Retire in comfort: what are your options?

Retirement villages come in various shapes and sizes, and it is essential to know and understand the different structures applicable to these community schemes.

There are three types of structures: Ownership of the unit; rights of occupation or “lesser rights”; and a hybrid between these.

• With full title ownership, the buyer acquires ownership of a separate piece of land with an existing house or where a house can be built. You have the right to change anything on your property. A title deed is issued, and a bond can be registered on the property.
• Sectional title schemes are divided into different sections which include individual units and communal property. In this case, you own everything within the four walls of your property, but external hallways, gardens, elevators, etc. are co-owned by the rest of the community. You also acquire a portion of the common property based on your participation quota, which is calculated by factoring in the size of your individual unit.

• Purchasing life rights is where you buy a large once-off rental which lasts for the rest of your life. You do not own your home and there is no title deed. The full value of the unit belongs to the developer or trust. This right terminates upon your death. The occupation right transfers back to the developer, who can then sell it to a new buyer, and the original capital amount of the loan is paid to the lender’s estate. The lender also has the option of selling his/her rights back to the developer and investing in accommodation elsewhere.
• By purchasing into a share-block scheme, your rights of residence are conferred upon a block of shares in a holding company in which you become a shareholder. The scheme is managed by the board of directors of the share-block. Owners of shares in the company have the right of occupation to certain portions or housing units, but they never own any property.
• A long lease agreement is a lifelong agreement signed between the purchaser and the developer. The rentals can differ but normally consists of an upfront lump-sum payment.
• The purchaser pays a membership fee to become a member of a retirement club. The club oversees the granting of certain occupation rights to the members.

Lately, a combination of rights is used to create one overhead retirement scheme or a new retirement scheme within a community scheme. A typical example would be several sectional title developments within an estate. They would operate independently but would ultimately fall under a single homeowners’ association which has the final say. Mixed schemes are often found where “lesser rights” are transferred to a sectional title.

All schemes go through different phases of risk and the purchaser’s risks are closely related to these. These risks can cause inconvenience, delay in occupation or even financial loss by the purchaser.

Buying property “off-plan” in a scheme which has not been substantially developed yet can pose a significant risk, as it may fail to develop as promised.

Legislation and several rules and regulations apply to retirement villages. It is important to note which legislation applies to your choice of accommodation.

• The Older Persons Act 13 of 2006 is the principal Act that protects and ensures the dignity of retired persons and seniors.
• The Housing Development Schemes for Retired Persons Act 65 of 1988 provides protection when investing in retirement village developments.
• The Sectional Title Schemes Management Act 8 OF 2011 regulates the rights of purchasers and sellers in sectional title developments.
• The Community Schemes Ombud Service Act 9 of 2011 is your recourse in case of any dispute you might have.

Choosing where you want to live after retirement is a major decision which requires careful consideration. Investors would like their money to yield a good profit, but may also be looking for additional lifestyle benefits like medical facilities and meal services. This property could be your final nest egg and there is a legion of possibilities. It is key to carefully consider your lifestyle, health and financial status before entering into this important decision.