Unravelling the Life Right
Bizarre as it may seem, many people are more fearful of living than they are of dying. They worry whether they’ve saved enough to last them through their retirements, whether they’ll be able to live independently as they get older, and whether they’ll be able to afford decent healthcare. These are all valid concerns, particularly given that people are living longer than ever before, thanks to modern medicine.
The best way to overcome financial worries in later life is to do your homework and plan ahead. Deciding where to live, for example, will have a material impact on your financial peace-of-mind, and if you decide to move into a retirement village, you’ll probably need to choose between sectional title or Life Right ownership.
The Life Right was introduced to South Africa in the seventies, but many people are still unsure about what it is, how it works, and how it differs from sectional and full title property investments. Here are a few frequently asked questions to help you navigate your options:
What exactly is a Life Right?
When you buy a Life Right, you buy the right to live in an apartment or cottage within a retirement village for the remainder of your and / or your partner’s life, but you don’t actually own the property.
How is it different to sectional- or full-title ownership?
With sectional and full-title ownership, you own the actual property and take transfer of it. You will therefore have to cover the legal costs relating to the transfer, as well as rates and taxes, normal and special levies.
On the other hand, with a Life Right, there is no actual transfer of property ownership, and no payment of bond registration fees, transfer duty, or VAT. It rivals a traditional bricks-and-mortar property investment in that it offers a stress-free retirement to those who either can’t or don’t want to deal with things like property maintenance, security, repairs, gardening, landscaping, insurance etc.
How does the cost of a Life Right compare with sectional title properties?
The purchase price of a Life Right is generally lower than a house or apartment of similar size in a comparable area. This is because freehold or sectional title properties are sold at market related prices.
Do levies apply in Life Right villages, and if so, what do they cover?
Monthly levies cover the day to day running expenses of the village including, but not limited to, the cost of communal areas, shared facilities, security, catering, healthcare and landscaping. There are also no special levies in a life Right village because the developer owns the real estate and is obliged to maintain it.
When the Life Right is terminated, what happens to the original investment?
When the Life Right is terminated, it reverts back to the developer who will then resell it. In terms of what you get back once the unit is resold, this will depend on the original contract signed. At Evergreen, we reimburse the original amount invested, less any costs linked to the refurbishment and sale of the unit.
How long does it take for the investment amount to be paid back?
This depends on the developer. At Evergreen, payment and reimbursement is handled through our conveyancing attorneys. When the Life Right is terminated, the property is immediately refurbished and placed back on the market for resale and once the proceeds from the resale are paid to our attorneys, they immediately reimburse the former Life Right Holder, or their estate.
An Evergreen Life Right can alleviate a lot of the finance-related stress in later life because it allows you to accurately plan for your financial future. There is no transfer duty, VAT, registration fees or capital gains tax, levies are both affordable and transparent, and there are no special levies. It is not a traditional financial investment, but it is an investment in a financially stable, risk averse, safe and secure, carefree retirement lifestyle where you can live an active, independent, autonomous life without the traditional burdens that come with owning a home.