Life Rights Versus Sectional Title Ownership: What you need to know

Choosing a retirement property is tough enough without having to consider different purchase agreements. Buzz words like “life rights” and “sectional title” can really confuse those looking to make this important acquisition, so we’d like to shed some light on the topic.

What are Life Rights?

Generally speaking, within a Life Rights scheme, the “purchaser”’ never attains ownership of the property. Instead, they purchase a right to occupy it for life or until they leave. This structure suits some buyers as it guarantees them a secure and happy place to live until the end of their days. In estates or villages that cater to the needs of older individuals, this is perfect as health care is accessible to them. Another benefit is that the purchase price is lower, making it more affordable for occupiers. In a Life Rights scheme, the heirs to the estate are guaranteed a buy-back on the property due to the agreement signed at the time of purchase.

A clear disadvantage though is that the purchaser’s heirs won’t get the capital gain on the property that would have accumulated during the period of occupation. In most cases, once the owner has passed on or left the property, the amount of the original lump sum payment will be transferred into the estate of the occupier. However, Life Rights models will vary from estate to estate.

What is Sectional Title Ownership?

Where Sectional Title is concerned, this refers to the individual ownership of units within a development. By making a Sectional Title purchase, you buy a section with an undivided share of common property. One advantage of this type of ownership is that the purchaser can automatically become part of the development’s body corporate. Another perk is that the monthly levy paid by the owner is used to cover maintenance costs of the property like gardens, general upkeep and exterior. Once the owner is deceased, this property can be sold by the heirs to include the capital gain amassed over the period of ownership.

Where disadvantages are concerned, sectional title ownership tends to cost far more than a Life Rights purchase. This has proven to be a major factor in times of economic turmoil. Another disadvantage is that the heirs to the estate aren’t guaranteed to sell the property, so the amount they can get for it could be dramatically less.

What about Renishaw Hills?

As a sectional title development, in terms of the Sectional Titles Act, we do offer a Sectional Title purchase option at a significant discount on selected sites. This is facilitated through a Reversionary Transfer Obligation (RTO) contract. This allows for a reversion of ownership of the unit, or disposal thereof, to the developer, at the price originally paid for the unit.

Within the Renishaw Hills model, the owner does actually purchase the property under Sectional Title. However, they’re given the choice to sign an agreement that will require them to sell the property back to the developer on disposal/death, at the price paid for the unit (less VAT). If the purchaser signs this agreement we’re able to provide a discounted price for the unit. This amounts to 25% on free-standing homes and 20% on our maisonettes.

We do things right. We keep our promises. We care.

If you’re looking for a retirement property that offers the perfect balance of quality, value and affordability, we bring several options to the table. Our recently launched Phase 3 extension now includes stunning one-bedroom apartments and more of the popular two-bedroom maisonettes. This makes the prospect of a beautiful and happy retirement available to everyone. Click here to view our floorplans.

Should you have any queries about the units or lifestyle at Renishaw Hills, please contact Julieann today on julieann@renishawhills.co.za