Longer lifespans and economic uncertainty, especially as a result of a weakened economy and the impact of the Covid-19 lockdown, mean it’s more difficult to plan for retirement than ever before.
Knowing this, retirees should think carefully about every decision they make, including how they go about choosing a retirement home. This, of course, also adds increased pressure to access for housing for the elderly in South Africa – resulting in new retirement developments being constructed, many of which operate on the life rights basis.
Today, especially for middle- and upper-income retirees, the accommodation available focuses more on lifestyle and quality of life, attracting people at earlier stages of their retirement, rather than just when they become too fragile or sickly to live independently.
Many are aware of buying sectional title properties that involve purchasing a stand-alone property but there is another option that could go a long way to helping retirees alleviate financial insecurity. Known as the life right model, it involves acquiring the right to live in a particular home for life rather than owning the property itself.
A life right allows a resident to occupy the property throughout their lifetime - and that of their spouse. However, it remains the property of the developer, and therefore it is maintained to a high standard, refurbished and available for resale by the developer.
This model is ideal for people who do not wish to take on the responsibility of maintaining the property themselves, or having to deal with various other issues linked to home ownership, such as insurance, security, and landscaping.
“The life right concept is attractive for the older person, who may have neither the desire nor the ability to maintain a property,” says Cobus Bedeker, MD of Evergreen Property Investments. “A capital amount is paid to the developer, who remains the legal owner responsible for maintaining the units, village and facilities.”
According to Bedeker, purchasing a life right at a retirement village brings the added advantage of financial flexibility which can be very reassuring for people who may well require expensive medical care and frail care at some point in the future. Given that most homeowners are advised to spend one percent of the value of their property on maintenance annually, it presents major savings for retirees as it relieves them of this burden since this responsibility rests with the developer as legal owner.
“Recently, the business has focused on the value of the incredible flexibility of the life right model and developed a flexible pricing product,” shares Bedeker.
“The essence of flexible pricing is that seniors can purchase a life right on a new house or apartment at discounts of up to 30% of the list price. This could assist them in two ways. Those who are unable to sell their family home at the price they would have hoped for because of the current climate are now able to price their home more realistically to attract buyers. In turn, this enables them to purchase a life right at a reduced price without having to supplement the purchase price with additional funds. Others may be able to liberate capital from the sale of their home after purchasing a life right, to bolster retirement savings,” Bedeker says.
Evergreen makes this model work financially by adjusting the capital return to the life right-holder’s estate on termination of the life right.
“Along with the financial benefits, a life right guarantees a safe and secure home for the remainder of one’s natural life, with the added benefits of resort-style facilities, top security features, a fully-managed and maintained environment along with health care facilities that typically include 24-hour nursing, recuperative palliative care, and frail care,” explains Bedeker.
The facilities cover a range of activities, all geared to enhance the residents’ lives – sporting amenities such as bowling greens, gyms and heated swimming pools; cultural stimulation at art and photographic clubs; and medical facilities for those who need assistance.
The life right model is a welcome addition to the options available for acquiring a retirement home as it also delivers peace of mind and freedom from financial worry. With transparent levies, and tenure guaranteed for life, the prospect of living longer is no longer cause for anxiety.