When you acquire a residential or commercial property with one or more individuals, you will be asked to pick the ownership option. There are 2 popular types of residential or commercial property ownership in Singapore - joint tenancy and occupancy in typical.

This short article discusses both residential or commercial property ownership types in Singapore and their benefits and drawbacks. It also highlights the differences between the two kinds of joint ownership. It will make it possible for homebuyers to make an informed choice on the way of holding when purchasing a residential or commercial property with a co-owner. Furthermore, we will also discuss how you can alter the ownership type.

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

What is joint occupancy?

Joint tenancy is a kind of ownership in which all co-owners of the residential or commercial property will have an equal 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 three other co-owners, each will own a 25% share.

In joint tenancy, you or other co-owner(s) are thought about a single legal entity. All co-owners will have equivalent interest and rights, regardless of just how much one owner adds to the residential or commercial property's purchase cost. So, one owner can't toss out the other co-owners in any situation.

Under this type of ownership, the residential or commercial property might just be sold or mortgaged as one unit. Therefore, neither you nor other co-owners can make a unilateral choice on issues like selling or mortgaging the residential or commercial property.

Joint tenancy is an appealing option for married couples or other relative who wish to own residential or commercial property together. Note that it is the 'default' holding alternative on the contract when a couple purchases their home.

Let's comprehend it better with an example.

Suppose there are 3 adult siblings and a $2 million residential or commercial property agreed upon joint tenancy amongst the moms and dads and the eldest kid at the time of purchase. After their parents' death, the residential or commercial property is instantly moved to the eldest kid given that he is the only survivor of the co-owners. Even if the moms and dads' will states otherwise, it ends up being unimportant here.

Pros of joint occupancy

The right of survivorship. It is one of the most substantial advantages of joint occupancy. If the event one co-owner passes away, his/her share of the residential or commercial property automatically passes to the making it through owner(s), regardless of whether there is a will or not.

It also assists prevent the delays and expenses associated with probate. So, if you and your partner hold residential or commercial property together under a joint occupancy, she will instantly get the flat's ownership after your death.

Simple and uncomplicated. This ownership structure is easy to understand, and the right of survivorship eliminates the requirement for complicated legal arrangements or estate preparation.

Protection from financial institutions. In joint occupancy, each owner's share is protected from their specific lenders. It indicates that if one co-owner incurs a financial obligation, their creditors can not take the co-owner(s) share of the residential or commercial property.

Cons of joint tenancy

Lack of control. Under joint occupancy, all co-owners own the residential or commercial property rather than their private shares. It suggests all co-owners have the exact same rights over the residential or commercial property, even if there is a significant distinction in the financial contributions made by various owners.

So, you (being a co-owner) can not sell or mortgage your share of the residential or commercial property without the permission of the other co-owner(s), even if you pay the significant part of the mortgage payments, expenses or upkeep.

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

Potential tax implications. Joint occupancy can have tax ramifications for the enduring co-owner(s) upon the death of one co-owner. It is since the departed owner's share of the residential or commercial property to the making it through co-owner(s) is thought about a present for tax functions.

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 way of a gift to relinquish their ownership totally. The co-owner who has transferred 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 wishes to own a second residential or commercial property without incurring Additional Buyers Stamp Duty (ABSD). For example, a spouse can sell her share to her other half and buy a 2nd 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 renovation.

Why is it challenging to decouple a joint tenancy?

In Singapore, decoupling under a joint occupancy is a bit complicated. To decouple, you should go through a legal severance, typically 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 personal residential or commercial properties in the majority of situations. For an HDB residential or commercial property, you must reach out to the HDB to know whether you can or can not decouple it.

What is tenancy in typical?

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

Since the shares in the residential or commercial property are plainly divided, you may sell or mortgage your part to a 3rd party without needing the permission of other co-owners. You can also leave it for another person or third-party of your choice in your will.

Tenancy in typical is a popular choice for company partners or good friends who want to invest together in a residential or commercial property but still wish to keep the liberty of selling or mortgaging their share of the residential or commercial property individually. Sometimes, couples who can not wed may likewise go for occupancy in typical.

Taking the same example as above, if the house was concurred upon tenancy in typical, the youngest kid could challenge the oldest boy around what remains in the will. In such a circumstance, the residential or commercial property would be distributed according to the will.

What occurs to a joint occupancy when a co-owner passes away?

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 indicates the deceased owner's share will not instantly transfer to the making it through co-owner(s). It will be distributed according to the directions specified in the will.

If there is no will, the deceased's share in the residential or commercial property will be administered to the recipients as per the provisions of the Intestate Successions Act.

Pros of tenancy in common

More versatility. Unlike joint occupancy, occupancy in common enables each co-owner to own a particular share of the residential or commercial property and hence permits higher flexibility in regards to financing and ownership arrangements. This type of ownership allows each owner to disperse or move their share of the residential or commercial property to whomever they want by stating it in their will.

