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Is it better to buy or rent property in a retirement village?

Many South African citizens will reach a stage in their lives when they will need to consider spending their golden years in a retirement village.

There are various retirement options available in South Africa, however each elderly person has their own specific needs and preferences when it comes to where they would like to retire.

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Below are just a few factors to consider ensuring you pick the right retirement village for your needs and that maximum benefit is achieved during your retirement years:

  1. Location -

Is the retirement village located close to transport services, medical facilities (hospitals and clinics), entertainment and/or shopping centers;

  1. Construction -

Is the construction completed with building materials that will last;

  1. Levy costs -

Request a list of what is included in the monthly levy for example does it include internet, use of the medical facilities, gardening and cleaning services, security and insurance;

  1. Healthcare Services -

Will the retirement village have a frail care unit and other medical services on site;

  1. Community and activities -

What type of indoor, social and outdoor activities will be available for participation;

  1. Home layout –

Will the layout be practical for long term and short-term liabilities namely stairs, hand railings as well as bath and shower safety measures implemented (higher toilet seat, hand railings inside the shower, non-slip mats on shower floor as well as in bathtub).

The above are critical things to consider regarding the day to day lifestyle when relocating to a retirement village. The other main consideration will be the three different buying options known as life right, sectional title or scheme block shares.

Life Right Homes for Retirement

Choosing a life right home means that you do not become the owner of the property, but instead you have the right to occupy the property for the rest of your life.

The advantages of a life right retirement home are as follows:

  • Lower monthly levies and administrative costs;
  • Less capital required to buy;
  • No transfer duty, VAT or bond registration costs;
  • Developer responsible for maintenance of property;
  • After death or resale the original purchase price plus a percentage of the net profit will be reimbursed to the seller or the deceased’s estate;

The disadvantages of a life right are the following:

  • No ownership of the unit;
  • The total sale price can possibly decrease compared to the property market values;
  • Life right is not an asset that can be left in a will to children or used by any other party to live there themselves.

Share block schemes for Retirement

Share block schemes entail purchasing shares in a company who is the owner of the retirement village with the result of becoming a shareholder of the retirement village.

The advantages of a share block scheme are as follows:

  • Not required to be registered in the Deeds Registry, therefore no rates clearance certificate and/or homeowners association consent required;
  • Quicker than the normal transfer process;
  • Shareholders have input in the management and regulations of the scheme which ensures enough knowledge of the scheme;
  • There is a levy fund for all shareholders to contribute towards scheme levies;
  • Shareholders have no liability with regards to the debt of the management company.

The disadvantages of a share block scheme are the following:

  • A sale agreement must be concluded, and transfer duty and conveyancing fees are still payable;
  • Financial institutions are not allowed to offer finance to buy shares scheme as there is a lack of security to be offered.

Sectional Title Schemes for Retirement

The last option is sectional title which is very similar to buying any immovable property.

The advantages of a sectional title are as follows:

  • Retiree has ownership of the unit or cottage in the retirement village;
  • You have the choice to transfer ownership according to your own free will;
  • In the event of the unit being sold, many of the retirement villages have appointed estate agents where no commission is charged.

The disadvantages of a sectional title are as follows:

  • Resale may result in giving a percentage of the resale price to the developer, which may possibly cause the retiree to downscale and struggle to relocate;
  • The retiree can expect a loss of anything between 10 and 40 percent of the resale value that goes to the levy support system to prevent and protect against sharp levy increases;

Bailey Haynes Inc. – Your Family Lawyers in Cape Town

In conclusion, there are various factors to take into consideration when going into retirement. The above can be a great guideline to assist in your specific circumstances.

Before deciding, retirees must consider their financial position together with which of the above options is the most fitting for their retirement.

Our law firm in Cape Town can assist you with property conveyancing, estates, trusts as well as the drafting of your will.

Retirement should be simple and as stress-free as possible, contact our attorneys for more information about our legal services.

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