Ins and outs of buying into a life rights retirement scheme (Arthur Case, chief executive officer at Evergreen Lifestyle: 30 Aug 2017)

12 Sep 2017

Case says a further advantage of the life right is that of affordability. Since one does not actually own the property, the purchase price of a life right may be lower than a house or apartment of similar size in a comparable area.

“Bizarre as it may seem, some people are more fearful of living than they are of dying,” says Arthur Case, chief executive officer at Evergreen Lifestyle, one of South Africa’s providers of retirement living.

“Their concerns focus mainly on two issues: their financial situation after retiring, and whether they will be able to live independently when they are older. People generally dread the thought of becoming reliant on someone else for their daily living needs.”

Case says these anxieties are valid, as the average South African is likely to reach the age of 80, and possibly even older, owing to improved medical knowledge and preventative measures regarding health.
“For those who live longer than previous generations, financial independence can come under pressure,” says Case.

When planning their retirement, Case recommends that people give careful consideration to the type of home they select for the remainder of their lives.
“While most are aware of the benefits of downsizing from the suburban family home to something smaller, not many know enough about how options in property ownership can impact their financial position at that stage of life,” says Case.

Generally, he says people buy property through either full ownership (often, a freestanding house) or sectional title (which usually applies to cluster homes and apartments). But there is another option that is particularly suitable for the retired community: that of the life right concept.

The life right option does not constitute a property investment, it is however an investment in a secure, enjoyable, and fully-supported retirement lifestyle, says Case.

“With a life right, people acquire the right to inhabit a property throughout their lives and the lives of their spouses, but because the purchaser does not own the property outright, they have no responsibility to maintain it, to pay rates on it, or to be liable for Capital Gains Tax,” says Case.

“The maintenance issue is particularly significant for older people, who may be less willing and able to manage the upkeep of a house. The developer of a life right scheme retains full ownership and remains committed to the scheme on an ongoing basis, and this includes responsibility for maintenance.”

Case says another important issue is additional or hidden costs such as special levies which often arise in sectional title properties. Since the law precludes this from applying to a life right development, those retirees dependent on pensions or fixed retirement income will feel reassured.

At Evergreen’s Broadacres Village in Johannesburg, for instance, the developer recently invested R1.5 million to improve the village’s road infrastructure. Had this been a sectional title scheme the funds would have been raised through a special levy payable by residents, but in this instance the full cost was covered by the developer, says Case.

Ultimately, one need not face retirement with trepidation, and with the correct planning and appropriate lifestyle choices, these can indeed be the ‘golden years’.He says a further advantage of the life right is that of affordability.

Since one does not actually own the property, the purchase price of a life right may be lower than a house or apartment of similar size in a comparable area.
Case says the life right also delivers peace of mind and freedom from financial worry, and with transparent and affordable levies, pricing tailored to fit your budget, and tenure guaranteed for life, the prospect of living longer is no longer cause for anxiety. The purchaser must, of course, plan for paying monthly levies in a retirement village, but this could apply equally to someone living in a home they own.

The life right option does not constitute a property investment, it is however an investment in a secure, enjoyable, and fully-supported retirement lifestyle, says Case.

Ultimately, he says its benefit lies in the fact that it 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.

“As for people’s anxiety about becoming dependent on children, grandchildren or friends, a good retirement village will address this issue, giving retirees the ability live independently, enjoying the resort-style facilities, but if their health deteriorates, care is generally available via an onsite health or frail care facility,” says Case.
Ultimately, one need not face retirement with trepidation, and with the correct planning and appropriate lifestyle choices, these can indeed be the ‘golden years’.