Freehold Title, Sectional Title or Life Rights – what’s best for you?
When considering moving into a retirement village or estate, understanding the different types of ownership is essential before deciding what’s best for you.
- Freehold title
Freehold or full title describes the transfer of full ownership rights when you own a property, including the building and the land on which it is built. These kinds of properties include free-standing houses, cluster houses, residential properties used for business purposes, and smallholdings. The freehold owner is responsible for all the bills and maintenance of the property, including taxes, insurance, upkeep, security, electricity and water bills. In addition, within gated communities like retirement estates/villages, there will be a monthly levy to cover services such as maintenance of the common areas, security, catering and healthcare. Some developments will retain a certain portion of the profits on resale to subsidise the levies owners pay.
- Sectional title
Sectional title describes separate ownership of units or sections within a complex or development. When you buy into a sectional title complex, you purchase a section or sections and an undivided share of the common property. This is similar to a sectional title in a non-retirement development, where a monthly levy funds rates, insurance and maintenance of the complex. The scheme will have a board of trustees and a body corporate, through which all owners have a say in decision-making. As with a freehold title scheme, the developer carries no responsibility for the ongoing maintenance and cost management aspects once the development has been built; the onus falls on the owners or residents to do so.
- Life right
You buy the right to live in a dwelling for your life and that of your spouse – you don’t own physical property. There are no legal costs, transfer duties or other taxes payable. You may dispose of your life right, or it will be sold on your death, in which case you or your estate will, depending on the contract, receive the purchase price plus a percentage of the profit. When a life right transfers to a spouse on the death of the first-dying spouse, it does not form part of the first- dying spouse’s estate. Residents, who pay a monthly levy to cover running costs, enjoy similar privileges to those in sectional title homes; the developer, however, remains the sole owner and is responsible for the upkeep of the village.
Watch Kim Potgieter in conversation with Rob Jones from Shire Retirement Properties discussing the different options. Rob founded Shire Retirement Properties in 2010 in response to a clear need for independent specialist consultants in the South African retirement industry. For more information, visit Shire Properties.