Interests are individually owned in tenancy in common. what does that mean?

It is common knowledge that two or more people may share ownership of a property. When an individual is looking to purchase a property with his/her partner, relatives or friends, one may not think about the manner of co-ownership of a property. First reason is perhaps he/she may not know there is such difference, and even if he/she knows, may not fully understand the difference between the two.

In the case of purchasing private property where a conveyancing lawyer is involved in the conveyancing process, the buyers may likely to only learn about it at the law firm’s office with little or no time to give a proper thought about it. In the case of purchasing a public housing flat (Housing and Development Board flat), one is at the mercy of his/her real estate agent’s knowledge on this and there is only during the Resale Submission where he/she has to indicate the manner to hold the property.

1. Joint Tenancy

2. Tenancy-in-Common

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There are two different manners for two or more persons to hold a property:

In joint tenancy, each co-owner is presumed to have an equal share in the property without having distinct shares. Each co-owner is regarded as wholly entitled to the property. The main characteristics of a joint tenancy is the right of survivorship – on the death of one co-owner, the deceased co-owner’s interest automatically passes to the surviving co-owner(s). In the other words, survivor(s) take all. Neither of the co-owners can dispose of their interest by Will. Common mode of ownership in joint tenancy manner is between married couples, or parent-child(ren), close family members or relatives.

Concurrent ownership of a property by 2 or more persons, each having a distinct but undivided share in the property.  Each co-owner is not regarded as being entitled to the whole property. Each co-owner can sell his shares away.

Forms of Ownership in Summary

Joint TenancyTenancy-in-CommonEqual share in the property without having distinct sharesShareholding needs not be equalThe right of survivorship. Upon death of one co-owner, the deceased co-owner's entitlement in the property passes to the survivor(s)No right of survivorship. The deceased co-owner's entitlement in the property passed to his estateUpon death of a co-owner the surviving co-owner can deal with the propertyUpon death of a co-owner, the property cannot be dealth with by the survivor(s)Can be converted to tenancy-in-common in equal shares by registering a declaration at the Singapore Land RegistryWhere the shareholding is equal, it can be converted to a joint-tenancy at the Singapore Land Registry

Read another article of ours on how to convert a joint tenancy to a tenancy-in-common and vice versa.

Conclusion

If two or more persons intend to purchase a property in equal share, with no possibility of any co-owner to sell his shares away to someone else, and every co-owner intends to pass on the property to the surviving co-owner on co-owner’s death, they should opt for joint tenancy as manner of holding the property.

Likewise, if the two or more persons have intention to pass his interest to another person other than the other co-owners, he should opt for tenancy-in common as manner of holding the property.  

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When you own real property with another person, there are a variety of ways you can hold title together. Two of those options are as joint tenants and tenants in common. Both of these ownership options set you up as joint owners, but there are some key differences between the two. Keep in mind that although the word "tenant" is often used when someone rents property, in this context, it means ownership.

Overview of Tenants in Common

One way for two or more people to own real estate together is as tenants in common. In this arrangement, owners can have equal ownership or they could each own different percentages, such as one tenant owning a 75% interest and the other 25%.

Tenancy in common is created by a deed, wherein a previous owner transfers their interest to the new tenants. The tenants in common could obtain the property together from one owner or they could each purchase or inherit their ownership from different previous owners at different times.

Transfer of Tenancy in Common

Tenants in common are able to individually sell their ownership in the property. That means that owner A could sell his 50-percent interest while owner B retains her half. The same holds true for inheritances.

If owner A passes away, his ownership rights are inherited by his heirs, while owner B would continue to own her portion of the property. This can lead to some sticky situations where co-owners of a property don't know each other well or at all.

Overview of Joint Tenants

Joint tenants are also co-owners of real property, but there are some distinctions. For example, joint tenants must all take title simultaneously from the same deed while tenants in common can come into ownership at different times.

Another difference is that joint tenants all own equal shares of the property, proportionate to the number of joint tenants involved. So if there are two joint tenants, for example, each owns 50 percent, while three joint tenants would each own a third, and so on.

Transfer of Joint Tenancy

Joint tenancy also differs from tenancy in common because when one joint tenant dies, the other remaining joint tenants inherit the deceased tenant's interest in the property. However, a joint tenancy does allow owners to sell their interests. If one owner sells, the tenancy is converted to a tenancy in common.

Joint Tenancy and Taxes

Joint tenancy delays estate tax on the property. Let's say that Jack and Jill are joint tenants of their home. When Jack dies, Jill automatically inherits Jack's interest in the home, with no estate tax owed. When Jill dies and leaves the home to her children, estate tax is applied to the entire property.

In instances where a non-spouse is added to the property as a joint tenant, it is considered a gift, meaning gift-tax laws apply to the transfer. This is one reason that it's so important to think about joint tenancy in conjunction with your entire estate plan.

When setting up property ownership, be sure to consider the benefits and drawbacks of tenancy in common versus joint tenancy, as one may be a better fit for your situation than the other.

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