Author: Nicolas Nel
As we get older, there are numerous things we need to come to terms with. Largely, we need to face the reality that the house we have lived in for so many years, might no longer be an affordable and safe place to carry out retirement. Considering this, many chose to down-size their living space and opt for senior living communities.
When down-sizing to a senior living community there are three main options to purchase, namely, a Life Right, shares in a Share Block Scheme and a unit in a Sectional Title Scheme.
Life rights are regulated in terms of the Housing Development Schemes for Retirement Persons Act 65 of 1988 (HDSRP). In short, purchasing a life right gives the purchaser the right to occupy the property for the remainder of their life, it does not however, make you the owner of the property.
The HDSRP sets the minimum age for purchasing a life right at 50, although some schemes set higher minimum age requirements.
When purchasing a life right, you will sign a life rights contract, the terms of this contract are extremely important. It may be advisable to seek legal advice if you are uncertain of any of the terms in the contract. It is especially important to understand the clause pertaining to the re-sale of the life right as this can vary greatly depending on the development.
Life rights offer their greatest advantage in their level of transparency, making it a great option for those living on a fixed retirement income. Where sectional title owners are often hit with hidden costs and special levies, life right holders are protected from such expenses by the HDSRP. With developers being obliged to provide a two-year cost estimate in respect of levies, it allows individuals to plan accordingly well ahead of time.
Because of their popularity, the waiting lists are generally long to life rights, it is thus advisable to put your name down as soon as possible.
SHARE BLOCK SCHEMES
In a share block scheme, the company is the owner of the units. This company then allocates a number of shares to the scheme. By purchasing a share, you obtain a right of occupation to your specified unit in the scheme. With share block schemes, you only own the shares and the accompanying rights, you are not the owner of the property or any portion thereof.
The biggest advantage of share block schemes is the simplicity of the process and the speed at which the occupation rights can be transferred. Furthermore, as the individual who purchased the shares will be a shareholder in the company, they will have a say in the management of the scheme. Finally, shares are an asset that can be inherited along with the rights attached to them.
A further option would be to purchase a unit in the retirement complex. This process is Regulated by the Sectional Titles Act 95 of 1986. The purchaser acquires full ownership rights in their unit. Along with full ownership comes more secure and extensive rights in the property when compared to the two abovementioned options of purchase. A major downside, however, are the expenses involved in the purchase. The purchaser will be required to pay the attorney fees and transfer duty involved when purchasing the sectional title unit. Furthermore, it can be an equally time-consuming procedure, especially in instances where you are purchasing a unit from a deceased estate.
As can be seen from the above, each purchase option discussed offers unique advantages and disadvantages. Finding the best fit for your individual needs is what is ultimately most important.