Legal Ownership
TYPES OF RETIREMENT SALES
Retirement complexes are aimed at those who either own existing homes or have other funds to finance the purchase. Remeber, the purchase is usually on a cash basis as the banks are reluctant to provide finance to anyone over 60 years of age. When you buy into a retirement scheme the legal form of ownership is a critical factor: it is advisable for all documentation to be approved by an attorney, as mistakes are likely to prove costly at a time when you are living on a fixed income.
Further considerations include whether the property will be in your name or, for example, a trust. This will depend on your financial situation and will include factors such as the projected impact of Estate Duties and Capital Gains Tax. In order to obtain qualfied and professional advice it is imperative to consult a financial advisor who understands and focuses on this market.
Essentially there are three methods of buying a retirement home:
- Sectional Title - this is a straightforward system with which most people are familiar. Registration of the unit (section) is done through the Deeds Office by a conveyencer and fairly substantial costs are involved, including transfer duty and conveyincing costs.
- Share Block Scheme - This provides the owners of shares in a company with the right of occupation to certain portions of a building. The company owns the building and shares are allocated into Share Blocks. The Share Block resident therefore owns shares in a company. Minimal costs are involved.
- Life Rights/Occupation Rights - These rights give you the right to occupy a particular unit for the rest of your life, and fall under the Housing Development Schemes for Retired Persons Act. No legal costs are involved such as transfer duty or conveyencing fees.
In all three of the above-mentioned schemes it is vital to understand the implications of the documents you will be signing. Ask for the latest balance sheet and other relevant information. If you find this confusing, it is best to seek advice.
NEW DEVELOPMENTS
Ensure that the developer or controlling body is financially strong and healthy, and insist on having all documents a few days before you sign them. If necessary take them to either an attorney, accountant or financial advisor. Watch out for the following:
- Are you and your spouse or partner both signing the agreement? If not, on the death of one party, what happens to the surviving partner?
- If you are relying on the cash for the new property coming from the sale of your present home, have you made the purchase dependant on the sale of your home? If you don't you may end up owning two properties!
- Have you given yourself at least 90 days to accomplish this?
- Are there any costs on signature, such as administration fees or deposits? If so, who holds these monies? They should be going into a Trust Account.
- Is the date of right of occupation clearly stated?
When buying off plan or during construction consider the following:
- Who is the developer?
- What facilities have been promised: club house, frail care unit etc.
- What time limit has been promised for completion?
- Who will manage the complex?
- An estimate, for a period of two years, of the levies and what is included.
- Is the land to be developed encumbered by a mortgage bond? If so, who is the bond holder?
- Have you read the 'use and occupation agreement" or the house rules?
- Are monies retained on re-sale of the unit? If so, how much?
- What happens on the death of a surviving spouse?
- Finally, are you sure as to whether you are buying life/occupation rights, Share Block or Sectional Title?
This is the time to ask all the questions, clafify any assumptions and ensure that you get "exact" answers. For example, exactly how much, exactly when, exactly who and exactly how. If promises are made, have them in writing in the sale agreement.