Life rights: understanding the pros and cons of this retirement living option

One of the most misunderstood retirement property choices is life rights. Just Property give us some insight into the pros and cons of the life rights model:

Pros:

• Reduced costs: The transaction is not processed via the deeds office, saving on attorney fees and transfer duty. There are also usually no special levies.
• Quick transfer: The transfer process is quick and easy, as transfer may be effected on the day/date as recorded in the contract.
• Peace of mind: The purchaser has the right to use the home/unit for the remainder of their and their spouse’s life.
• Maintenance-free: As the developer retains the ownership of the property, they are responsible for the upkeep of the buildings, facilities and common areas – this ensures that the ongoing resale value is maintained or enhanced.
• Upgrades are possible: A life-right holder may, with permission, upgrade the home’s interior, which could improve the unit’s resale value.

Cons:

• Cash only: You don’t get any financing options. All transactions must be cash related
• Cannot be inherited: Life rights apply to the life rights holder and their spouse only and can’t be endowed on the passing of the life rights holder
• Be careful of the pay out modet: There are different resale models that determine what percentage of the original price, as well as the profits after resale, will be paid out.
• Strict rules on occupancy: Only the life rights owner or nominated occupant may live in the purchased unit.
• Delayed payout: While homes with life rights may be cheaper than sectional title or freehold, you are likely to have to wait quite a long time to get your money out.
• The developer is king: The developer has more say than the residents in terms of deciding factors of the property as a whole. As a result, you may be disadvantaged by this imbalance of power.