The Benefits of the Life Right Retirement Scheme

Private Property South Africa
Anna-Marie Smith

The benefits of choosing the Life Right retirement scheme option over full title, sectional title or share block ownership, are aplenty.

However, experts in the field emphasise that this only applies when the risks associated with this option have been researched and assessed. They say because of its complex nature, sufficient knowledge of the rights and obligations of all parties involved is what leads to informed decisions and ultimate peace of mind.

Prospective life right scheme buyers are also advised to consult with attorneys, auditors or a person in a position of authority when checking the fine print of contracts. Senior citizens have access to the services and membership of a number of industry associations that provide assistance. These include the SA Association of Retired Persons (SAARB), the Cape Peninsula Organisation for the Aged (CPOA), and the SA Older Persons Forum.

To protect the rights of senior citizens is the well established regulation of retirement development schemes. It provides buyers with protection to development schemes itself, as well as the long term management of such schemes. Paul Rosenbrock, Director of SAARP who provides the layman understanding of retirement scheme options, says there are five different Acts serving the interests of senior citizens. The Older Persons Act (Act 13 of 2006), the Development of Housing Schemes for Retired Persons Act 65 of 1988 (The HRP Act), The Act on Share Holdings - Act 59 of 1980, the Sectional Title Act - Act 95 of 1986, and the Arbitration Act - Act 42 of 1965.

SAARB describes the Life Right ownership option as a guaranteed right of occupation of individuals for their lifetime, whereby ownership is retained by the administering authority, and is resold after the demise of the last dying person.

This type of ownership may contain a clause which ensures that the estate ultimately benefits, either by the whole purchase price plus a portion the of capital growth, the whole purchase price without capital growth, only a portion of the original purchase price, or no part of the purchase price or a combination of these, and in some cases an adjusted purchase price. From a legal perspective, in the case of a lifelong rental lease occupancy agreement, this type of occupancy represents any normal rental agreement where tenants have no rights of ownership at all.

Although this choice of scheme provides the right to occupancy for as long as both spouses live, their rights are by far lesser when compared to the rights of purchasers of the various title deed schemes. The HRP Act also states that life right holders enjoy the same rights as if they had entered into any other registered long term property lease, in that the real right of the life right-holder will rank in priority over any other right, no matter whether or not this other right is registered over the property, and no matter the time when this right was registered.

Further extending the security within the life right option, say industry professionals are purchases into well established and fully functional schemes, due to reduced risk compared to buying into off plan, and or incomplete schemes. Another important point for consideration is the risk of taking transfer, and or occupation of a unit prior to completion. Reason being that while the life right buyer’s right to remain in occupation is protected by law, the recovery of the capital sum of their loan to an insolvent scheme, such as a bankrupt landowner and scheme developer, does not enjoy any preferential status by law.

Of utmost importance in contracts is the transparency of increasing operating levies and future inflationary adjustments, as well as the proceeds of sales of life right units, such as percentages of profit specified, that can differ vastly from one scheme to another.

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