When a surviving joint owner cannot own the whole property

A man who co-owned an HDB shophouse with his late father learnt an expensive lesson in law when he was forced to share the $500,000 property with his three siblings.

The shophouse had been bought by their father, who added the son’s name as a co-owner in order to get better loan terms. The mortgage instalments for the property, which was used for the family’s hardware business, were paid entirely by the father.

When he died, the son, as joint owner, thought the shophouse would be his by virtue of the often-cited “right of survivorship”.

In truth, it is simply the legal consequence of holding property as joint owners: The surviving owner becomes the sole owner in name but this does not automatically come with absolute ownership if there are eligible claimants.

This important clarification by the High Court on the law relating to joint ownership should sound a cautionary note to all owners who have such arrangements. They should think twice before naming certain relatives as joint owners of their properties if they do not intend to let their co-owners inherit the assets totally upon their death.

But the joint ownership rule favours married couples because there is a legal presumption of “gifting” between spouses even if only one of them had paid for the property. So if one spouse dies, the entire property automatically passes to the surviving one.

High Court Judge Vinodh Coomaraswamy noted that there is a strong basis for “gifting” in cases involving couples and their matrimonial homes.

“Each spouse is very likely to intend that, upon the other spouse’s death, the surviving spouse should become the sole and absolute owner of the property and have a place to reside... before the property can pass to the next generation,” he said.

The judge made this observation when he heard the case involving three sisters who sued their brother over their late father’s shophouse.

The issue started festering when their father died in 2016 and his widow took over the hardware business and ran it until her death a year later. Her will stated that all her assets would be divided four ways among her children.

The sisters continued to run the business and all was well until they started asking their brother if he was going to sell the shophouse and split the proceeds among them. But he told them that as the surviving joint owner, the shophouse was his alone. He refused to budge so his sisters took him to court in 2020 to secure their share in the $500,000 property.

The brother lost the case because he could not prove that his late father had intended to benefit him solely, just because he was named as joint owner.

He was deemed to be holding the shophouse on his behalf and when the father died without a will, their mother would own half the property while the other half would be shared by the four siblings.

As the mother stated that all her assets would be shared equally among her children, each sibling would then inherit a quarter share in the shophouse.

Justice Coomaraswamy highlighted three important rules on joint ownership that all property owners should know.

Holding properties on trust for those who paid

Not all joint owners are equal under the law because the ones who pay for the properties, like the parents, are deemed the real owners.

If the parents die, their children are presumed to be joint owners in name only, unless evidence shows that they are also meant to inherit the properties.

The court looked at what the father intended when he said at his son’s wedding that they would “join name” to buy the shophouse.

The judge noted that typically, lay persons who use such terms would not immediately understand the legal consequences of such a relationship. So when the father said that, he probably meant he and his son would be the immediate owners with equal rights to use the shophouse or rent it out, without giving any thought as to what would happen when one of them died.

After all, the father always viewed himself as the sole owner and made all decisions relating to the property and his business. In doing so, he could well have “destroyed” the son’s rights by selling the shophouse or by adding other children as joint owners.

Moreover, the family was not wealthy and the main purpose in buying the property was to enable the hardware business to remain there without paying higher rent.

Justice Coomaraswamy noted: “It therefore appears to me likely that, if the father formed any intention at all about what was to happen to the property after his death, that intention was for the property and the business to support their mother in her widowhood rather than to benefit the (son).”

Not removing name does not mean consent

The son made much ado over the fact that his father did not remove him as a joint owner even after the mortgage loan was repaid.

But the judge noted that mere inaction would not give rise to a new outcome unless there was supporting evidence, such as the father having done nothing even though his three daughters also wanted to be named as co-owners.

So the father’s failure to remove the son as a joint owner was more likely because he viewed himself as the sole owner and that he could deal with the property without seeking the son’s consent.

He was satisfied with the status quo, so he did not even ask for the return of the title deed after paying off the loan because he preferred to pay the bank a fee to keep the document for him.

Being fair to all children

If the only child is listed as the joint owner of the family home, there is a strong presumption that the parents would have intended that their kid inherit the property.

But in the context of a parent-child relationship, the number of children the parent has is a factor that weakens the strength of such a presumption.

“The more children a parent has, the less basis there will be to presume that the parent’s transfer of property of substantial value to a single child was intended to be a gift to that child,” Justice Coomaraswamy noted.

The father in this case had four children, and there was no compelling evidence that he intended to benefit only one of them over the others.

Moreover, the son “was financially independent and his income was on an upward trajectory” during the purchase of the shophouse, while his father’s business was not doing well and his income had not improved.

This reduced the likelihood of the father intending to gift the shophouse to the son just because he was named as a co-owner.

“I find that both parents did not favour… their only son over their daughters, as may have been typical for parents of their generation and culture,” the judge said, as he ruled that all four siblings had equal stakes in the shophouse.

As the son lost the case, he had to pay about $150,000 in legal cost to his sisters, an amount that exceeded the value of his quarter stake in the shophouse when the fight started.

So if you are a joint owner of a property in name only, you should seek legal advice first before declaring no one else can have a share of it.

Source: The Straits Times © SPH Media Limited. Permission required for reproduction.

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