Planning for your retirement? Before you begin searching for the right area and property size you want to spend your senior years in, you need to be aware of the different types of ownership models that retirement developments offer.
Life Rights
The holder purchases the right to occupy a property for the rest of their life. The property developer retains ownership, along with the maintenance, management and resale of it.
Full-Title Ownership
The purchaser has the full rights relating to a property, including the land and the buildings on that property.
To help you make a more informed decision when choosing your future retirement home, we’ve outlined the advantages and disadvantages for both ownership models below:
Life Rights
Pros
A Life Right investment in a retirement development is more cost-effective, as the buying price is usually lower than that of purchasing your own house or apartment of a similar size in a comparable area.
This option is also more flexible, as the agreement can be tailored to fit the retiree’s budget.
With no admin or extra monthly fees, residents can live a stress-free retirement lifestyle.
There is no need to register with the Deeds Office, so registration will be quick when transferring from one holder to the next.
The developer remains the sole owner of each unit and therefore is responsible for maintenance as well as the upkeep of the retirement development and its facilities. This ownership ensures that all facilities will be kept to the highest standard.
Cons
As every Life Rights agreement is different, it’s important to understand carefully what it is you’re paying for – specifically regarding the developer buying back your unit when you pass away.
With no ownership of any form, there are no financing options.
Should the developer become insolvent and require a sale in execution of the property, the Life Rights holders are viewed as concurrent creditors and as a result are last in line to benefit when assets are redistributed.
Holders can’t bequeath their Life Rights on death. The ownership of the Life Right reverts to the developer who can then resell it.
Full-Title Ownership
Pros
Purchasing a Full-Title Ownership retirement property offers financial growth, as well as a capital asset.
Purchasing an immovable property can be financed through a home loan.
With this option, you can invest in your retirement property now and secure your future needs at today’s price. In addition, by purchasing your retirement home before the time, you also have the opportunity to rent it out and generate income that can pay off the property.
By owning your retirement property you are able to do with it as you wish, which includes painting, structural renovations, etc.
A Full-Title Ownership property forms part of one’s estate on death, allowing the property to be bequeathed to your heirs in terms of a will.
Cons
Purchasers will pay according to a market-related price, including VAT, as well as cover additional fees for insurance, maintenance, monthly levies, etc.
If a retiree outlives their pension, they might be forced to sell up and move.
Residents at a retirement development will have to deal with special levies, body corporates and managing agents.
With appealing advantages for both options, the biggest benefits for choosing Full-Title Ownership is access to financing, not needing the full amount upfront, and the opportunity to leave a financial legacy behind for your children and grandchildren.
De Plattekloof Lifestyle Estate has a variety of Full-Title Ownership luxury retirement properties on offer:
Assisted Living Suites • Luxury Apartments • Exquisite Homes • Penthouse Apartments
Contact our sales consultants to find out more.
References:
- ”Life rights vs sectional title property in retirement: what’s the difference?” Property24 (blog), 11 April 2018
- ”Retirement Villages and Life Rights” Snymans Inc Attorneys (blog)
- ”The right retirement ownership model for you: Life Rights or Sectional Title” Faircape Retirement Holdings (blog), 31 May 2019
- Craig Torr – Crue Invest (Pty) Ltd “Choosing your retirement home” Moneyweb (blog), 30 May 2019
- Gareth Collier – Crue Invest (Pty) Ltd “Understanding your retirement home options” Moneyweb (blog), 12 May 2020
- “PLANNING TO RETIRE? THE ADVANTAGES OF SECTIONAL TITLE” Harbour Bay Village (blog)
