Life Right
A Life Right Agreement is an agreement whereby the developer of a property sells to the Life Right buyer the right to occupy the property for the remainder of his/her life.
What is a Life Right?
A Life Right sale is strictly regulated by South African Law under the Housing Development Schemes for Retired Persons Act No. 65 of 1988. Life Right sales is a commonly used practice around the world in retirement villages.
The following must be noted:
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- 1. The Life Right Owner of the unit must be 50 years or older
- 2. The Life Right attaches to the Nominated Life Right Owner.
- 3. The Life Right selling price is pre-determined by the developer as a market related price.
- 4. The developer sells the right to occupy the unit to the Life Right Owner.
- 5. A mortgage bond cannot be registered over a Life Right according to the Section 4C endorsement.
- 6. On termination of the Life Right agreement (i.e. Death of Life Right Owner / last surviving spouse or other reasons) the following happens –
- 6.1. The Developer places the property back in the market for re-sale as a Life Right to a new Life Right Owner. This price will be market related.
- 6.2. Upon successful re-sale the original Life Right Owner of the unit / his/her estate will receive back the original amount paid for the Life Right less the following –
- 6.2.1. 1% of original purchase price goes to the Body Corporate Levy Fund to ensure that the retirement village remains in a good financial position – This helps stabilise the levy increases and provides comfort and peace of mind to the Life Right Owners.
- 6.2.2. 1% of the original purchase price goes to the Care Facility Reserve fund under control of the body corporate and developer to ensure that care service facilities are always well maintained;
- 6.2.3. A maximum of 3% of the original purchase price is retained for repairs to the unit that was occupied by the Life Right holder. The true cost will be calculated by the facility mangers and the balance of the 3% will be re-funded to the Life Right Owner / his/her estate should the true cost be less than 3%. This is the same as a security deposit on a rental.
- 7. The advantages of buying a life right –
- 7.1. Because the developer always remains the legal owner of the unit it provides peace of mind to the Life Right Owner that the retirement village will always be well managed and maintained as the developer has a long term vested interest in the retirement village.
- 7.2. Because no transfer of ownership (Title) is required there is no lengthy delays after signing the contract. As soon as the contract is in place and the Life Right payment is made the occupant may take occupation of the unit, granted that construction of the unit is completed in the case of buying a unit of plan.
- 7.3. Lastly because the agreement is governed by the Housing Development Schemes for Retired Persons Act No. 65 of 1988 the Life Right Owner is assured that he or she and their nominated spouse will always have security of tenure regardless of what happens to the ownership of the unit. This is done by of a Section 4C endorsement on the title deed of the property and is registered in the Deeds office. The Life Right agreement always ranks higher than any other encumbrance.
- 7.4. The Life Right owner will become a member of the body corporate and will have full voting rights when it comes to administrative matters of the body corporate such as new levy budgets etc.
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