GEORGE NEWS - The George Herald received a complaint that residents of the Murray House, a block of retirement flats, or their family, earn no interest whatsoever when selling the life right on their property, should the resident pass away or move out.
The complainant says that the life right on the property is sold at current market prices, and then the resident has only two options: a) The resident (or nearest family) receives 100% of the original ‘purchase price’ and George Service Clubs Utility Co (RLR), manager of the retirement flats, receives the balance of the selling price, or;
b) The resident receives 80% of the original ‘purchase price’ plus 20% of the profit from the sale. The balance goes to RLR.
Since property prices went through the roof in the last 20 years (or more), it is fair to understand why a resident might feel cheated if they receive only R80 000 for a property which might nowadays sell for R680 000.
Upon investigation, the George Herald found out however, that at Murray House, residents don’t buy property as is the case at the retirement villages of Genevafontein and Bergville; they merely purchase life rights, which is an entirely different thing.
Board members of Bergville Retirement Village were not keen to stipulate their current balance of profit sharing, but the Murray House complainant alleged that in Bergville’s case about 20% of the profit goes back to the management and 80% to the seller.

It is important to remember that the comparison is being made between retirement accommodation or villages such as Murray House which sell life rights, and retirement villages that sell sectional titles - two completely different contracts, says Mr Charles Rowe, project manager for Bishopslea Retirement Village. He says that one could consider a life right contract as being closer to a rental contract than a property purchase.
"When you purchase life rights, you purchase the right to live on a property, you don’t own it," says Rowe.
"It is like paying a one-off rental amount up front with a defined return at the end of your tenure."

At Bishopslea residents also buy life rights as at Murray House, but the resident receives 80% of the resale price back after
one year, 75% after two years and 70% thereafter. Their monthly levy ranges from R750 to R1 250, whereas Murray House’s levies range from R1 230 to R1 867. However, Rowe warns that levies cannot be directly compared as the facilities which retirement complexes offer vary considerably. In the case of the RLR, meals are provided, there is provision for assisted living, there is an excellent nursing service and there is the associated Lyttleton Frail Care Centre for those who may need frail care.

As a board member of RLR, Rowe vouches that the RLR Service Centre is not in the money-making business and, as a non-profit Section 21 company, it hardly gets by.
"The RLR provides a lot of facilities and services which cost a lot of money," says Rowe.

Article: Michelle Pienaar