Are you considering buying a Housing Development Board (HDB) flat?
If so, remember that amidst the excitement of the home-buying process, there’s a critical, often overlooked aspect that deserves everyone’s attention. This is choosing the type of ownership, joint tenancy and tenancy-in-common HDB.
This choice is essential when purchasing a property with a co-owner, such as a spouse, family member or investor.
At the point of purchase or transfer of ownership, you’ll have to decide on the manner of holding, which will be reflected by the Singapore Land Authority (SLA).
You’re faced with two primary options, which are joint tenancy, where all co-owners hold an equal 100% ownership interest in the property, and tenancy in common, where each co-owner holds a specific, potentially unequal share.
Your decision can have far-reaching implications for your future, possibly preventing family disputes over property ownership like the recent case involving three siblings and a S$3.1 million property that became the talk of the town.
If terms like joint tenancy and tenancy-in-common HDB are new to you, worry not. This article will provide you with all the necessary knowledge to navigate the process of home buying like a seasoned pro.
What Is Joint Tenancy?
Joint tenancy in the context of Housing Development Board (HDB) flats in Singapore refers to property ownership where all co-owners hold equal rights to the entire property.
This is characterised by the ‘right of survivorship’, meaning that upon the demise of one co-owner, their interest in the property automatically passes to the surviving co-owners rather than becoming part of the deceased’s estate.
Legally, this has significant implications for estate planning and inheritance.
For example, consider a scenario where Mr. and Mrs. Tan and their son jointly own an HDB flat. If Mr. Tan passes away, his share of the property does not go through the will or estate process but is directly and equally transferred to Mrs. Tan and their son.
What Is Tenancy-In-Common HDB?
Tenancy-in-common is another form of property ownership in Singapore, differing significantly from joint tenancy.
In this arrangement, each co-owner holds an individual, distinct share in the property, which can be unequal. This means each owner has a quantifiable percentage of ownership separate from the others.
Legally, upon the demise of a co-owner, their share in the property does not automatically transfer to the surviving co-owners. Instead, it becomes part of the deceased’s estate and is distributed according to their will, or in the absence of a will, as per the Intestate Succession Act.
For instance, let’s consider a couple, Mr. and Mrs. Lee, who own an HDB flat under tenancy-in-common. Mr. Lee holds a 70% share, and Mrs. Lee owns the remaining 30%.
If Mr. Lee passes away, his 70% share in the flat will be handled according to his will or the Intestate Succession Act, and Mrs. Lee will retain her 30% share.
If the deceased tenant was a Muslim, the estate distribution will be governed by the Administration of Muslim Law Act (AMLA).
2 Main Financial Considerations And Implications For Property Owners
If you want to change from joint tenancy to tenancy-in-common, here are the two main financial considerations and implications you must know:
1. Impact On Mortgages And Loans
The manner of holding the property (joint tenancy or tenancy-in-common) generally does not affect mortgage loans, as loan repayment is joint and several liability for the borrowers.
2. Tax Implications And Potential Benefits
Changing to tenancy-in-common can have tax implications, particularly concerning stamp duties. Stamp duties are government taxes imposed on certain types of transactions, typically involving the transfer of property or shares.
This means transferring shares to achieve an equal split may incur the seller’s stamp duties, and the co-owner receiving the share needs to pay the buyer’s stamp duties.
These duties are calculated based on the property’s market value or shares and are essential considerations in property ownership transitions.
However, holding property as tenants-in-common can facilitate decoupling, leading to tax benefits such as avoiding or reducing Additional Buyer’s Stamp Duty (ABSD) on a second property.
Decoupling In HDB Ownership: What You Didn’t Know About Moving From Joint Tenancy To Tenancy-In-Common
Decoupling in HDB flats in Singapore, a strategy joint homeowners employ, involves one co-owner transferring their share to the other, giving up their ownership completely.
This process is especially beneficial for financial planning, as it allows the transferring co-owner to be treated as a first-timer in property ownership.
Consequently, they can purchase a second property without incurring the Additional Buyer’s Stamp Duty (ABSD). This strategy is particularly advantageous for joint tenancy arrangements, where conversion to tenancy-in-common is necessary for share transfer.
