What to look for in your purchase of life right contract

There is a steady increase in the number of Retirement villages being built in each province, and more so an increase in retirees’ wanting to purchase a life right. This can be attributed to the numerous benefits that exist with purchasing a life right, one of them being that the developer is responsible for the village maintenance hence easing the burden on the retiree.

This article seeks to discuss what one must ensure is present in an agreement for the purchase of a life right in a retirement village in terms of the Housing Development Schemes for Retired Persons Act 65 of 1988.

Important to note; the act refers to life rights as housing interest and defines it as “ in relation to a housing development scheme, means any right to claim transfer of the land to which the scheme relates, or to use or occupy that land  ”. The act further defines a retired person as “a person who is 50 years of age or older”. Therefore the minimum age for any person wishing to purchase a housing interest in a retirement village is 50 years old.

The Act requires the following in terms to be present or adhered to in the contract (purchase agreement) of purchase:

  • The purchaser is at liberty to choose which language the contract is written in and the seller may not insist otherwise;
  • The contract must be in writing;
  • Must state who the purchaser and the sellers are, identity numbers, along with their residential or business addresses;
  • Furthermore in what capacity the seller sells the housing interest (developer or agent);
  • If an agent signs on either of the parties’ behalf, the agent must be duly authorized with either a signed resolution or special power of attorney. Failing which they may not sign the contract on either parties’ behalf;
  • The seller must state clearly basis on which they sell housing interest, in that they must state they have the right to sell the housing right and the development was registered as such and complies with the necessary legislation;
  • The contract must state the period of the housing interest and any other limitations and rules that may exist that apply to the housing interest;
  • If there are house rules, it must clearly state where they are kept and/or lay for inspections,
  • Must state if the land is subject to a mortgage bond, if yes how much remains to be paid and how much of the purchase price will be used by the seller to repay the mortgage bond,
  • State how much the housing interest will cost, if payable by instalments how will the instalments be calculated and when are these instalments payable?
  • Contract must also contain a statement as to whether the life right is registerable, as well as a statement as to whether the Title Deed of the land has been endorsed;
  • A developer is not allowed to sell a life right in a Retirement Village unless the Title Deed has been endorsed in the Deed’s office, if they do they can be fined R20 000 or be imprisoned for a period of 5 years;
  • Contract must state that a section 6(1) certificate has been received. This certificate is issued by an architect or quantity surveyor and states that the housing development has been erected in accordance with the approved plans. If it has not yet been received the contract must clearly state when it will be received;
  • Contract must state what services are available and which apply to you the purchaser, furthermore what your obligations are with regards to those services;
  • The levy should be clearly stated for at least two years in advance.

The act is not yet perfect; however, if the contract substantially complies with the law as stated above it can be regarded as safe to enter into. If you need any assistance with selling or purchasing of a housing interest/life right you should not hesitate to contact our offices.

BY: SINDISIWE GOBA (Candidate Attorney)

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