There is a major shift in the lifestyle, social and housing needs of todays over 50’s. With advances in science and medicine – living to 100 is becoming more likely. The way people are approaching this change is delayed retirement – where people aged 65+ are extending their careers, and active ageing – where over 50’s are swapping their sedentary lifestyles for more physically, socially and intellectually active ones. The trend is approached by sectional title living that covers aging in place -where residents current and future health needs are provided by assisted living providers that cover cleaning, laundry and physical care in the residents’ homes.
Old Age Home vs a Retirement Estate
Old Age home
This is a facility – normally belonging to a Church, Trust or charity to assist the elderly who have not the means to buy into life rights/share block or sectional title for retirement care.
It is generally a government backed facility and has strict rules relating to the acceptance of residents relating to the level of income, rules of residence etc.
Retirement Estate
This is an economically viable property development that allows purchasers with available capital the options of buying extra living benefits, yielding capital growth on their investment and getting a higher level of support services such as medical care, meals etc
There are 4 options in retirement properties – life rights, share block, sectional title and full title.
Life rights
The most popular form of retirement in THE US and Australia and over 80% of retirement village residents in New Zealand have life right agreements. The concept is relatively new to SA. It is aimed at those who do not have the capital for outright ownership and are looking to buy into a certain lifestyle with lower monthly levies and less administration. Life rights fall under the Housing Development Scheme for Retired Persons Act – protecting buyers financially and ensuring sales contracts are carried through. No transfer duties, registration fees not VAT are payable.
The buyer has no ownership of his/her unit but buys the legal right to live in the unit for the remainder of his/her life, with lower levies and admin costs. The developer is required to maintain the property.
A life right cannot be inherited nor bequeathed. When it terminates through death or sale it reverts back to the developer or owner of the Scheme who can then on sell the right. The total sale price is unlikely to have kept up with market values in the property market and the clients estate will receive a portion of the original purchase price plus a percentage of net profit.
Share block[
Prior to the Sectional Title Act or legislation that allowed developers to give buyers the rights to sections of the property, there were share block schemes.
Here the buyer becomes a shareholder in a company that owns a retirement Estate and gets issued a share certificate that entitles the owner to use and occupation of a unit in the Estate, secured by a use and occupation agreement between them and the company. Usage rights as determined by the use agreement, the management rules and the articles of the company.
No financing option is available for this type of purchase as there is no security against the loan. Regulations do however control this type of ownership to ensure full disclosure to owners. Transfer duties and conveyancing fees are payable though the transfer is not registered in the Deeds Office.
The buyer of a share block also plays a role in the management of the scheme through a general meeting of shareholders, and a levy contribution to a fund is made to meet the running expenses. Shareholders are not liable for the debts of the management company.
Shares can be bequeathed or can be sold – however the use agreement or articles may stipulate who can occupy or buy ones interest.
The Share Block Control Act 59 of 1980 makes provision for the conversion of share block to sectional title.
Sectional Title
Sectional title ownership is legislated by The Sectional Titles Act, 95 of 1986 as amended. Most retirement schemes today in SA, are developed as sectional or full title ownership. Sale and purchase agreements are regulated in terms of the Act and buyers have various financing options from the financial institutions, as there is proper security for a mortgage bond and the title deeds are registered in the Deed Office by a conveyancer. Thus, transfer duties and conveyancing costs are payable by the purchaser. This sort of ownership also comes with complex administrative structures that are subject to rigorous legislative requirements to protect the consumer.
Sectional Title ownership allows the buyer to own his/her unit in the Estate and they may also sell, transfer or bequeath the unit. He/she is responsible for municipal rates and taxes as well as services such as water and electricity. They are also responsible for a general levy to cover the maintenance and expenses of running the Estate and these levies will differ from Estate to Estate.
Levies have a direct impact on the standard of services and reputation of a retirement Estate and the value of the units when it comes to resales. Levies must be calculated as realistically as possible to maintain a high quality of service that includes general maintenance, security and services.
The Body Corporate is represented by an elected Board of Trustees who manage and control the expenses of the Estate, receipt of the general levies and common property that includes the land, gardens, roads, foundations and roofs, lifts and foyers. The Body Corporate also approves the budget. The Trustees raise the general levies and if required special levies which have to be approved by the Body Corporate.
Nursing services and primary medical health care is usually charged separately by the health care provider and includes panic buttons and on-site nurse – the medical levy does not form part of the monthly general levy. Residents would have the option of 24-hour care, medication administration, laundry, cleaning services if needed, at an extra cost.
A percentage of any resale price goes towards a levy stabilisation fund that allows for buyers levies to be protected against any sharp increases in the general levies. The Sectional Title Schemes Management Bill has been revised and will regulate the functions of the Body Corporates and the rules under which they function.
The Levy stabilisation fund is set up to prevent any large increases in levies each year and allows the Body Corporate to either set the ordinary levies at a fixed rate or to keep increases at or below the rate of inflation. Special levies may still be called for dependant on the decisions and requirements of the Body Corporate.
Full Title
Buyers in a normal residential retirement Estate must be of a certain age and no children are allowed. They are not subject to the Sectional Titles Act and don’t have to do an annual audit. A Home Owners Association, and not a Body Corporate is formed.
REF:
South African Property Review – May 2017 – Marc Pettipher
Personal Finance – Retirement Villages
www.property24.co.za – Luxury apartments and retirement estates on the rise in SA – May 2017
Update on Construction of Phase 2 The Oaks
Block 5 and 8 
Block 7 and 8
Block 6 and 7
