Life right vs sectional title: how buying into a retirement village works

Most South African retirement villages sell units in one of three ways: a life right, sectional title, or rental. The headline price is only part of the picture. What matters just as much is what is paid back when the unit is vacated, and who carries the risk if property prices fall.

Life right

With a life right your parent pays a lump sum for the right to live in a unit for the rest of their life (or the life of the last surviving spouse). They do not own the unit and it does not form part of their estate. When the right ends, the village resells it and repays an amount defined in the contract.

Repayment terms differ a lot between villages. Some repay a fixed percentage of the original price, some share in the resale price, and some reduce the repayment for each year of occupation. Ask for a worked example with real numbers.

Life right schemes are regulated by the Housing Development Schemes for Retired Persons Act, which requires the contract to set out these terms clearly.

Sectional title

With sectional title your parent owns the unit outright, registered in the deeds office, and pays a monthly levy to the body corporate. On a sale, the proceeds go to them or their estate, minus agent costs. Villages often restrict who may buy (an age minimum) and may have a say in the resale.

Rental

Some villages and many assisted living facilities rent units monthly. No capital is tied up, which suits families who want flexibility or who are trying a village before committing. The trade-off is rent increases and no capital return.

Questions to ask any village

Ask what the monthly levy covers and how it has moved over the past few years, what happens to the unit if your parent moves into frail care, and how long resales are currently taking. Have an attorney read the agreement before anyone signs.