Yahoo Finance Property Unpacked: Joint tenancy vs. tenancy-in-common
The type of ownership is very important to avoid disputes. (Photo: Samuel Isaac Chua/EdgeProp Singapore)
SINGAPORE (EDGEPROP) - When there are multiple owners for a property, most are unaware that they have to decide on the type of ownership. The ownership type determines how the interest in the property is distributed upon the death of a co-owner. Hence, it is important to make an appropriate decision if the surviving co-owners want to avoid disputes over the ownership of the property when one of them passes away.
There are two ways to hold a property if there is more than one owner, and we will examine both methods in this article. We will also discuss which type of ownership is more suitable for different types of scenarios.
Joint tenancy
Under joint tenancy, the co-owners own the entire interest in the property together. This means that each co-owner does not have a distinct share in the property; instead, all co-owners jointly own 100% of the property. As such, all decisions regarding the property must be made jointly by all co-owners, and the property can only be sold or mortgaged as a whole.
The right of survivorship applies to joint tenancy, which means that upon the death of a co-owner, their share of the property will be inherited by the surviving co-owners.
For example, John and Jane are a married couple who bought a HDB flat together John’s mother, Daisy. They decide to hold the flat under joint tenancy. Upon John's death, Jane and Daisy will inherit his share of the flat.
Tenancy-in-common
Under tenancy-in-common, each owner owns a separate and distinct share in the property. As such, the co-owners will have to decide how many shares each owns in the property.
The right of survivorship does not apply to tenancy-in-common, so the share of a co-owner will be passed on to his or her beneficiaries according to his or her Will (if any). If the co-owner did not leave a Will, then his or her share of the property will be distributed according to the Intestate Succession Act.
For example, Sally, Donna, and Lisa are friends who bought a condo unit as an investment. They chose to hold the unit under tenancy-in-common. They also decided to allocate the shares of the flat according to the amount of investment that each contributed. Hence, Sally owns 60% of the flat, Donna owns 30%, and Lisa owns the remaining 10%. Upon Sally's death, her 60% share of the unit will be passed on to her beneficiaries. Donna and Lisa will continue to own their respective shares of 30% and 10%, together with Sally’s beneficiaries. The same will happen upon Donna or Lisa’s death.
Which to choose
Each option has its pros and cons that make it suitable for different scenarios. Co-owners should take the time to weigh the merits and drawbacks of each manner of holding before making a decision. While it is possible to switch from one manner of holding to another, it will take time and money to do so.
Joint tenancy will be suitable for a couple buying a home for their family. In fact, joint tenancy is usually the default option for couples marrying a residential property. This is because it ensures that the family home will be automatically transferred to the surviving spouse.
Alternatively, a parent buying a property as an early inheritance for their child may also wish to hold the property with the child under joint tenancy. This will allow the smooth transfer of the property to the child upon the death of the parent.
Tenancy-in-common will be more suitable for friends investing in a property together, especially if each person contributes different amounts for the purchase. Tenancy-in-common allows the co-owners to carve out a distinct share of the property which can be passed on to their beneficiaries.
Singles who are buying an HDB flat together under the Joint Singles Scheme (JSS) may also wish to opt for tenancy-in-common. JSS allows two or more single Singaporeans to buy a resale HDB flat together if they are aged 35 years or above. Currently, JSS allows such single Singaporeans to buy two-room flexi Build-to-Order (BTO) flats in non-mature estates only, but with effect from the second half of this year, they can purchase two-room flexi BTO flats in any location.
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