Understanding the difference between Life Rights and Sectional Title

by antoinette pombo
April 22, 2018

The term “sectional title” is familiar to most South Africans who have ever purchased a home. It essentially enables you to purchase a section, or unit, of a larger property – making you part owner of a building or development, and therefore partially responsible for maintenance and management of the property.

You might not, however, have heard of Life Rights – a term perhaps becoming better known to the retirement community.

Some retirement developments have adapted the Life Rights model, owing to increased demand for this type of housing in South Africa. So, what is a Life Right exactly?

When someone decides to move into a retirement home, they need to make decisions on the form of ownership.

While investing in a sectional title property allows an individual to remain on the property ladder, a Life Right enables a person to purchase a home, typically within a retirement development, purely for the remainder of their life and that of their spouse.

“One of the biggest concerns worrying older people is whether they will outlive their assets. If you retire in your 70s and live well into your 90s, there is a good chance your retirement savings won’t see you through,” says Arthur Case, the CEO of Evergreen Lifestyle – a leading provider of retirement living in South Africa and a subsidiary of the Amdec Group.

“The Life Right concept is attractive for the older person, who may have neither the desire, nor the ability or finances, to maintain a property at this later stage in life. With a Life Right, one pays over a capital amount to the developer and is then able to live in a unit within a retirement village and use all the various facilities offered there. The developer, however, remains the legal owner, and so it is the developer who must maintain the units, the village and the facilities.”

Today, retirement accommodation focuses on lifestyle and quality of life, attracting people at earlier stages of their retirement, rather than just when they become too fragile or sickly to live independently.

With people living longer than ever before, and working until a much older age, it becomes vital to ensure security for the long term. A Life Right offers guaranteed security, with the additional benefit of a resort-style facility, security, a fully-managed and maintained environment, and health care facilities that generally include 24-hour care, recuperative and palliative nursing, and frail care.

Sectional title might offer financial growth, but it also comes with special levies, body corporates, managing agents and more burdensome admin. The primary purpose of a Life Right is to offer a stress-free retirement lifestyle for older people who don’t want to take on, or keep, the responsibility of home maintenance, insurance, security, etc.

In terms of cost, a Life Right can also be tailored for the retiree’s budget and is typically lower than you’d pay for a house or apartment of similar size. Traditional property investments remain relatively fixed at a market related price.  

What makes a Life Right the right life choice?

  • The owner of a sectional title property is responsible for VAT, transfer duty, and capital gains tax. These costs don’t apply with the purchase of a Life Right property.
  • Over and above the monthly levies, residents of sectional title properties are also liable for any special levies which typically cover large-scale refurbishments, renovations, and upgrades to security, etc. In the case of a Life Right property, the developer is liable for the retirement village’s maintenance.
  • Sectional title residents are also liable for all costs relating to maintenance, insurance, and security – costs which are not applicable in a Life Rights development.
  • The purchaser of a Life Right must plan for paying monthly levies in a retirement village, but this could apply equally to someone living in a home they own.
  • Once a property is completed and sold, the developer has no obligation to remain invested in or maintain a sectional title development. With a Life Right village, the developer retains ownership of the property in perpetuity and therefore has both a responsibility and a vested interest in maintaining the development to the highest possible standards.

“It’s clear that investing in property is a good decision for younger people looking to get a foot on the property ladder. The Life Right model, however, offers an older person the comfort and security of knowing that they will have a home throughout the rest of their lives in an environment geared to provide a quality lifestyle,” concludes Case.

For more information about Evergreen Lifestyle Retirement Villages, go here

 

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