What does housing schemes for retired persons entail?
Housing schemes for retired persons may adopt different formats:
- Individual title
- Sectional Property
- Life or residential real
- Or a combination of the above
Caves Retirement Village is a sectional title scheme. The sectional format is commonly used for the development of retirement villages in which case the Sectional Titles Act and the Housing Development Schemes for Retired Persons Act applies.
What is sectional title?
A sectional title development scheme (usually referred to as a scheme) provides for separate ownership of parts of a property by individuals. These schemes are governed by the Sectional Titles Act, No. 95 of 1986. Residing in a sectional title scheme is a commitment to form part of a community that is bound by rules and the Sectional Titles Act. How do you establish a sectional title ownership and what exactly does one own?
The deeds registry includes a list of all the sections in the scheme, and specifies the name and details of each owner. You will buy a section, plus an undivided share of the common property. Taken together, this property is called your unit.
A section extends to:
- the mid-point of outer or dividing walls;
- the lower part of the ceiling; and
- upper part of the floor.
What is common property?
The common property is that part of a development which does not form part of any section. Structures and areas in this category include:
- Swimming pool
- Entrance foyer
- Parking bay
- Outer walls
What is a corporate body?
Each scheme has a body corporate. It is an association, not a company or a partnership – with the ability to contract, sue and be sued. All unit owners are members. The function of the body corporate is to administrate and manage the common property. The body corporate makes decisions on two levels:
- meeting of owners
- meeting of trustees
Who controls the body corporate?
All unit owners are members of the body corporate. They elect trustees in charge of the daily management of the scheme. Trustees often use a managing agent to assist them.
The Trustees are required to manage the scheme in accordance with the provisions of the Sectional Titles Act, the Housing Development Schemes for Retired Persons Act and the scheme rules and any restriction or direction which the owners decides upon during a general meeting.
Trustees are elected at each annual meeting by the owners. As owner you are entitled to make yourself available for election but this is not compulsory. The trustees are not requires to be owners, and they are usually not paid for their services.
The Board of Trustees at the Caves Retirement Village consists of five members as well as an Office Manager. Currently there are three trustees represented by owners of the building and the other two trustees are representing the development company. Once the Village has been fully developed, the developers withdraw and the Owners Association will take full control of the management of the Village.
The Act defines a “retired person” as a fifty year old or older. A younger person may own a property, but it may only be occupied if either he/she or his/her spouse are older than 50. The property may be leased to a person older than the age of 50.
How safe is an investment in a retirement home?
Housing Schemes for Retired Persons Act, no. 65 of 1988, provides protection measures to purchasers of units or residential rights in retirement homes. The purpose of the law is therefore the protection of the elderly from exploitation by developers.
For a prospective investor, it is important to determine which registered mortgages is part of the project. The members of such a scheme have rights over any mortgage, but the payment ability of the developer still has an influence on the feasibility of the scheme. It is also important that prospective investors should determine whether the promised communal facilities (eg. frail care unit) have been completed and, if not, when it will be completed.
The investor should determine whether the scheme is managed by a juristic person, in terms of the Sectional Title Act or a management association in terms of the Housing Development Schemes.
The above principles are guidelines by which the Caves Retirement Village functions. The project management team has been involved in two similar retirement village schemes and has a lot of experience and knowledge to the benefit of the new resort. There are no development bonds applicable to Caves Retirement Village.
May I lease my unit?
Yes, you my lease your unit to tenants older than 50 years. Tenants are subjected to the same rules of conduct and constitution as owners of the units. The owner remains legally responsible for all costs incurred. The owner has the option of ceding his frail care benefits to the tenant for the period of the lease provided that the tenant is under the age of 65 years. This arrangement remains subjected to the approval of the Board of Trustees.
What is the endowment levy?
Upon the re-sale of a unit, 10% of the selling price will be transferred to the levy stabilizing fund of the Caves Retirement Village. This fund, established by the Board of Trustees on behalf of the owners association, will be used to subsidize rates and contribute to the management of the resort and for any necessary repairs. It will therefore contribute additional funds to the management of the Village while monthly costs will be kept low.