Real Estate Investor Magazine South Africa April 2018 - 100th Issue! | Page 37

RETIREMENT
property outright, they will then also be
held accountable for all the responsibili-
ties for maintenance of that property.
The Life Rights model, however, is
ideal for older people who do not wish
to take on that responsibility, and would
prefer not to deal with various other is-
sues linked to home ownership, such as
insurance, security, etc.
What are the core differences between
a sectional title or a Life Right purchase?
While the cost of a sectional title
property remains relatively fixed (deter-
mined by the size, location, and market
value of the property), a Life Right is
more flexible and can be tailored to fit
the retiree’s budget.
But does a Life Right offer bang for
your buck? In terms of affordability, Case
says yes. The purchase price of a Life
Right is generally lower than that of a
house or apartment of similar size in a
comparable area. With freehold and sec-
tional title properties, however, the buyer
pays according to a market related price.
Know your (life) rights - other key dif-
ferences include:
• The buyer of a sectional title property
is liable for transfer duty, VAT and
capital gains tax. These costs do not
apply when purchasing a Life Right.
• Over and above monthly levies, sec-
tional title residents are liable for
special levies that cover large-scale
renovations, refurbishments, and im-
provements to security, among other
things. With a Life Right develop-
ment, the developer is responsible for
village maintenance.
• Sectional title residents are also liable
for all costs relating to maintenance,
insurance, and security – costs which
are not applicable in a Life Rights
development.
• The purchaser of a Life Right must
plan for paying monthly levies in
a retirement village, but this could
apply equally to someone living in a
home they own.
• Once a property is completed and
sold, the developer has no obligation
to remain invested in or maintain a
sectional title development. With a
Life Right village, the developer re-
tains ownership of the property in
perpetuity and therefore has both a
responsibility and a vested interest in
maintaining the development to the
highest possible standards.
“A sectional title purchase offers no
lifetime guarantee. If an older resident
outlives their pension, they might find
themselves in a position where they are
forced to sell up and move. A Life Right
guarantees a safe and secure home for the
remainder of one’s natural life, with the
added benefits of resort-style facilities,
state of the art security, a fully-managed
and maintained environment, and health
care facilities that typically include 24-
hour nursing, recuperative and palliative
care, and frail care,” explains Case.
“Ultimately, the Life Right delivers
peace of mind and freedom from finan-
cial worry. With transparent and afford-
able levies, pricing tailored to fit your
budget, and tenure guaranteed for life,
the prospect of living longer is no longer
cause for anxiety.”
THE CASE FOR SECTIONAL TITLE
Bill Rawson, Chairman of the Rawson Property Group, highlights a few factors driving the popularity of sectional
title properties. “Sectional title properties are, on average, less expensive than full title homes, but more impor-
tantly, they are also quite a bit less expensive to maintain,” he says.
Rawson goes on to explain that maintenance is becoming more and more difficult for homeowners as inflation
eats into disposable income. “Sectional title developments have the benefit of being able to leverage economies
of scale to reduce these costs significantly, and can also reduce the incidence of expensive emergency repairs
through frequent preventative maintenance and updates.”
It is worth noting, however, that this maintenance still comes at a price, and under the new Sectional Titles
Schemes Management Act, that price may be increasing.
“Comprehensive access control and 24-hour security is typically unfeasible for standalone properties, but
becomes a lot more viable for sectional title developments with shared entrances and exits. Having residents
coming and going at various times of day also means more eyes and ears picking up on anything out of the
ordinary, and adds to the safety of the complex as a whole,” he explains.
These factors also make sectional title properties popular rental choices: “Apartments and townhouses almost
always provide better rental returns than freehold properties, both for long-term leases, and short-term lets us-
ing platforms like AirBnb. They’ve also shown stronger price inflation than any other property market segment,
making them an excellent investment on all front,” concludes Rawson.
SA Real Estate Investor Magazine APRIL/MAY 2018
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