The advantages of a life right
Category News
The Housing Development Schemes for Retired Persons Act 65 of 1988 introduced life rights as a formal form of ownership for retired people in South Africa. This legislation was implemented not only in response to the growth in the retirement village sector but also to provide legal protection to the elderly.
What are the benefits?
While more conventional forms of ownership like sectional title are still available to retirees, life right schemes have become an attractive option as they offer the following benefits:
- With a life right, there is no formal transfer of property or registration of security like a bond - and therefore, no associated costs.
- The life right holder is usually given a three-year draft levy projection, which allows them to budget accordingly.
- Maintenance is done by the development owner with minimal expenses for the life right holder
- No special levies may be charged in a life right scheme.
- On the death of the life right holder, the purchase price (and profit, if applicable) minus the refurbishment and selling costs will be refunded to the life right holder's estate.
There are also some disadvantages for retirees to consider:
- No interest will be earned on the purchase price.
- Appreciation of the asset does not play a role.
Does the Property Practitioners Act (PPA) apply?
Yes, the PPA applies in the same way it applies to any sale or lease. The retirement village consultant, broker or agent is included in the definition of "property practitioner" and will therefore be held accountable in terms of the PPA, if necessary. A life right holder in a retirement village will also have access to the Community Schemes Ombud Service. It's important to remember that a life right scheme is a typical community scheme, and is defined as such in the Housing Development Schemes for Retired Persons Act 65 of 1988.
Author: Snymans Attorneys Inc.