The process can be complex and requires legal guidance to ensure compliance with HDB regulations and financial implications.
9-Step Process On How To Change HDB Flats From Joint Tenancy To Tenants In Common
Here’s a detailed guide on how to change the manner of holding your HDB property from joint tenancy to tenancy-in-common:
1. Understanding The Difference: First, understand that in joint tenancy, owners hold an equal interest in the property with a right of survivorship. In tenancy-in-common, each owner has distinct shares, which can be unequal.
2. Decision And Agreement: All co-owners must agree to convert from joint tenancy to tenancy-in-common. This is crucial as the process cannot proceed without unanimous consent.
3. Engaging A Lawyer: It’s recommended to engage a conveyancing lawyer for this process. They will help prepare and lodge the necessary legal documents.
4. Preparing The Documentation: The required documentation includes an Application Form for changing the manner of holding, available from any HDB branch or on the HDB website.
Additionally, an Instrument of Declaration must be signed before a Commissioner for Oaths, stating the intention to convert to tenancy-in-common.
5. Submitting The Application: Submit the completed application form to HDB and the necessary documents. There is a non-refundable administrative fee of $50.00.
6. Equal Shares Requirement: For conversion to tenancy-in-common, the owners must equally divide the shares. For example, in a two-owner scenario, each should hold a 50% share post-conversion.
7. Handling Stamp Duties: Transferring shares to achieve equal conversion division may incur seller and buyer’s stamp duties.
8. Bank’s Consent: If the property is under a mortgage, you may need to obtain the consent of the mortgagee bank before changing the tenancy type.
9. Finalisation By HDB: After HDB processes and approves the application, the change in tenancy type is officially recorded.
What To Do If Co-Owners Refuse To Change the Manner of Holding
When joint tenants cannot agree on converting the property to tenancy-in-common, the process becomes more involved.
The joint tenant wishing to convert their holding must individually sign an Instrument of Declaration with the Singapore Land Authority, expressing their intention to switch to tenancy-in-common. A solicitor must then legally serve this declaration on the other joint tenants.
Given the complexity of this procedure, it’s strongly advised to consult a conveyancing lawyer. They can guide you through the legal intricacies and ensure all steps are correctly executed.
Conclusion On Joint Tenancy And Tenancy-In-Common HDB In Singapore & How To Change It
When considering joint tenancy and tenancy-in-common for HDB properties in Singapore, seeking legal advice is crucial.
A legal expert can provide detailed insights into the implications of each ownership type, guide you through complex processes like decoupling or ownership transfer, and ensure compliance with HDB regulations.
They can also offer personalised advice based on your situation, such as estate planning, co-ownership agreements, and resolving disputes. It’s advisable to consult a conveyancing lawyer experienced in Singapore property law to navigate these matters effectively.
Frequently Asked Questions On Joint Tenancy And Tenancy-In-Common HDB In Singapore & How To Change It
Can A Lawyer Assist In Resolving Disputes Between Co-Owners In A Tenancy-In-Common Agreement?
Yes, a lawyer can help resolve disputes between co-owners in a tenancy-in-common agreement. They can provide legal advice, mediate negotiations, and represent clients in court if necessary.
How Can A Lawyer Help In Estate Planning For An HDB Property Under Joint Tenancy?
A lawyer can guide you on how joint tenancy impacts estate planning, particularly concerning the right of survivorship, and can help draft wills or other legal documents to ensure your estate is managed as you wish.
Can Non-Family Members Co-Own An HDB Flat Under Joint Tenancy Or Tenancy-In-Common?
Non-family members can co-own an HDB flat under both joint tenancy and tenancy-in-common, subject to HDB’s eligibility criteria and regulations.
What Happens To My HDB Flat In A Joint Tenancy If My Co-Owner Declares Bankruptcy?
If a co-owner in a joint tenancy declares bankruptcy, their share in the property may be affected. The legal implications depend on the bankruptcy estate’s claims and the Official Assignee’s decisions.
Are There Any Restrictions On Selling My Share Of An HDB Flat Held Under Tenancy-In-Common?
Selling your share of an HDB flat held under tenancy-in-common is possible, but it’s subject to HDB’s rules and co-owners agreement. A lawyer can assist in understanding these restrictions and facilitating the sale.
