Why choose a life right?

By: Evergreen Retirement Holdings

There has been much debate over the years about the best retirement options, the most common these days being between life right and sectional title.

However, the life right option is gaining traction across the globe, particularly given the increase in both the cost of living and how much longer people are living, says Arthur Case, Brand Marketing Director for Evergreen Retirement Holdings.

With its shareholders, the Amdec Group and the PSG Group, the Evergreen life right model has been in existence since 2008, with villages in the Western Cape and Gauteng, and new villages planned for Kwa-Zulu Natal.

Says Case: “With economic uncertainty as it is, particularly for those facing retirement, a life right model provides retirees with the peace of mind they need.”

According to the World Health Organisation, lifespans have increased by 5.5 years between 2000 and 2016.

“People need to know they have a quality existence, and a solid roof over their heads for the rest of their lives,” says Case, “and a life right option provides this to them in a far more secure way than a sectional title scheme.”

The life right option provides a buyer and their partner with the right to live in a property until the end of their days, without having to worry about the extra and ever-rising costs that come with being part of a sectional title scheme, such as the raising of special levies.

According to Cobus Bedeker, MD of Evergreen Property Investments: “Ownership of a life right complex always remains in the hands of the developer, which means it is the developer who is responsible for all maintenance and upgrading costs, not the home-owner.”

In other words, “It provides buyers with a stress-free retirement, without all the unnecessary administration that a sectional title scheme may bring,” adds Bedeker.

“A life right will not increase in capital value the way in which buying a sectional title property will do – in fact, it’s more like purchasing a life insurance policy – but it guarantees the purchaser, as well as a spouse or partner, a home for life and can be a far more affordable consideration.”

Known as a Life Plan in the USA, or a Licence to Occupy in Australia and New Zealand, it is already the preferred type of retirement accommodation agreement in these countries, and is gathering momentum across Europe and the UK.

Of great importance, however, to anyone considering the life right option, is the track record of the estate into which one is buying, with a model that should be backed by large developers who are financially secure.

The best-run life right estates will also, more than likely, give residents access to specialised healthcare, or frail care, or even palliative care,  should circumstances get to that point in a resident’s lifetime.

“None of us can predict what our future needs will be, but a life right provides the flexibility that can really make the difference,” stresses Case.

“It also embraces changing needs that may come over time, allowing residents to scale down after the passing of their partner, should they wish to do so, without the stress of first selling the unit they’ve occupied – as one would need to do with sectional title. This provides enormous peace of mind to both partners, without the worry of what will happen as life takes its course.”

Plus, upon the passing of the final occupant of a unit, the occupant’s estate will still receive an agreed percentage of the original entry price, making the life right an asset to the estate.

Adam Kajee, Financial Director of Evergreen Retirement Holdings, says there are major monetary advantages to the life right model: “Firstly, there is no transfer duty, VAT or registration fee associated with a life right. Plus, the law stipulates that, as part of the agreement, the first two years of levy payments must be declared upfront, so buyers are aware of exactly what these will be.”

Another major advantage could present itself in the face of a financial crisis, notes Kajee:  “If you live in a sectional title scheme, your only option to liberate the capital you have in the scheme would be to sell your unit. Apart from the stress this causes, it can take quite a bit of time. Plus, few senior citizens would be able to secure additional bonds or bank loans to assist them.

“As a life right holder in an Evergreen retirement village, some of your capital can be released, in an emergency, via the capital that would be due to your estate, to fund outstanding levies and care centre costs,” he says.

“Our best defence against inflation is to build larger retirement villages that benefit from economies of scale, making it more economical to provide everything from quality staff and healthcare to catering and maintenance, and it’s one of the primary reasons Evergreen will build retirement villages on a larger scale in the future. In this way we will be able to keep our developments affordable, while continuing to offer a carefree retirement to as many people as possible,” he concludes.