In Singapore, more than 80% of the residents live in HDB flats. Yet how many are aware of the various HDB regulations and its implications to themselves and their loved ones? Not knowing the rules can potentially land you in financial troubles, but may also cause family disharmony and destroy relationships. One of the most overlooked clause is the Manner of Holding, specifically, “Joint Tenancy” and “Tenancy-in-Common”. Read on if you are a joint owner of a HDB flat and is curious to find out how it can impact you.
When you are buying a HDB flat with your spouse or other family members, you would need to decide on the manner of holding the flat upon the transfer of flat ownership, either through joint tenancy or tenancy-in-common.
Technically, under joint tenancy, all the flat owners have an equal share in the flat. However, in the event of a demise of any joint owner, the right of survivorship applies and his interest in the flat would automatically be passed on to the remaining co-owners. This is regardless of whether the deceased joint owner has left behind a Will.
According to an example quoted from HDB’s website “Mr A, Mrs A (wife) and Mr C (son) own an HDB flat under joint tenancy. In the event of Mr A’s demise, the ownership of the flat will automatically be passed to Mrs A and Mr C.”
On the other hand, under tenancy-in-common, each co-owner holds a separate and definite share in the flat. This means that unlike in the case of joint tenancy, the right of survivorship does not apply. Upon the demise of one of the joint owners, his interest in the flat would be distributed according to his Will. In the absence of a Will, the Intestate Succession Act will kick in and distribute the estate accordingly.
According to an example quoted from HDB’s website “Mr A and Mrs A (wife) own an HDB flat under tenancy-in-common with 60% and 40% share respectively. In the event of Mr A’s demise, his ownership in the flat (i.e. 60% share) will be distributed according to his Will, or according to the provisions of the Intestate Succession Act.”
There have been numerous family disputes which landed as court cases because many Singaporeans are unaware or do not understand the implication of this manner of holding clause. Many Singaporeans tend to pay for or finance their elderly parents’ HDB mortgages under joint tenancy. There is nothing wrong with this act and in fact, it is a filial act worth commending in our society. However, complications arise when the elder parents both passed on. The rest of the siblings who had not contributed financially to the property at all but had their names under the joint tenancy will still get equal share of the flat. In such cases, even having a Will will be useless and the only way the rightful owner can claim back his money is through his siblings’ goodwill and the strength of their relationships.
Obviously this may seem like an unfair rule and even though the rightful owner is able to show proof that he paid for the flat, his sibling are still entitled to equal share of the flat. However, from HDB’s point of view, joint tenancy is the more straight forward approach to implement. After all, not all Singaporeans have a Will and you need to realize that if the government has to administer Intestate Succession Act for every death notice, the amount of the work load can be unimaginable, given Singapore’s aging population. So having a joint tenancy clause would make sense, at least for HDB!
However, the HDB is cognizant that not every Singaporeans prefer the right of survivorship approach and henceforth, the provision for tenancy-in-common, which allows owners to distribute in accordance to their Wills or the Intestate Succession Act. Thus, there are certainly flexibility in the rules but Singaporeans need to understand the regulations first and foremost before making the decision on the manner of holding the flat.
So the key lesson learned for HDB owners is to think through the kind of ownership for the flat before making a hasty decision. This is especially so if a Will is already in placed before purchasing of the HDB flat. I have read so many sad articles on family disputes over ownership of HDB because of this relatively unknown clause. The ultimate winners are usually the lawyers who earned fat legal fees from the court cases. The losers are normally the family owners because relationships have been strained and damaged to the point of no return.
Many Singaporeans like to say “Oh well, its okay, we are all family! There is no need to be so calculative!”. Yet when it comes to crunch time, money always come first before kinship. This is a sad fact of life. So bottom line is: make sure you understand the rule of the game before you play. Join me in my personal finance journey and subscribe to my email updates. Don’t be stubborn!
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SG Wealth Builder