Residential propety

Understanding your residential retirement options

The different living options for seniors can be quite confusing. It is important to go there with open eyes. Here are the answers to the questions we receive most frequently about retirement villages and homes.

What is the difference between a retirement home and a retirement village?

Retirement homes : There is general agreement that retirement homes offer the bare minimum in terms of amenities. Accommodation comes in a variety of forms, but in most cases older people will share bathrooms, a dining room, hospitality lounges and sometimes accommodation as well. Medical facilities/services are normally provided; however, the standard may differ from house to house. Retirement homes are sometimes called retirement homes because they provide daily assistance to elderly people who need it.

There is often an age limit in retirement homes (meaning you have to be a certain age before you can buy).

Retirement villages: These are popular with retirees looking to retain their independence while living in a safe and secure environment. Usually, retirement villages offer individual houses of different sizes and configurations, garages/carports, small gardens, community rooms for entertainment purposes and various common areas (parks, gardens). Most offer medical facilities and services, and some villages also offer frail care facilities.

There may be an age limit but it is less prohibitive. For example, “if you’re over 50, you’re eligible to reside at [email protected],” says Melissa Petzer (real estate salesperson at Just Property Midstream Estate in the heart of Gauteng).

What are the different ownership models for retirement villages?

Lifetime rights: The buyer buys the right to inhabit a house/housing for the rest of his life, in accordance with the law on the housing development program for retirees. The buyer never owns the property and the life interest transaction is not processed by the deeds office. Ownership remains with the developer. Life rights are non-transferable and cannot expire until the death of the holder.

Section title: This option is the same as any other section title transfer (buyer owns the home) and is registered at the deeds office, attracting attorney transfer fees and transfer duties if the purchase exceeds a million. The purchaser or his heirs must pay a percentage of the resale value to the levy fund.

Full title: As with the section title, the buyer owns the property. The freehold section would normally be run by a homeowners association and will be an easily salable asset as it is self-contained.

What are the advantages and disadvantages of the right to life?

Advantages

  • The transaction is not processed through the deeds office, which saves on attorney fees and transfer taxes.
  • The transfer process is quick and easy
  • The transfer can be made on the day/date as written in the contract
  • No transfer duty is applicable
  • The buyer retains the right to use the house/unit for the rest of his life and that of his spouse
  • The developer retains ownership of the property and as such will be responsible for maintaining the buildings, facilities and common areas – this ensures that the continued resale value is maintained or enhanced
  • A life interest holder can, with his permission, improve the interior of the house, possibly increasing the resale value of the unit.
  • There are generally no special levies

The inconvenients

  • There are no financing options (mortgages) – all transactions must be cash related
  • Life rights cannot be endowed on the death of the life right holder
  • Different resale models regarding payments (% of original price) and profits prevail in different retirement villages. It is extremely important to evaluate each option offered.
  • In the unlikely event that the development is declared insolvent, the holder of the life interest will be considered a creditor and as such will be the last to benefit from the distribution of the assets.
  • Only the life interest owner or named occupant can reside in the purchased unit
  • Homes with a right to life may be cheaper than title deed or freehold, but you can wait longer to get your money out.
  • The right to life is a complex business model – you are buying the right to live in a home for an unknown period of time. Resale is influenced by the real estate market.

The developer has more power than the residents in terms of determining factors of the property as a whole. As a result, you may be disadvantaged by this power imbalance.

What is the difference between assisted living and frail care?

Life support: This may be suitable for someone who needs a little help but wants to continue living in their home. Assistance will be provided with activities of daily living, but not with nursing. It is usually possible to hire a nurse’s aide at your own expense if nursing care is required.

Fragile Care: This would be suitable for someone who needs qualified medical professionals who provide day to day nursing care as determined by a doctor or family. Most care facilities will assess the patient prior to admission to ensure that the fragile care facility is able to provide the care required.

What questions should I ask when trying to decide on a retirement living solution?

  • Am I buying a life right or a sectional title? Please explain the model you are using if this is a lifetime entitlement.
  • Can I see a copy of the contract, including rules and regulations?
  • Would I be able to scale up/down over time?
  • What levies are applicable and what do they cover?
  • Rates and taxes, water and electricity, how are they billed and what are the applicable rates?
  • What medical equipment and services are available?
  • Is there a care facility for frail people?
  • Where is the nearest hospital?
  • What is the access to emergency services?
  • Do you have security services and arrangements in place?
  • What services are provided regarding hairdressing, exercise, cooked meals, etc.?
  • What is your pet policy?
  • Who are the agents?
  • Are visiting family/friends allowed to stay on the tour?
  • Are there malls/convenience stores nearby?
  • Are there socializing/entertainment opportunities provided to residents?
  • Questions relating to your personal needs and preferences – for example, the nearest places of worship.

Before you start shopping, ask yourself some serious questions about your health and finances. Think about what you might need in terms of care (health, ready meals, fragile care, etc.). And don’t forget to do a thorough calculation of your current and future financial situation before making any decisions.

Gavin O’Leary is a real estate practitioner with Just Property Port Elizabeth and Lawrence Homan is a Just Property franchisee.