Words: Kit Heathcock Image: Supplied

Purchasing a retirement home is so much more than a bricks and mortar property investment. You’re buying into a lifestyle, looking for a peaceful, caring environment that will support you through the rest of your life. Two different purchase models are prevalent in South African retirement developments. Traditionally sectional title is best known, but the life rights model has increasingly gained popularity.

What’s the difference?

Sectional title is an outright property purchase. Your house is your own, can be willed to your heirs and appreciates in value according to the current property market. Maintenance is your responsibility and a body corporate made up of property owners, usually working with a management company, runs the common areas and facilities.

Life rights give you and your partner a right to live in your house for the rest of your life, but ownership remains with the developer. The developer is responsible for maintenance of property and management of common facilities. Upon your death the life right is sold on, and your estate receives an agreed percentage of the original entry price.

Life rights

One reason for the increase in popularity of life rights schemes is that a lot of the hassles of property ownership are taken care of for you.

“It guarantees professional management, taking away the day-to-day worries facing body corporates such as security, clubhouse management, maintenance and insurance,” says Leon Cohen, Rabie Property Group, who is launching their Oasis Life retirement developments at three sites around Cape Town. “Also, the developer is in it for the long haul. By retaining ownership of all homes as well as the common property, it’s in the developer’s interest to maintain the village and its facilities to a high standard.”

The purchase price of a life right is generally lower than full ownership of a similar property in the area, and monthly levies are set from the beginning, with no extraordinary levies applicable.

“Ultimately, life rights deliver peace of mind and freedom from financial worry,” says Arthur Case, Evergreen Lifestyle, the retirement subsidiary of the Amdec Group, who are expanding into Kwa-Zulu Natal with a development at Umhlanga Ridge. “With transparent and affordable levies, pricing tailored to fit your budget, and tenure guaranteed for life, the prospect of living longer is no longer cause for anxiety.”

Sectional title

A sectional title scheme has the advantage of a known and straightforward model of property ownership and the capital gain associated with a property investment.

“We considered life rights, but ultimately chose to go with sectional title ownership,” says Craft Homes development director Charl May, currently developing The Retreat at Hazeldean, Pretoria. “Our buyers consisted mainly of owner-occupiers and children buying for their parents. The owner-occupiers preferred direct ownership, desiring to have secured ownership if they pass on, so as not to burden their partner with the complications of life rights. The children generally see the property as an investment in the short term and a property they could retire to in the long term, and want the financial benefit of direct ownership.”

Owners belong to the body corporate, so they have a say in the running of the retirement village. Should there be unforeseen maintenance expenses, extraordinary levies might need to be financed.

“Both life rights and sectional title models have intrinsic benefits,” says Claudius Combrinck, MD, Imagine Property Consulting, currently involved with De Plattekloof Lifestyle Estate in Cape Town. “Sectional title retirement schemes allow retirees the additional benefit from capital appreciation similar to the typical residential property market.”

Due diligence

Whichever model appeals, it’s essential, just as with any property purchase, to look carefully into the fine print of the contracts and check out the financial standing of the development. What are the arrangements should you wish to relocate? How are levies calculated and what do they cover? Are the promised facilities already in place or what’s the time frame for providing them? Speak to the residents too; they’re the best barometer of the lifestyle and community you will be buying into.

The purchase price of a life right is generally lower than that of a house or apartment of similar size in a comparable area. With freehold and sectional title properties, however, the buyer pays according to a market-related price.
Arthur Case, CEO, Evergreen Lifestyle

NEW RETIREMENT DEVELOPMENTS

  • Oasis Life: Clara Anna Fontein, Burgundy and Century City, WC
  • Evergreen Lifestyle: Umhlanga Ridge, Zimbali, Hilton, KZN; Val De Vie, WC
  • CPOA: Quadrant Gardens, Claremont, WC
  • Craft Homes: The Retreat, Hazeldean, PTA
  • MSP: Buh-Rein Estate retirement village, WC
  • De Plattekloof Lifestyle Estate, WC
  • Shoreline Sibaya, KZN
  • Renishaw Hills, KZN
  • Lazuli Coastal Retirement Estate, KZN
  • The Village at Langebaan Country Estate, WC