Because of huge demand, retirement villages are mushrooming.
However, according to specialist sectional title attorney and director at BBM Attorneys, Marina Constas, buyers need to investigate all the options.
“For the most part, retired people have to choose between buying a unit in a sectional title complex or buying a life right,’ she says.
“I’m often asked how sectional title ties up with retirement villages. The answer is that a developer may decide to sectionalise the village under development and register it as a sectional title scheme. In that case, the Sectional Titles Act applies and the fact that it is strictly a retirement village reflects in the rules of the complex.”
Buying a life right is different. On signing an agreement, a buyer commits to paying a contribution ( the purchase price) and has the right to live in the unit for the rest of his life or until he leaves the village.
Constas emphasises that the life right option should never be regarded as a property investment as there is no asset that grows in value.
However, this structure does suit many people as it guarantees them a safe place in which to live until the end of their days. These villages also cater specifically for the needs of elderly people and ensure that the best medical care is easily available.
Constas points out that life right developments don’t fall under the Sectional Titles Act but under the Housing Development Schemes for Retired Persons Act 65 of 1988, which protects elderly people buying into villages and is specific about what must be included.
In terms of this legislation, a Section 21 company must run the life rights scheme. This company now falls under new Companies Act and must have a memorandum of incorporation rather than a memorandum of articles.
Constas says that if a developer follows life rights there are a few important prerequisites. First, there must be an endorsement made against the title deeds of the scheme as well as the units to which the Housing Development Schemes for Retired Persons Act applies. It is also compulsory to get an architect’s certificate declaring that the building is fit for its purpose.
She says that because buyers are liable for levies and have to pay for facilities used, the agreement between the developer and the occupant has to specify the estimated levies for two years in advance. It also has to go on record that the prospective occupant knows his rights and is aware of what he could recover if the contract ends.
“If you die or leave, the Section 21 company or trust running the scheme may retain a percentage of the original contribution or the new sale price, whichever is greater,” she says.
“For example, if this takes place within 12 months, the occupant or his estate will get 80 percent of the original payment. After 12 months, he will get 70 percent and, after 24 months, 50 percent. The reasonable cost of fixing up the interior of the unit will also be deducted from the payment to the occupant or his estate.”
Constas emphasises that anyone buying either a sectional title unit or a life right in a retirement village should get advice from an attorney before signing an agreement.
Source: iolproperty.co.za
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In a life right scheme is the geyser covered by insurance?
Dear B Hancock,
Thanks for your email. That depends on your insurance policy. You need to obtain a copy of your insurance policy document and confirm the cover.
Hope this helps.
Michael