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.
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