Real Estate Investor Magazine July/ Aug 2020 July 2020 | Page 52

RETIREMENT
Pandemic shines a
light on Life Right
Retirement Model
Longer lifespans and economic uncertainty,
especially as a result of a weakened economy and
the impact of the Covid-19 lockdown, mean it’s more
difficult to plan for retirement than ever before.
Knowing this, retirees should think carefully about
every decision they make, including how they go
about choosing a retirement home.
T
his, of course, also adds increased pressure to access
for housing for the elderly in South Africa – resulting
in new retirement developments being constructed,
many of which operate on the Life Rights basis. Today,
especially for middle- and upper-income retirees, the
accommodation available focuses more on lifestyle and
quality of life, attracting people at earlier stages of their
retirement, rather than just when they become too fragile
or sickly to live independently.
Many are aware of buying sectional title properties that
involve purchasing a stand-alone property but there is
another option that could go a long way to helping retirees
alleviate financial insecurity. Known as the Life Rights
Model, it involves acquiring the right to live in a particular
home for life rather than owning the real estate itself.
A life right allows a resident to occupy the property
throughout their lifetime - and that of their spouse. However,
when the Life Right terminates, it remains the property of the
developer, and therefore it is maintained to a high standard,
refurbished and available for resale by the developer.
This model is ideal for people who do not wish to take on
the responsibility of maintaining the property themselves,
or having to deal with various other issues linked to home
ownership, such as insurance, security, landscaping, etc.
“The life right concept is attractive for the older person,
who may have neither the desire nor the ability to maintain
a property,” says Cobus Bedeker, MD of Evergreen Property
Investments. “A capital amount is paid to the developer, who
remains the legal owner responsible for maintaining the
units, village and facilities.”
According to Bedeker, purchasing a life right at a
retirement village brings the added advantage of financial
flexibility which can be very reassuring for people who may
well require expensive medical care and frail care at some
point in the future. Given that most homeowners are advised
to spend one percent of the value of their property on
maintenance annually, it presents major savings for retirees
as it relieves them of this burden since this responsibility
rests with the developer as legal owner.
“Recently, the business has focussed on the value of the
incredible flexibility of the life right model and developed a
flexible pricing product that is unequalled in the industry,”
shares Bedeker.
“The essence of flexible pricing is that seniors can
purchase a life right on a new house or apartment at
discounts of up to 30% of the list price. This could assist
them in two ways. Those who are unable to sell their family
home at the price they would have hoped for because of
the current climate are now able to price their home more
realistically to attract buyers. In turn, this enables them to
purchase an Evergreen life right at a reduced price without
having to supplement the purchase price with additional
funds. Others may be able to liberate capital from the sale of
their home after purchasing a life right, to bolster retirement
savings,” Bedeker says.
Evergreen makes this model work financially by
adjusting the capital return to the life right-holder’s estate
on termination of the life right. Owned by the PSG Group
and the Amdec Group ensures shareholder backing, which
means Evergreen is able to take a long-term view of the
business by incorporating this innovation. It is an advantage
48 JULY/AUGUST 2020 SA Real Estate Investor Magazine