners owned unequal shares in the property, then the co-owner with more shares will need to transfer the shares either by gifting or by sale and purchase to achieve equal shares between the co-owners. Do take note that stamp duties are payable on any transfer of ownership interest.
Joint tenants who want to change the manner of holding to a tenancy-in-common are always assumed to hold the property in equal shares. Any transfer of ownership shares, buyer’s stamp duties (BSD), and/or additional buyer stamp duties (ABSD) will be applicable to the co-owner that is receiving the shares.