(Updated: 19 March 2024)
As we get closer to our retirement age, the idea of having to find a retirement estate that can cater to our changing lifestyle needs can be quite exhausting. Not to mention we would need to consider location, cost, amenities, and healthcare access.
On the list of considerations should be the type of property ownership scheme you would like to buy into. Most retirement estates in South Africa provide two types of ownership options: Sectional Title or Life Rights Ownership. These two types of property ownership differ slightly in terms of monthly costs, special levies, and maintenance, as well as how the property is managed once the owner has passed on.
The misconception of life rights ownership
Sectional title ownership is accessible to homeowners of any age, whilst life rights ownership is reserved for those at retirement age, looking to buy into a life rights estate. Most retirees are aware of and understand sectional title ownership, so when they encounter life rights ownership, there is room for misconceptions.
For example, most retirees assume that life rights ownership offers the same claim to a property as someone who is merely renting. However, life rights provide the buyer with exclusive rights to live on that property for the duration of their life. Those who opt for life rights ownership have the same rights as those who have entered into long-term property lease agreements, but they are not required to oversee the transfer of ownership.
How does the Life Rights ownership model work?
There are typically three parties involved in a life right agreement. These include the owner of the property who grants the life right, the holder who pays for the life right, and the occupant of the property who has the right to remain there for the duration of his or her life.
The holder of the agreement can often be the same person as the occupant, however, in most cases they are a trusted family member who pays the life right to ensure that the occupant can enjoy a high standard of living, with access to world-class amenities, without the hassles of maintaining a property.
When a resident passes away, the estate is responsible for reselling – the Life Right. A pre-established formula is applied to the profits from the sale, and the proceeds can go to the deceased’s nominated beneficiary.
Life rights vs sectional title ownership
The primary difference between life rights ownership and sectional title ownership, is that the life rights occupant’s claim to the property ends upon their death. This type of ownership aids the family members of the deceased occupant, who are typically charged with managing the sale of the home in the following ways:
- The owner of the property will manage the sale of the life right and will be charged with marketing the life right, thus reducing pressure on the deceased occupants’ family.
- The sale of the life right operates similarly to a house sale. The holder of the life right (if not the occupant) is paid once the life right has been sold to a new holder. If the holder is also the deceased occupant, the money will be paid to the beneficiary of the estate.
- If the life right sells for more than what was originally paid, the owner will pay the holder or beneficiary the full amount originally invested, minus any transactional or renovation fees.
Before entering into any agreement, it is important for the retiree to discuss their needs with their family and to go over the pros and cons of the different ownership models. This will provide the family with the information they need to make an informed decision.
What are the benefits of Life Rights?
There is a reason why life rights ownership is fast becoming the most popular choice amongst retirees around the world. With some of the biggest benefits of life rights ownership being:
- You and your family have peace of mind, knowing that you have a home for life.
- You can enjoy security, access to amenities, healthcare, and so much more at an affordable monthly rate whilst reducing hassles and stress associated with having to maintain the property yourself.
- You are exempt from paying VAT or transfer duty.
- The estate retains ownership of the property and therefore has a long term vested interest in maintaining high standards, promoting improvements, and ensuring the profitability of the estate.
- When a spouse passes away, the surviving partner retains his or her life rights ownership to the property.
How can Lonehill Manor Retirement Estate help you?
At Lonehill Manor Retirement Estate, our residents have access to luxury independent living apartments, comfortable assisted living suites, and comprehensive frail care rooms at affordable prices. We aim to provide our residents with the flexibility they need when coming to their healthcare and living needs, whilst offering a happy, stimulating, and healthy retirement community.
When an apartment comes up for resale, the estate will sell on behalf of the occupant/s and an exit fee on the re-sale price is payable to the estate.
For many retirees, life rights ownership is the most sensible property investment, as it is a custom-crafted ownership model for people entering retirement. It offers financial peace of mind, hassle-free living, and enables you to enjoy a stress-free retirement without having to compromise on your standard of living.
Contact Lonehill Manor Retirement Village to book your viewing of our amazing estate today!
