WHAT HAPPENS TO YOUR LIFE RIGHT WHEN YOU DIE?
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Your life right can’t be inherited by your family – it expires when you die. If the agreement states that both you and your partner have life rights on the property, your partner will be able to continue living in the unit. That’s why it’s important that both your name and the name of your life partner appear on the life-right agreement of sale. A life right ends when you die, and the contract determines what will happen to the life right upon your death.
With the death of the liferight owner, the developer resells the unit and pays out a percentage of the life-right’s purchase price or reselling price, depending on your contract with the developer. This payment can be bequeathed to someone in a will. The payout varies depending on the developer. It could be 100% of the selling price, or the purchase price you paid plus profit on the resell, but many developers pay out a percentage of the market-related resell value according to the number of years the owner lived there.
“For example, if you were to die within 12 months of signing the sale agreement, your estate may get 80% of the original payment. After 12 months you could get 70% and after 24 months, 50%,” says Marina Constas, a specialist community schemes attorney and a director at BBM Attorneys.
“The amount you get back also depends on the rules of the development scheme. The developer can also deduct the reasonable cost of fixing up the interior of the unit,” she adds.
This is very different to sectional-title ownership, where you can bequeath your property to an heir. Still, Constas stresses that if you purchase either a sectional-title unit or a life right in a retirement village, it’s best to ask an attorney for advice before signing any agreement.
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