Real Estate Investor Magazine South Africa May 2018 | Page 32
RETIREMENT
The advantages of a
Life Right Scheme
An easier way to retire
TO BE THE BEST,
WE ONLY WORK
WITH THE BEST.
That’s why we’re
looking for ambitious,
driven property brokers
in Cape Town, Pretoria,
and Johannesburg.
W
ith life expectancy on the rise globally, the aver-
age, healthy South Africans could find themselves
comfortably welcoming their 90th year. However,
for many this prospect is a daunting one. As retirement age
looms, concerns around affordability, being reliant on others
for daily living needs or the loss of independence become real
and very valid. Early planning for this stage of life is more
necessary than ever.
Life Rights schemes - officially recognised by the Housing
Development Schemes for Retired
Persons Act of 1988 - first appeared in South Africa in the
1970s and have since rapidly grown in popularity. The scheme
gives the Life Right holder the security of tenure for the re-
mainder of his or her life, while enjoying similar privileges
to those of homes purchased by sectional or other title. The
‘purchaser’ does not buy the unit outright, but rather secures
the right to occupy it for their lifetime, or until they leave the
village, while the unit and its facilities remain the asset and
responsibility of the owning body.
This relationship ensures that all facilities are regularly
maintained and no special levies can be charged. Once the
Life Right agreement ends, the unit reverts back to the owner
of the village, who is then entitled to resell it, and the initial
purchase price is refunded to the Life Right holder or his/her
estate upon re-sale of the unit.
“As life expectancy has steadily increased over the years, so
too has the risk of outliving ones retirement savings,” says Dr
Michael Zipp, CEO of CPOA. “A Life Right has a lesser im-
pact on finances as there are no additional fees at the time of
purchase, often making it the more affordable option. While
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MAY/JUNE 2018 SA Real Estate Investor Magazine
there are monthly levies, the Life Right holder is given a draft
levy budget for the first three years of occupation which en-
sures that there are no hidden costs and allows the Life Right
holder to financially plan accordingly.”
Wh ile some developers may choose to offer profit share
upon re-sale of the unit, Life Right is not a property invest-
ment, as there is no asset that grows in value and the purchas-
er does not stand to benefit financially from the transaction.
However, the advantages suit many as it does guarantee a safe
place in which to live for the duration of their lifetime.
“On an international scale, Life Right is a widely practiced
and sought after retirement model, particularly in the USA
which is the world market leader when it comes to retirement
villages,” says Dr Zipp. “While the concept is still relatively
new in South Africa, we are certainly seeing an increase in
popularity with this model as more retirees understand its ad-
vantages.”
When comparing a Life Right scheme to sectional title for
example, one advantage is that a Life Right is not a property
transfer – there are no bond registration fees, no transfer du-
ties and no VAT payable. Therefore the negative effects that
such additional costs can have on income and estate values are
avoided. Life Rights are also typically cheaper than sectional
titles and levies more transparent.
Essentially a Life Right scheme can be viewed as a hous-
ing product, an insurance policy and a worry-free existence
rolled into one. This is not to say that peace of mind cannot be
secured via other schemes, but a well-run Life Right scheme
offers all the ingredients for a financially successful, secure, and
stress-free retirement.
Interested in joining one of South Africa’s
leading Real Estate Advisory firms?
Then we want to hear from you.
We are looking for senior brokers in
residential, commercial and industrial
property to join our team. For those
looking to enter the industry, and who are
young, motivated individuals, then this is
the perfect opportunity to change careers.
Knight Frank is globally connected, locally
expert and offers world class experience.
Strong administrative support, exceptional
systems and international best practice,
make us what we are today. Innovative,
committed, respectful and enduring at
everything we do.
CONTACT US AT [email protected]
kfsa.co.za