Buying into a ‘life right’ scheme

06 Sep 2011

If you’re at a stage in life when you are weighing up your own retirement options or those of a relative, you may be considering buying into a ‘life right’ scheme to secure your future or theirs, in an environment where appropriate care is provided.

The benefits of entering into a life right scheme are that there are no transfer duties or registration fees payable.

So says Alwina Muggeridge, Pam Golding Properties area principal in the Kloof and Hillcrest areas of KwaZulu-Natal who adds that when entering into life right schemes it is critical to understand that despite the reference to the ‘buying’ and ‘selling’ of a unit, there is no purchase of actual real estate, but rather a purchase of the right to live in a specific unit.

“The ownership of the unit is retained by the development and is not transferred to the individual as with sectional title.

“It is important to understand that the property itself does not become an asset in the purchaser’s estate and therefore cannot be bequeathed to an heir in their will,” says Muggeridge.

She says in a life right scheme, the basic concept is that an individual purchases the right to live in that unit for the remainder of his or her life, possibly along with a spouse. The sum of money paid in such purchases is a market-related and pre-determined amount. That purchase price is often viewed as a lifetime rental paid in advance.

The benefits of entering into a life right scheme are that there are no transfer duties or registration fees payable. In the event of the sale of the life right unit, the outgoing resident (or their deceased estate) receives a percentage of the resale price. However, this is not a fixed percentage. The percentage will differ from one development scheme to another and the amount or percentage is usually linked to the period of occupancy.

“The amount or percentage retained by the development is usually used to subsidise the facilities at the development. This would have a stabilising effect on the monthly levy and removes the inflationary risk from the retirement equation.

“An additional benefit of entering into a life right scheme is that accommodation costs remain fairly stable, especially if the development offers a fixed for life levy. Furthermore, on the death of one spouse, the surviving spouse is usually entitled to continue living in the unit until his or her death or until the unit is sold,” says Muggeridge.

She adds that it is important to understand that life right properties can be bought with loans, however, banks are hesitant to provide finance due to the lack of security.

“A comforting factor for the families of the retirees is that most retirement centres provide opportunities for social interaction with amenities such as heated swimming pools, gym facilities, lounges and TV rooms, and also makes provision for private space in the gardens, balconies and libraries.”

She says families can have peace of mind knowing that if the family member encounters any serious problems, health or otherwise, there will be staff on hand to look after them.

For more information on retirement options in KZN, contact 031 7640017 (Kloof) or 031 7656755 (Hillcrest) or      send an email    .

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