Homeowners, are you aware of the nitty-gritty of property ownership, also known as the manner of holding? Here we take a deep dive and explore which option works best for you.
Buying a house, particularly your first home, is inherently exciting. The moment you get the keys marks a huge milestone in anyone’s life, whether it’s a HDB BTO, resale flat or private property.
However, there’s one aspect of the buying process that is often overlooked, one that more homeowners-to-be should know more about — the choosing of ownership type.
It dictates how you wish to slice and dice the ownership shares if you’re owning the home with a co-owner. This could be your spouse, family member or even another investor.
There are two options to consider: joint tenancy, where all family members have 100% ownership of the house, or tenancy-in-common, where each member owns a specific share of the property that need not necessarily be equal.
It's best to take this seriously, else your future family saga might be the next talk of the town, just like how a recent article covered three siblings who are in dispute over a S$3.1 million property (yikes!).
Now if these are your first encounters with such terms, don’t fret. Here’s everything you need to know to navigate your home buying like a seasoned pro.
TL;DR Joint tenancy vs Tenancy-in-common
|Each co-owner owns the entire interest of the flat — no splitting of shares here!||Individual co-owners own separate shares of the flat|
Eg. you and your spouse can split the shares by owning 60% and 40% respectively
What is joint tenancy?
If your home is a cake, consider the entire thing yours. The same principle also applies to your co-owner. No matter how you slice it, both of you own the property entirely.
It’s worth noting that the right of survivorship comes into play here. This means that if you or your co-owner passes away, the interest of the flat will be transferred to your other co-owners — even if your will states otherwise. Keep this in mind if you’re particular about your property’s ownership holdings as it is not as clear cut as its counterpart, tenancy-in-common.
In the context of the recent article, since the house was agreed upon joint tenancy among the parents and the eldest son, the property is automatically transferred to the eldest son since he is the last survivor of the co-owners, rendering whatever that was stated in the will irrelevent.
How joint tenancy works
You, your spouse, and your child own a property together under joint tenancy. In the event that your spouse passes away, the ownership is then transferred to the remaining owners: you and your child.
What is tenancy-in-common?
This ownership type allows you and your co-owners to own individual shares of the property in varying proportions. Simply put, the ownership of your home is sliced and diced into separate shares. This involves a mutual agreement on how much that percentage would be. Unlike joint tenancy, there’s no right of survivorship here. In the event of a co-owner’s death, your individual shares remain the same.
With regards to the article, if the house was agreed upon tenancy-in-common, the youngest son would then be able to build a case around the content of the will and have it distributed accordingly to what the will states.
How tenancy-in-common works
By owning the property under tenancy-in-common, you and your spouse could allocate the ownership into 70% and 30% shares respectively, if you’re forking out a larger portion of the payment. Should your spouse pass away one day, your ownership share remains at 70%. Your deceased spouse’s 30% shares will be distributed according to the instructions left in their will.
Which type of ownership is best?
There’s no good or bad to any of the ownership types. To make your decision making easier, perhaps you could take into account why you’re buying the property in the first place. If you’re thinking of buying a home for you and your spouse to settle down and raise a family in, both ownership types could work perfectly well.
However, if you are co-owning with another investor, tenancy-in-common could be a more apt and fuss-free way to divide the property’s shares. Moreover, if you choose to sell the shares of the property one day, you are entirely free to do so.
Is it possible to make a switch?
Yes, you can switch to the other ownership type. HDB homeowners will need to inform and seek assistance from HDB while private property owners will need the help of a law firm.
If you and your co-owner decide to convert ownership from joint tenancy to tenancy-in-common, you can only do so if it’s split right down the middle. This means that each owner should hold a 50% share — no more, no less. However, if this involves relinquishing a part of your share holdings in order to achieve the even split, stamp duty fees may apply.
In the same vein, tenancy-in-common could also be converted to joint tenancy. However, this could only be done if the shares have already been split equally.
Homeowners, getting your manner of holding sorted is just the tip of the iceberg. Use our home insurance comparison tool to find a home insurance plan that will fit both your needs and at affordable prices today. Simply click below to start.
Read these next:
The Complete Guide To Transfer Of HDB Ownership
Everything You Need To Know About Escrow Services In Singapore
Step-By-Step Guide To Buying Your Very First HDB BTO In Singapore
HDB BTO, SBF Or Resale: Which Should You Pick?
Upgrading from HDB to Private Property? Here’s How Your Home Insurance Should Change