Joint Tenancy Vs Tenancy-in-Common
Geraint is a Financial Strategist with one of the leading Financial Institutions in the world, managing numerous client’s financial portfolios.
When a family member passes on, family disputes over the distribution of property are more common than you can imagine. And it is usually the result of the lack of awareness and understanding of the implications of this clause called “Manner of Holding”.When you are buying a home with your spouse or other co-owners, you would need to decide on the manner of holding the flat, either through “Joint Tenancy” or “Tenancy-in-Common”.
The question is what are the differences and what are it’s implications?
In Joint Tenancy, the owners own the whole share in the property.
Upon the death of one joint tenant, the surviving tenant takes sole ownership of the whole property, regardless of whether the deceased joint owner has a will in place.
If a married couple bought a home under joint tenancy and the husband passes on, the wife gets the full ownership of the whole property.Another point to note is that under joint tenancy, the ownership must be split equally among the owners.
If a married couple with a child bought a home under joint tenancy and all 3 of them owns equal parts of the home, when the husband passes on, the wife and the child gets to split the shares of the property equally.
In tenancy-in-common, the owners own definite and separate shares of the property.
Upon the death of one tenant, the surviving tenant will only be entitled to his share of the property.
When death occurs, the surviving tenant will only be entitled to his share in the property. The shares of the deceased tenant will go to his estate.
This means the deceased tenant’s interest in the property can be passed according to his will. If there is no will, it will be distributed according to the Intestate Succession Act (ISA).
If a married couple bought a home under tenancy-in-common and they split the shares equally at 50% each, if the husband passes on, the wife only gets to keep her 50% ownership of the property.
The husband’s 50% will be distributed according to his will. If he did not do up a will, it will be distributed according to the ISA.
Another point to note is that under tenancy-in-common, the owners can own the property at different percentages.
If a married couple bought a home under tenancy in common, the husband can own 60% of the property while the wife owns the remaining 40%.
Pros of Tenancy-In-Common
Here are 2 scenarios why having the option to choose the percentage and the flexibility to exercise your will is so important.
Assuming you and your spouse bought a home under joint tenancy and you paid a greater share of it.
You then had a feud with your spouse and you filed for a divorce.
It may be wise at this point to change the holding status of your home from a joint tenancy to a tenancy-in-common so you can decide to will your share of the property to your children.
If you pass on before the status is changed to tenancy-in-common, the full ownership of your home will go completely to your spouse.
If you had invested in a property with your friends under joint tenancy, in the event of your death, the shares of your property will be transferred to your friends equally and they will get the proceeds from your shares when they sell the property.
If that is your wish it is alright, but if you wanted to transfer your shares to someone else like your spouse, parents or children, you can only do so if the status of the property is changed to tenancy-in-common.
Cons of Tenancy-In-Common
However, one disadvantage of the tenancy-in-common status is that if the other co-owner has willed his shares to others and he dies first, you no longer own the whole house.
if he has drawn up a will and gives his shares to his father, then the house is now owned by you and his father.
If he does not leave a will, then it will be distributed according to the ISA. This means that half of his share goes to you and the other half is split among the children equally.
Now if you wish to sell the house, it will be more difficult as you’ll need approval from the other owner.
The solution for this is to will the property entirely to your spouse, even under tenancy-in-common.
Converting Manner of Holding
Conversion has to be agreed by all tenants by signing a form.
As the procedures can be rather complex, thus it is advisable to consult a property lawyer.
For HDB property, you can seek assistance of HDB to change the manner of holding of the HDB property. More information can be found on HDB’s website.Photo Credits: LangleyNotoryPublic