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Know your rights if re­tire­ment vil­lage of­fers you life right in­stead of sec­tional ti­tle

Weekend Argus (Saturday Edition) - - PROPERTY -

BE­CAUSE of huge de­mand, re­tire­ment vil­lages are mush­room­ing.

How­ever, ac­cord­ing to spe­cial­ist sec­tional ti­tle at­tor­ney and di­rec­tor at BBM At­tor­neys, Ma­rina Con­stas, buy­ers need to in­ves­ti­gate all the op­tions.

“For the most part, re­tired peo­ple have to choose be­tween buy­ing a unit in a sec­tional ti­tle com­plex or buy­ing a life right,’ she says.

“I’m of­ten asked how sec- tional ti­tle ties up with re­tire­ment vil­lages. The an­swer is that a de­vel­oper may de­cide to sec­tion­alise the vil­lage un­der de­vel­op­ment and reg­is­ter it as a sec­tional ti­tle scheme. In that case, the Sec­tional Ti­tles Act ap­plies and the fact that it is strictly a re­tire­ment vil­lage re­flects in the rules of the com­plex.”

Buy­ing a life right is dif­fer­ent. On sign­ing an agree­ment, a buyer com­mits to pay­ing a con­tri­bu­tion ( the pur­chase price) and has the right to live in the unit for the rest of his life or un­til he leaves the vil­lage.

Con­stas em­pha­sises that the life right op­tion should never be re­garded as a prop­erty in­vest­ment as there is no as­set that grows in value.

How­ever, this struc­ture does suit many peo­ple as it guar­an­tees them a safe place in which to live un­til the end of their days. These vil­lages also cater specif­i­cally for the needs of el­derly peo­ple and en­sure that the best med­i­cal care is eas­ily avail­able.

Con­stas points out that life right de­vel­op­ments don’t fall un­der the Sec­tional Ti­tles Act but un­der the Hous­ing De­vel­op­ment Schemes for Re­tired Per­sons Act 65 of 1988, which pro­tects el­derly peo­ple buy­ing into vil­lages and is spe­cific about what must be in­cluded.

In terms of this leg­is­la­tion, a Sec­tion 21 com­pany must run the life rights scheme. This com­pany now falls un­der new Com­pa­nies Act and must have a mem­o­ran­dum of in­cor­po­ra­tion rather than a mem­o­ran­dum of ar­ti­cles.

Con­stas says that if a de­vel­oper fol­lows life rights there are a few im­por­tant pre­req­ui­sites. First, there must be an en­dorse­ment made against the ti­tle deeds of the scheme as well as the units to which the Hous­ing De­vel­op­ment Schemes for Re­tired Per­sons Act ap­plies. It is also com­pul­sory to get an ar­chi­tect’s cer­tifi­cate declar­ing that the build­ing is fit for its pur­pose.

She says that be­cause buy­ers are li­able for levies and have to pay for fa­cil­i­ties used, the agree­ment be­tween the de­vel­oper and the oc­cu­pant has to spec­ify the es­ti­mated levies for two years in ad­vance. It also has to go on record that the prospec­tive oc­cu­pant knows his rights and is aware of what he could re­cover if the con­tract ends.

“If you die or leave, the Sec­tion 21 com­pany or trust run­ning the scheme may re­tain a per­cent­age of the orig­i­nal con­tri­bu­tion or the new sale price, which­ever is greater,” she says.

“For ex­am­ple, if this takes place within 12 months, the oc­cu­pant or his es­tate will get 80 per­cent of the orig­i­nal pay­ment. Af­ter 12 months, he will get 70 per­cent and, af­ter 24 months, 50 per­cent. The rea­son­able cost of fix­ing up the in­te­rior of the unit will also be de­ducted from the pay­ment to the oc­cu­pant or his es­tate.”

Con­stas em­pha­sises that any­one buy­ing ei­ther a sec­tional ti­tle unit or a life right in a re­tire­ment vil­lage should get ad­vice from an at­tor­ney be­fore sign­ing an agree­ment.

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