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When you purchase a residential or commercial property with several individuals, you will be asked to select the ownership alternative. There are 2 popular kinds of residential or commercial property ownership in Singapore - joint tenancy and occupancy in typical.

This post describes both residential or commercial property ownership types in Singapore and their advantages and disadvantages. It also highlights the distinctions between the 2 kinds of joint ownership. It will enable homebuyers to make a notified choice on the way of holding when buying a residential or commercial property with a co-owner. Furthermore, we will also go over how you can change the ownership type.

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

What is joint tenancy?

Joint occupancy is a type of ownership in which all co-owners of the residential or commercial property will have an equivalent stake in the residential or commercial property. For example, if you and your partner 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 equal interest and rights, no matter just 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 system. Therefore, neither you nor other co-owners can make a unilateral decision on concerns like selling or mortgaging the residential or commercial property.

Joint occupancy is an attractive alternative for couples or other family members who desire to own residential or commercial property together. Note that it is the 'default' holding choice on the agreement when a couple purchases their home.

Let's understand it much better with an example.

Suppose there are 3 adult siblings and a $2 million residential or commercial property concurred upon joint tenancy amongst 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 eldest child because he is the only survivor of the co-owners. Even if the moms and dads' 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 occasion one co-owner passes away, his/her share of the residential or commercial property automatically passes to the enduring owner(s), regardless of whether there is a will or not.

It likewise assists avoid the hold-ups and costs related to probate. So, if you and your spouse hold residential or commercial property together under a joint occupancy, she will automatically get the flat's ownership after your death.

Simple and straightforward. This ownership structure is simple to comprehend, and the right of survivorship gets rid of the need for complex legal arrangements or estate preparation.

Protection from financial institutions. In joint tenancy, each owner's share is secured from their specific lenders. It suggests that if one co-owner incurs a financial obligation, their creditors 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 instead of their specific shares. It implies all co-owners have the very same rights over the residential or commercial property, even if there is a considerable distinction in the financial 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 approval of the other co-owner(s), even if you pay the significant portion of the mortgage payments, costs or upkeep.

Limited estate preparation. Under the right of survivorship, the residential or commercial property passes automatically to the making it through co-owner(s) without requiring a will or probate. This makes it tough to make sure that the residential or commercial property passes to the intended beneficiaries after the death of the enduring co-owner(s).

Potential tax ramifications. Joint tenancy can have tax implications for the enduring co-owner(s) upon the death of one co-owner. It is because the deceased owner's share of the residential or commercial property to the surviving 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 method of a gift to relinquish their ownership totally. The co-owner who has moved their stake will be treated as a first-timer, as they no longer own the residential or commercial property.

This is frequently the case when a couple wants to own a 2nd residential or commercial property without sustaining Additional Buyers Stamp Duty (ABSD). For example, a spouse can offer her share to her husband and purchase a second residential or commercial property later on without paying ABSD. She can then use the conserved quantity for other home-related purchases, such as furnishings and/or home remodelling.

Why is it hard to decouple a joint tenancy?

In Singapore, decoupling under a joint tenancy is a bit complicated. To decouple, you should go through a legal severance, normally a divorce. You will require to connect to a residential or commercial property attorney to sign an Instrument of Declaration and after that lodge it with the Singapore Land Authority (SLA).

Note that decoupling is just 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 know whether you can or can not decouple it.

What is occupancy in typical?

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

Since the shares in the residential or commercial property are plainly divided, you might offer or mortgage your part to a third celebration without requiring the authorization 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 company partners or friends who desire to invest together in a residential or commercial property but still desire to retain the flexibility of selling or mortgaging their share of the residential or commercial property independently. Sometimes, couples who can not wed may also go for occupancy in typical.

Taking the very same example as above, if the domestic home was concurred upon tenancy in common, the youngest boy could challenge the eldest boy around what is in the will. In such a circumstance, the residential or commercial property would be dispersed 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) remain the exact same. Unlike joint occupancy, there is no right of survivorship. This suggests the deceased owner's share will not automatically move to the enduring co-owner(s). It will be distributed according to the directions 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 based on the arrangements of the Intestate Successions Act.

Pros of occupancy in common

More flexibility. Unlike joint tenancy, occupancy in typical 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 arrangements. This kind of ownership allows each owner to distribute or move their share of the residential or commercial property to whomever they desire by mentioning it in their will.

