When you acquire a residential or commercial property with one or more people, you will be asked to choose the ownership choice. There are two popular kinds of residential or commercial property ownership in Singapore - joint tenancy and occupancy in typical.

This post explains both residential or commercial property ownership types in Singapore and their pros and cons. It likewise highlights the distinctions in between the 2 types of joint ownership. It will enable property buyers to make an informed choice on the manner of holding when purchasing a residential or commercial property with a co-owner. Furthermore, we will also talk about how you can change the ownership type.

So, let's start with a quick introduction of the ownership types with their benefits and drawbacks.

What is joint occupancy?

Joint occupancy 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 instance, if you and your spouse 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 tenancy, you or other co-owner(s) are considered a single legal entity. All co-owners will have equivalent interest and rights, despite how much one owner adds to the or commercial property's purchase rate. So, one owner can't kick out the other co-owners in any circumstance.

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

Joint occupancy is an attractive choice for couples or other household members who want 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 three adult siblings and a $2 million residential or commercial property concurred upon joint occupancy among the parents and the oldest boy at the time of purchase. After their parents' death, the residential or commercial property is immediately moved to the eldest son considering that 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 occupancy

The right of survivorship. It is one of the most considerable advantages of joint tenancy. If the event one co-owner dies, his/her share of the residential or commercial property immediately passes to the surviving owner(s), despite whether there is a will or not.

It also assists avoid the delays and costs connected with probate. So, if you and your other half hold residential or commercial property together under a joint tenancy, she will instantly get the flat's ownership after your death.

Simple and straightforward. This ownership structure is simple to understand, and the right of survivorship gets rid of the requirement for complicated legal plans or estate preparation.

Protection from creditors. In joint tenancy, each owner's share is safeguarded from their individual creditors. It suggests that if one co-owner incurs a debt, their creditors can not take the co-owner(s) share of the residential or commercial property.

Cons of joint occupancy

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

So, you (being a co-owner) can not offer or mortgage your share of the residential or commercial property without the consent of the other co-owner(s), even if you pay the major part of the mortgage payments, costs or upkeep.

Limited estate preparation. Under the right of survivorship, the residential or commercial property passes instantly to the enduring co-owner(s) without needing a will or probate. This makes it challenging to make sure that the residential or commercial property passes to the desired recipients after the death of the surviving 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 because the deceased owner's share of the residential or commercial property to the making it through co-owner(s) is considered 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 method of a gift to relinquish their ownership completely. The co-owner who has actually moved their stake will be dealt with 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 2nd residential or commercial property without incurring Additional Buyers Stamp Duty (ABSD). For example, an other half can offer her share to her other half and purchase a second residential or commercial property later without paying ABSD. She can then use the conserved amount for other home-related purchases, such as home furnishings and/or home renovation.

Why is it tough to decouple a joint occupancy?

In Singapore, decoupling under a joint occupancy is a bit complicated. To decouple, you should go through a legal severance, usually a divorce. You will need to reach out to a residential or commercial property legal representative to sign an Instrument of Declaration and then 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 should reach out to the HDB to understand 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 particular portion share of the residential or commercial property, usually depending upon their contribution to the purchase price. For example, you could own 70% of the residential or commercial property while your sis (another investor) owns 30%.

Since the shares in the residential or commercial property are plainly divided, you may offer or mortgage your portion to a third party without requiring the approval of other co-owners. You can also leave it for another individual or third-party of your choice in your will.

Tenancy in typical is a popular choice for organization partners or buddies who wish to invest together in a residential or commercial property however still desire to retain the freedom of selling or mortgaging their share of the residential or commercial property separately. Sometimes, couples who can not marry might also opt for occupancy in common.

Taking the exact same example as above, if the home was concurred upon tenancy in common, the youngest child could challenge the eldest child around what remains in the will. In such a situation, the residential or commercial property would be dispersed according to the will.

What takes place to a joint occupancy when a co-owner dies?

Upon the death of one owner, the shares of the co-owner(s) stay the very same. Unlike joint occupancy, there is no right of survivorship. This means the departed owner's share will not instantly move to the surviving co-owner(s). It will be distributed according to the directions mentioned 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 common allows each co-owner to own a particular share of the residential or commercial property and thus permits higher versatility in regards to financing and ownership arrangements. This type of ownership allows each owner to disperse or transfer their share of the residential or commercial property to whomever they want by stating it in their will.

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

With occupancy in typical, you can also 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 enables you to prioritise your children or brother or sister to acquire your share over your spouse after you die.

Allows decoupling. Unlike joint tenancy, decoupling is an uncomplicated procedure for tenancy-in-common. Decoupling permits co-owners or borrowers 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 total. If you already have strategies to purchase a second residential or commercial property later, it is encouraged to split the residential or commercial property 99-1 to save money on the Buyer's Stamp Duty (BSD) payable upon transferring 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 house in a dispute. However, it does not work like that.

Under occupancy in typical, all the co-owners can reside in the residential or commercial property irrespective of the size of their share. All legal choices associated with the residential or commercial property should be made jointly, even if a co-owner holds a small share.

Cons of tenancy in typical

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

Potential for Conflict. Tenancy in common can produce conflict between the co-owners. Since each owner has the capability to offer or mortgage their share of the residential or commercial property as they wish, it can cause disagreements over the usage and management of the residential or commercial property.

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

How do I examine the kind of ownership of my residential or commercial property?

For personal residential or commercial property, house owners can get info about the type of ownership by paying $5.25 for "Residential Or Commercial Property Ownership Information" through Integrated Land Information Service (INLIS).

HDB house owners are enabled to check their manner of holding totally free of cost by logging into My HDBPage.

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

The table listed below highlights the key distinctions in between the two 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 finance your home purchase, all co-owners have joint liability for the mortgage. If one owner passes away, the other co-owner(s) are still responsible to pay back the mortgage, or the bank will foreclose on the residential or commercial property.

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

Note that what percentage of mortgage payment each co-owner is paying is a private arrangement in between the co-owners or borrowers. The manner of holding makes little difference when it concerns mortgage loans.

Can I switch from joint tenancy to occupancy in common?

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

Note that if you wish to transform your holdings from joint tenancy to tenancy 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 occupancy 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 price.

Conversely, you can switch from an occupancy in common to a joint occupancy only if the share split is already 50-50. This implies 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 move shares to make it 50-50 before you can use to change to a joint tenancy. Note that this ownership transfer might attract payment of stamp responsibilities as well.

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

The loan provider bank can not offer authorization for the conversion. In such a situation, you need to settle the outstanding loan amount before applying again for conversion in the manner of holding.

How can you convert the way of keeping in Singapore?

In Singapore, the "conversion" of joint tenancy 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 require to sign a statutory statement before a Commissioner for Oaths to mention their intention to hold the residential or commercial property as joint tenants.

When the conversion is agreed upon by all co-owners, they will sign the Instrument of Declaration stating their intent to change the way of holding.

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

For personal residential or commercial property, you must consult a law office or residential or commercial property lawyer because the subsequent treatment and actions can be complex.

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

Which kind of ownership is right for you?

Both joint occupancy 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 kinds of ownership ought to suffice.

But if your objective behind purchasing a residential or commercial property with a partner or member of the family is to make sure 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 good friend for higher versatility and creating rental earnings or costing gains, then occupancy in common could be more apt. Moreover, if you ever require to sell your share of the residential or commercial property to meet any monetary requirement, you will be entirely totally free to do so.