Love and marriage are often one of life’s greatest milestones, a blissful day where you pledge and commit to your other half. As part of establishing a separate entity from one’s biological family, purchasing a matrimonial home to celebrate “two becoming one” is often a rite of passage. Now the real binding question beckons: “What type of property ownership should my partner and I go for?”
The type of property ownership may not seem important initially; however, it may eventually become a main point of consideration in cases such as investment, financial planning or even in unenviable situations such as a divorce.
In this article, we will be taking you through the 2 manners of holding in Singapore, namely Joint Tenancy and Tenancy-in-Common, and what are some things to note when choosing either of them!
For beginners, property ownership and legal relationships can exist between other parties apart from spouse-spouse relationships, such as parent-child, business-partners or even friends! It is a common misconception that property ownership depends on the financial provisions to the home mortgage, however this is simply not true. A business owner and his homemaker spouse can own a property under Tenancy-in-Common in 50-50 shares, although the latter may not be furnishing the mortgage payments. The decision between Joint Tenancy or Tenancy-in-Common is very much a personal decision made between respective parties.
Equal rights, interests and share in property regardless of contribution
Joint Tenancy is a form of property ownership that co-exists between parties, in which they have equal rights, shares and interest in the subject property. This is regardless of who finances the mortgage or contributes to the upkeeping of the house. For illustration purposes, a husband and wife own a condominium under Joint Tenancy. The husband provides for 90% of the housing mortgage, while the wife furnishes the remaining 10%. Despite the difference in mortgage contributions, the law recognizes that both husband and wife own equal shares in the property, 50-50. The percentage adjusts accordingly to the number of parties registered to the property title deed.
Either parties on the title deed cannot oust the other parties
Even if things should turn ugly, parties under the Joint Tenancy cannot oust each other without legal consent to severe the existing Joint Tenancy. This also means that either parties are prohibited from making key decisions alone regarding issues such as selling or leasing. Should either party decide that a Joint Tenancy is no longer a sustainable or viable option, he should provide for a notice of severance and serve it on the other parties on the existing Joint Tenancy. Should an agreement be reached with the provision of signature(s) on the notice of severance, parties should file the Instrument of Declaration of severance with the Singapore Land Authority to finalize the severance. Should the subject property be financed through a mortgage loan, Joint Tenants must notify the bank of the change in property title deed status.
In some cases, a Joint Tenancy may be held between more than 2 parties which may render things a tad bit more rigorous! For example, a property is held in ownership by Person A, Person B and Person C. Should Person A severe the Joint Tenancy and convert it into a Tenancy-in-Common, Person A will obtain 33.33% of the property ownership, while the remaining 66.66% is held as Joint Tenancy between Person B and Person C, and the clauses under the Joint Tenancy still bind them. Hence, it is important to note that the formation of a Joint Tenancy is held sacred in the eyes of the law, and specified writing and legal procedures have to be provided in order for proper severance.
Right of survivorship, no gifts allowed
Unfortunately, because of the sacredness of a Joint Tenancy between parties, upon the death of either party, the property is immediately conferred to the remaining Joint Tenant. This is known as the ‘Right of Survivorship’. Even if the deceased drafted a Will prior to his death stating for the transfer of property to another individual outside of the Joint Tenancy, it will be rendered invalid and the transfer of property ownership will naturally be conferred unto the remaining Joint Tenant. Likewise, this applies for gifts, where an individual seeks to confer a property unto another out of goodwill, for example between parent and child.
Tenancy-in-common is a popular option amongst business partners, investors or even couples that wish to ‘de-couple’ their properties in the future for financial benefits. In recent days, ‘de-coupling’ has become a popular option for married couples who wish to purchase a second property for investment purposes but want to avoid being slapped with hefty taxes under the Additional Buyer’s Stamp Duty (ABSD). In summary, if you and your partner(s) intend to use the subject property for investment purposes, it is recommended to register it under Tenancy-in-Common. Unlike Joint Tenancy, ownership percentages can be clearly distinguished across parties in any percentages, be it 70-30, 40-60 or even 99-1! The fluidity of ownership under Tenancy-in-Common also allows for each individual owner to make unilateral decisions that does not affect the other parties. For example, a business partner owns 50% of the property under Tenancy-in-Common. He can make an executive decision of selling his share to another person outside of the initial title deed. Therefore, gifts and provisions under written Wills may also be executed successfully for properties under Tenancy-in-Common.
While the clauses held under Tenancy-in-Common seem to be the exact opposite of those under Joint Tenancy, one thing remains the same: Either party cannot oust the other stakeholders from the property, unless all parties come to an agreement to severe all relations by offering a buy-over of the entire property, rendering 100% of the property ownership status under a single owner.
When it comes to property ownership, there is no right or wrong answer on which is the most ideal option. Both options present their merit, but one may prove to be a more expensive option in the case of dispute and disagreements. Given that real estate is often a high-ticket item, it is crucial for prospective owners to a property to discuss long-term considerations and contingency plans should disputes arise in the future.
It is always important to speak to a knowledgeable and professional mortgage broker about your property goals in order to get unbiased advisory to make the best-informed decision on the best way forward.