The Somerset Lifestyle & Retirement Village

BUYING INTO A RETIREMENT VILLAGE – PURCHASE OPTIONS

For many retirees, the prospect of a long retirement brings with it the obligation to provide financially for an unknown period with only your accumulated capital.

It is therefore important to maximise and preserve your capital for this purpose, including the prospect of paying for increasing healthcare costs.  Your retirement village purchase options can provide various ways to preserve your capital investment.

 

RETIREMENT VILLAGE PURCHASE OPTIONS

Understandably many retirees see the sale of their family home as the mechanism to create an additional capital lump sum for retirement, while down-scaling to purchase something more affordable and less costly to upkeep.

Unfortunately, although selling the family home may realise a tidy profit, purchasing a quality retirement home may be more costly than you think, with Capital Gains Tax, sales commission and transfer costs making inroads on your nest-egg.

 

PURCHASE OPTIONS DECIDE YOUR RETIREMENT QUALITY OF LIFE

The quality of the retirement village you choose will depend on your means, although you will most likely be buying into the same market into which you sold your family home.

Buying a new home in a retirement village should also take into consideration many other factors including security, convenience, healthcare, lifestyle and access to a range of assisted-living services.

It is these factors that will largely determine the quality of your life after making the move to your retirement village.

 

RETIREMENT VILLAGE PURCHASE OPTIONS

To assist retirees maximise their options, The Somerset Lifestyle and Retirement Village provides two investment options in several dwelling types:

  • Freehold Title purchase option
  • Life Right purchase option

 

FREEHOLD TITLE OWNERSHIP – RETIREMENT VILLAGE PURCHASE OPTION

Purchasers can be freehold owners of an erf and dwelling in a retirement village under the Housing Development Schemes for Retired Persons Act of 1988.

This type of purchase option is the simplest capital structure for retirees, and owners receive title deeds and have the property registered in their own name(s).

Owners also benefit from protection under existing South African property laws.

When the property is sold, 25% of the net profit is paid into The Somerset levy stabilisation fund. The Home Owners Association (of which you will be a member) uses this fund to subsidise levy increases in times of high inflation.

Under this form of ownership you are liable for rates and taxes, Home Insurance, home maintenance and the levy of the Home Owners Association. Levies are cost recovery mechanisms with a fixed portion and a variable portion that is dependent on the size of your property.

Levies cover costs associated with common facilities and services such as catering, security, garden services and healthcare.  A Managing Agent administers the levies on behalf of the Home Owners Association.

Additional healthcare services are available in your home or at the Health Care centre.

The Somerset offers a variety of house floor plans from which to choose. All houses are fully compliant with the SANS energy saving building regulations, and plans can be amended to suit your needs.

A 6-month period is allowed from time of acceptance of plan to when building must commence, with the plot transferring into the purchaser’s name before building to an agreed building contract, with phased progress payments.

LIFE RIGHT – RETIREMENT VILLAGE PURCHASE OPTION

Life Right developments commenced in the 1960s in South Africa and saw incredible growth during the mid-90s as a form of senior retirement accommodation.

This option is particularly attractive to people who prefer to leave the challenges and costs associated with house ownership, maintenance and sale to others – especially in their senior years.  The cost of such dwellings is also lower than other forms of purchase, for the same size house.

The Somerset has partnered with the Cape Peninsula Organisation for the Aged (CPOA). The CPOA has purchased a portion of the village for the erection of an apartment block and cottages that are available under their standard Life Right purchase agreement.

The CPOA has been in the retirement industry for more than 60 years and own more than 20 retirement villages, managing another 15 on behalf of other owners.  CPOA will be responsible for the management of The Somerset and its health care facilities.

Life Right is exactly what its name implies. A person or persons buying into such an arrangement has a legal right to occupy the premises for the duration of their lifetime.  The Life Right owner does not buy the property, but rather the right to live in the unit.  This is why in some countries life rights are referred to as “life leases”.

LIFE RIGHT RETIREMENT PURCHASE OPTIONS ARE A FORM OF OWNERSHIP

The Housing Development Schemes for Retired Persons Act of 1988 recognises Life Right developments as a form of ownership. This provides protection to seniors buying into them.

Unlike Sectional Title developments, no transfer duty or VAT is payable on life right transactions.

The developer is required to appoint a Managing Agent for the day-to-day operations.

The residents pay a levy for the operating costs, which must be estimated by the seller for the first two years after occupation, with details being attached to the initial sale’s documentation.

Life right purchases in The Somerset lifestyle and retirement village extend to both partners and upon the death of the last partner, the life right is re-sold.

After resale, the deceased estate receives the purchase price that was originally paid, less any refurbishment and admin costs plus 25% of the net profit made on the re-sale of the life right.

Life right purchasers are not liable for maintenance or home owners insurance. But life right purchasers must pay a levy which again has a fixed portion and a portion that depends on the size of the unit.

Life right is a very secure form of purchase with opportunities within the CPOA organisation to downsize, or swap your unit for another, elsewhere in another CPOA village, should the need arise.

There are also opportunities to defer a small portion of the capital payment to enable you to have a larger capital base on which to live.

Explore your retirement village purchase options with our sales consultants.

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