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

With tenancy in typical, you can also ensure that your share of the residential or commercial property will go to a particular person or third-party and not your co-owners by default. This permits you to prioritise your kids or brother or sister to inherit your share over your partner after you die.

Allows decoupling. Unlike joint occupancy, decoupling is a simple process for tenancy-in-common. Decoupling allows co-owners or customers to purchase a second 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 strategies to buy a 2nd residential or commercial property later on, it is recommended to split the residential or commercial property 99-1 to save on the Buyer's Stamp Duty (BSD) payable upon moving your share to another co-owner.

Right to live 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 tenancy in common, all the co-owners have the right to live in the residential or commercial property regardless of the size of their share. All legal choices connected to the residential or commercial property needs to be made collectively, even if a co-owner holds a small share.

Cons of tenancy in common

No protection from lenders. Unlike joint occupancy, occupancy in common does not protect the co-owners from the creditors of individual owners. This means that if one owner incurs a financial obligation, your share in the residential or commercial property can also be seized by their lenders.

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

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

How do I inspect the type of ownership of my residential or commercial property?

For private residential or commercial property, property owners can acquire info 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 property owners are allowed to examine their manner of holding free of expense 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 distinctions in 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 taken up a mortgage loan to fund 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 pay back the mortgage, or the bank will foreclose on the residential or commercial property.

When identifying mortgage eligibility, banks are only concerned about your Total Ratio (TDSR) and Mortgage Servicing Ratio (MSR). The ownership type - be it joint tenancy or tenancy in common - does not impact your mortgage approval.

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

Can I change from joint tenancy to tenancy in typical?

What if you already have a joint tenancy however wish to decouple it? Decoupling is rather made complex under joint occupancy. But here is fortunately: you can transform the way of holding from joint tenancy to occupancy in typical, and vice-versa.

Note that if you desire to convert your holdings from joint tenancy to occupancy in typical, both owners should have a 50-50 share-no more, no less. For example, if you and your spouse are co-owners but want to change to tenancy in typical, then every one of you will need to own/hold a 50% share of the residential or commercial property upon severance, no matter how much more you had paid in the residential or commercial property's purchase cost.

Conversely, you can switch from a tenancy in typical to a joint occupancy only if the share split is currently 50-50. This means you might be needed to move part of your interest to the other co-owner(s) in order to make the shareholdings equal.

For instance, if the ownership is divided into 60-40, you need to transfer shares to make it 50-50 before you can apply to switch to a joint occupancy. Note that this ownership transfer may attract payment of stamp tasks also.

If the residential or commercial property is still under a mortgage, you will need the consent of the lender bank before altering the way of keeping in the residential or commercial property.

The lender bank has the right to not offer authorization for the conversion. In such a scenario, you must settle the outstanding loan amount before using again for conversion in the way of holding.

How can you convert the way of holding in Singapore?

In Singapore, the "conversion" of joint occupancy to tenancy in common is done by accommodations and signing up a copy of the Instrument of Declaration with the SLA. All the existing co-owners will need to sign a statutory statement before a Commissioner for Oaths to state their intent to hold the residential or commercial property as joint renters.

When the conversion is agreed upon by all co-owners, they will sign the Instrument of Declaration specifying their intention to change the manner of holding.

Note that this will sustain legal costs, normally between $1,000 and $1,500. Otherwise, the co-owner(s) wishing to hold the residential or commercial property as occupants in typical will sign the statutory declaration mentioning their objective as such. The solicitor will then appropriately serve the Instrument of Declaration on the other unwilling co-owner(s).

For personal residential or commercial property, you need to seek advice from a law office or residential or commercial property attorney since the subsequent procedure and steps can be complicated.

For an HDB residential or commercial property, you must either appoint your own solicitor or seek assistance from HDB directly to change the manner of holding.

Which kind of ownership is best for you?

Both joint tenancy and occupancy in typical have their own benefits and drawbacks. What will work much better for you depends upon 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 types of ownership must be adequate.

But if your goal behind buying a residential or commercial property with a partner or relative is to guarantee the residential or commercial property passes flawlessly to the enduring co-owner(s) in case one of the owners dies, joint occupancy may be the finest option for you.

On the other hand, if you are an investor or buying the residential or commercial property with another financier or pal for greater flexibility and producing rental earnings or selling for gains, then occupancy in common might be more apt. Moreover, if you ever need to offer your share of the residential or commercial property to satisfy any monetary requirement, you will be totally free to do so.