Tenancy-in-Common: Great for Decoupling AND Against Greedy Co-Owners

4 min read

In a recent case in Woodlands, a co-owner sought to claim 40 per cent of the flat’s value, when he really just owned five per cent. Luckily, they weren’t just joint tenants:

A quick rundown of the case

You can read the full glorious details in The Straits Times. But here’s a quick run-down:

Around 1997, a man named Ng Cheng Hock agreed to be co-owner of a flat with Madam Tan Chor Hong, his friend’s mistress. So already, we’re off to a great start. At the time, Madam Tan was pregnant, and initially wanted to buy a flat with her mother; but sadly her mum passed away first.

Ng’s friend then paid him $5,000, to be a co-owner with Madam Tan. Mr. Ng paid around $7,900 out of his CPF, toward the initial payment of the flat (just over three per cent of the purchase price at the time).

It's a trap! meme
That was bad move. Unusual arrangements in home ownership seldom work out well.

All the mortgage repayments over the next two decades were then made by Madam Tan; probably not a negotiable issue, given that Ng subsequently went to jail for 18 years in Japan (due to drug offences).

When Ng returned in end-2018, he was perhaps a changed man and wanted to make a clean future for himself.  Or at least, we like to think he felt that way for at least a few minutes. Before he came back and harassed Madam Tan by “creating disturbances” at the flat and sending her death threats. This prompted her to apply for the property to be sold.

The current value of the flat is $450,000, of which Ng wanted about $170,000 (around 43.4 per cent). But, thanks to it being tenants-in-common and not a joint tenancy, Ng is going to have to settle for just five per cent (about $20,000).

Which is still returns of over nine per cent per annum, by the way, since he effectively only put in $2,900 (his friend paid him $5,000 remember?) Really, it’s all quite depressing – the man issues death threats and gets a return that beats the ST Index Fund.

But it helps that Ng clearly just owned five per cent

There’s a chance the same result would have happened if it were a joint tenancy – because Ng didn’t service the mortgage for the two decades or so. But the legal issues were simpler and faster to get around, because it was a tenancy-in-common.

Under a tenancy-in-common, each owner holds a fixed percentage. This makes it easy to work out how much each party gets, when the property is sold.

Tenancy-in-common is often used for decoupling. This is when you own 99 per cent of the flat, while a spouse owns another one per cent. Later, your spouse can transfer the one per cent to you for cheap (Buyers Stamp Duty will only apply on the one per cent); and then go off and buy another property as a first-time buyer (hence there’s no Additional Buyers Stamp Duty).

thinking buy home couple
Getting a third co-owner like a sibling? Tenancy-in-common can make later division of proceeds neater.

But as this case shows, tenancy-in-common also provides some defence against greedy co-owners. So if you’re making a joint investment in, say, a condo to rent out – this may be the preferable way to go. And if you currently have a joint tenancy, you can take steps to change it to a tenancy-in-common (talk to a lawyer).

But note the potential drawbacks too

Did Madam Tan fully come out ahead? Not really – she has been paying the entire mortgage for two decades, whereas Ng benefits from five per cent ownership, despite not servicing the loan.

The same risk can apply to couples who split their flat, with the intent to decouple. For example, say your ownership is split 99-1; and you own one per cent, but you pay most of the mortgage. If there’s a divorce and the flat is sold, there’s a chance you’ll come out on the losing end (your lawyer can argue the case of course, but that’s still time consuming and expensive).

So be sure to talk about the pros and cons with a legal expert, before you make a decision.

Would you prefer tenancy-in-common? Voice your thoughts in our comments section or on our Facebook community page.

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