When considering your options for retirement it is important for you to plan and carefully consider the financial implications that come with the various types of sales transactions.
There are many options available for South African buyers who can choose from a wide selection of retirement communities and villages.
We will consider Sectional Title, Share Block Scheme and Life Rights in this article as they are the three main purchase options available for buyers wishing to purchase retirement property.
When choosing an option that is best for you, it is necessary to consider the risks and rewards which come with each type.
You should also compare a few developments or estates along with their facilities and costs. When doing so you will need to also think carefully about your requirements for the future.
At the stage where you have chosen a development you should ask for all the relevant information relating to it and read through it. If you have any concerns about a piece of information you should ask for it to be clarified.
You should inspect the facilities, as well as speak with any existing staff and residents. This will give you insight into how things really are instead of how they appear on paper.
In your investigation you should also check the track records and reputation of the developer. In case of levy increase and special levies you should enquire in advance to ensure that you are fully aware of all associated costs.
Finally, when choosing a purchase option it may be necessary to seek the advice of a financial adviser or a real estate professional.
Most of the time it is impossible to compare retirement options as the costs and contracts are normally adapted to the needs of each development so precisely. However, potential buyers should not get confused with the differences of each purchase option as they all have unique features.
If you decide to purchase a sectional title unit within a retirement village, then ownership of a unit or residence is granted through a title deed which is registered with the Deeds Registry.
In some sectional titles owners are also offered a profit share. While the facilities are often very good the drawbacks come in the form of complex and arduous legislative procedures which have to be followed when it comes to the running of the scheme and decision making.
Compared to sectional title schemes, share block schemes operate differently. As an owner, you won’t have exclusive title to the that purchased unit but rather you have shares in the company that owns the residence.
Thus you are issued with a share certificate instead of a title deed. However, in order for the sale of a share block unit to be valid it needs a sale agreement.
A major drawback to purchasing in a share block scheme is the fact that as a buyer you aren’t given a title to the share block unit you intend to purchase.
This means that sufficient security can’t be provided to a financial institution.
As a result, they will be less inclined to offer finance for your purchase. If you intend on getting finance for a purchase then this is not the option for you.
In a Life Right, the purchase has the legal right to live in the unit for the duration of their life.
As such, the buyers don’t purchase the unit, but rather the right to live in it for the rest of their lives. This means that the entirety of the village is both the asset and responsibility of the developer.
This option is the preferred choice for buyers who have limited capital to invest as there are no costs of transfer associated with the purchase.
The only downfall is that when you die, then the life right is terminated and ownership is reverted back to the owner of the scheme instead of being passed on to beneficiaries in your will. The owner can then resell the unit.
It is worth noting that protection is provided to the buyer in all 3 schemes in the form of the Housing Schemes for Retired Persons Act of 1988.
You cannot afford to make mistakes at retirement age. Contact Us if you have any questions regarding your retirement property options.
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