Words: Anne Schauffer | Image: Shutterstock
There are three key retirement models: sectional title, share block and life rights. Like any property or legal transaction, visit as many retirement developments as you can to compare apples to apples. Having said that, there are numerous variations on the theme, so it’s not that straightforward – everything is development specific, and within the same purchase model costs can vary considerably.
With sectional-title retirement options, the buyer owns the unit outright by means of a title deed registered with the Deeds Office. The developer carries no responsibility for the ongoing maintenance and cost management aspects once the development is sold. In this model, the onus is on the resident to care for their asset. The advantage? Capital appreciation like any other sectional-title purchase.
Stefan Botha, director, Rainmaker Marketing, says, “Sectional title is proving popular with younger people who’re not yet at retirement age, but who see it as a good investment – they get a great rental yield until they want to use it for their own retirement purposes. On the other side, there’s a growing segment of young people investing in retirement for their parents and want to see capital appreciation on that investment they’ve made.”
Though less used today, with share block you don’t obtain exclusive title to the unit you’ve bought, you own shares in the company which owns your home i.e. not a section of the building itself. In this way, costs involved can be minimised. To maintain the property, directors of a share-block company establish a levy fund to which you contribute to cover its running expenses. You receive a share certificate. Transfer duty is still payable on the purchase price to Sars, but the sale is not registered in the Deeds Office.
Maria Davey, Meumann White Attorneys, says, “Today, this model is not a popular one for a retiree development. If a share-block company gets into debt and the property is attached and sold in execution, the use and occupation agreements will come to an end. As a shareholder, you have no real right over the property you occupy. Furthermore, finance to buy into a share block company is not readily available, so although it might be marginally cheaper to acquire accommodation this way initially, it may prove difficult to sell down the line.”
“With greater life expectancy than ever before, one of the biggest concerns worrying older people is whether they will outlive their asset,” says Arthur Case, CEO, Evergreen Lifestyle. “With this model, you have a right to occupy the unit for your and your spouse’s lifetime, free of maintenance responsibilities.”
Everything remains both an asset and the responsibility of the developer. When life rights terminates, the property reverts to the village’s owner – your estate will receive the original purchase price, plus a pre-determined percentage of the net profit (less certain pre-determined costs). Life rights is not a property transfer, so no bond registration fees, transfer duties and VAT is payable. Life-rights units are usually more affordable than the other models – no capital appreciation, but no maintenance required, and it’s in the developer’s interest to maintain his asset well. In addition, life rights has a comforting methodology of levy transparency for two years ahead, which makes financial planning easier for the retiree.