Freedom to sell or mortgage. This kind of ownership permits each co-owner to sell or mortgage their share of the residential or commercial property individually without needing authorization or approval from the other co-owners.

With tenancy in typical, you can likewise make sure that your share of the residential or commercial property will go to a specific individual or third-party and not your co-owners by default. This allows you to prioritise your children or sibling to acquire your share over your spouse after you pass away.

Allows decoupling. Unlike joint occupancy, decoupling is a simple process for tenancy-in-common. Decoupling enables co-owners or borrowers to purchase a second residential or commercial property without paying ABSD.

All you need 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 plans to purchase a 2nd residential or commercial property later, it is advised to split the residential or commercial property 99-1 to conserve 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 might think 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 conflict. However, it does not work like that.

Under tenancy in typical, all the co-owners have the right to reside in the residential or commercial property regardless of the size of their share. All legal choices connected to the residential or commercial property must be made collectively, even if a co-owner holds a little share.

Cons of occupancy in common

No protection from creditors. Unlike joint tenancy, occupancy in common does not secure the co-owners from the lenders of specific owners. This implies that if one owner sustains a debt, your share in the residential or commercial property can also be seized by their lenders.

Potential for Conflict. Tenancy in common can create dispute between the co-owners. Since each owner has the capability to offer or mortgage their share of the residential or commercial property as they want, it can cause differences over the use and management of the residential or commercial property.

For example, if a co-owner wishes to sell his/her share of the residential or commercial property to another person or will it to their company 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 personal residential or commercial property, homeowners can acquire info about the type of ownership by paying $5.25 for "Residential Or Commercial Property Ownership Information" through Integrated Land Information Service (INLIS).

HDB homeowners are enabled to inspect their way of holding totally free of cost by logging into My HDBPage.

What is the difference between a joint tenancy and an occupancy in typical?

The table listed below highlights the key distinctions between the two types of co-ownership of residential or commercial property in Singapore:

How does the ownership type affect your mortgage mortgage?

If you have used up a mortgage loan to finance your home purchase, all co-owners have joint liability for the mortgage. If one owner dies, the other co-owner(s) are still liable to repay the mortgage, or the bank will foreclose on the residential or commercial property.

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

Note that what proportion of mortgage payment each co-owner is paying is a personal arrangement between the co-owners or customers. The way of holding makes little difference when it concerns mortgage loans.

Can I switch from joint occupancy to occupancy in typical?

What if you currently have a joint tenancy however wish to decouple it? Decoupling is somewhat made complex under joint tenancy. But here is the great news: you can transform the manner of holding from joint tenancy to occupancy in common, and vice-versa.

Note that if you desire to convert your holdings from joint tenancy to tenancy in common, both owners should have a 50-50 share-no more, no less. For example, if you and your partner are co-owners however wish to switch to occupancy in typical, then each one of you will need to own/hold a 50% share of the residential or commercial property upon severance, regardless of just how much more you had actually paid in the residential or commercial property's purchase price.

Conversely, you can switch from a tenancy in typical to a joint occupancy just if the share split is already 50-50. This implies you may 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 must transfer shares to make it 50-50 before you can use to change to a joint tenancy. Note that this ownership transfer may bring in payment of stamp duties as well.

If the residential or commercial property is still under a mortgage, you will need the permission of the loan provider bank before altering the manner of holding in the residential or commercial property.

The lending institution bank has the right to not provide consent for the conversion. In such a circumstance, you should pay off the impressive loan amount before applying once again for conversion in the way of holding.

How can you transform the way of keeping in Singapore?

In Singapore, the "conversion" of joint occupancy to occupancy in typical is done by lodging and signing up a copy of the Instrument of Declaration with the SLA. All the existing co-owners will require to sign a statutory declaration before a Commissioner for Oaths to state their intention 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 alter the manner of holding.

Note that this will sustain legal charges, typically 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 statement stating their intent as such. The solicitor will then duly serve the Instrument of Declaration on the other unwilling co-owner(s).

For private residential or commercial property, you must seek advice from a law office or residential or commercial property lawyer since the subsequent treatment and steps can be complex.

For an HDB residential or commercial property, you should either select your own lawyer or seek help from HDB straight to change the way of holding.

Which type of ownership is right for you?

Both joint tenancy and occupancy in typical have their own and disadvantages. What will work much better for you depends on your personal situations and the reason you are purchasing the residential or commercial property. If you are getting a home with your spouse to remain in it with your family, both kinds of ownership should be enough.

But if your goal behind buying a residential or commercial property with a spouse or household member is to guarantee the residential or commercial property passes seamlessly to the enduring co-owner(s) in case among the owners dies, joint tenancy may be the very best option for you.

On the other hand, if you are an investor or buying the residential or commercial property with another financier or buddy for higher versatility and producing rental income or costing gains, then tenancy in typical could be more apt. Moreover, if you ever require to offer your share of the residential or commercial property to satisfy any financial requirement, you will be totally free to do so.