THOUGHT OF THE WEEK It's my life right?
Updated: Jul 23, 2020
Retirement Villages are trending on the property front and potential Life Right Holders are spoilt for choice when it comes to choosing where to settle down for their retirement.
The property can be registered as a housing scheme for retired persons in terms of The Housing Development Schemes for Retired Persons Act 65 of 1988 (“HDSRP Act”), as a Sectional Title scheme in terms of the Section Title Act, Act 95 of 1986 or as a share block in terms of the Share Blocks Control Act 59 of 1980. If you are buying a Life Right in a Retirement Village, the development scheme would have been registered as such and the Life Right Agreement will be, inter alia, subject to the HDSRP Act.
Despite its brief appearance, the HDSRP Act confers several powers and duties pertaining to the alienation of Housing Interests to the elderly. This article serves to assist you in your journey as a retired person, 50 years of age or older, wishing to acquire a Life Right in a Housing Development Scheme, as defined in the HDSRP Act.
It’s important to take note of the following:
Section 4A of the HDSRP Act states that the holder of a right of occupation shall for the purposes of any law have the same rights as those conferred on a lessee in terms of a lease, registered against the title deed of the leased land, and such rights shall rank in priority over any other right whether or not such other right has been registered or endorsed against the title deed and irrespective of the time when such other right was registered or endorsed.
Section 4C of the HDSRP Act states that no developer shall alienate a right of occupation in relation to a housing interest which originated as from the commencement of the HDSRP Act or enter into an agreement having such effect UNLESS the title deed of the land concerned to which such right relates, has, with the consent of the owner of that land and, if the land is encumbered by a mortgage bond, the consent of the mortgagee, been endorsed by a registrar as defined in section 102 of the Deeds Registration Act, 1937 (Act No. 47 of 1937), to the effect that such land is subject to a housing development scheme.The registrar concerned shall, on receipt of an application in the form prescribed by regulation after consultation with the chief registrar of deeds, make such endorsement.
The Alienation of Housing Interests:
An alienation of a housing interest to a retired person shall be of no force or effect, unless it is contained in a contract signed by the parties thereto or by their agents acting on their written authority unless the purchaser has in terms of the alienation rendered the full compensation and housing interest concerned has otherwise been vested in him/her.
The purchaser in relation to a contract is entitled to choose the official language in which the contract shall be drawn up.
The contract, if the seller concerned is a developer, shall in addition to the parties, property and consideration, contain the following:
a statement as to whether the housing interest is registrable;
whether the land is encumbered by a mortgage bond;
the name and address of the person in favour of whom the mortgage bond is registered at the time the contract is concluded and the outstanding balance owing by the mortgagor in terms of the mortgage bond;
the annual rate at which interest(if any) is to be paid on any balance in respect of the consideration;
a statement of the place where and the hours during which rules(if any), in accordance with which the housing interest concerned is to be utilised, may be inspected;
a statement of the location, nature and extent of any facilities or services which are to be provided or rendered in connection with the housing interest concerned;
the date on which the purchaser will become entitled to utilise the housing interest;
the date upon which the risk of the housing interest will pass to the purchaser;
a statement of the obligation (if any) of either the seller or the purchaser to insure the subject matter of the contract;
if the seller is the owner of the land, an undertaking by him that the land will not be encumbered or further encumbered by a mortgage bond, as the case may be;
an estimate, for a period of three years in advance, of all expenditure for the control, management and administration of the housing development scheme and all services and facilities concerned, and an indication of the person or persons who will be liable for the payment thereof, and a statement that over and above any levy estimated, the purchaser will not be liable for the payment of any such expenditure;
a statement of the basis upon which any levy payable by the purchaser is to be calculated, and an estimate·, for a period of two years in advance,of the amount of the levy;
a statement as to the percentage of the total number of housing interests in the housing development scheme concerned which is reserved for alienation to retired persons only;
a concise outline of the management structure or proposed management structure of the housing development scheme concerned.
Restriction on receipt of consideration:
No developer may by virtue of a contract receive any consideration or any part thereof, unless an architect or a quantity surveyor has issued a certificate that the housing development scheme concerned has been erected substantially in accordance with any applicable officially approved building plans and town planning scheme and applicable local authority by-laws, and is sufficiently completed for the purposes of utilisation of the housing interest concerned; and a copy of that certificate and a copy of the contract have been furnished to the purchaser concerned.
The above shall not apply to:
the receipt of any amount which the purchaser by virtue of a contract entrusts to a practitioner in his capacity as such, to be kept, for the benefit of the developer, in the trust account of the practitioner until the certificate referred to in subsection has been issued and a copy thereof has been furnished to the purchaser; or
which by virtue of a contract is paid to the developer if, before such payment, the purchaser was furnished with an irrevocable and unconditional guarantee by a banking institution undertakes to repay the said amount to the purchaser, if the certificate referred is not issued and furnished to the purchaser.
Buying a housing interest “off-plan”?
Section 6(1)(a) of the HDSRP Act restricts a developer to receive any consideration unless an architect or quantity surveyor has issued a certificate confirming that the housing development scheme has been erected substantially in accordance with any applicable officially approved building plans.
The Act does not prohibit or restrict the alienation of housing interests in housing development schemes which have not yet been completed. In principle, therefore, housing interests can be sold “off-plan”.
Section 4C of the HDSRP Act prohibits the alienation of a right of occupation in relation to a housing interest unless the title deed of the land concerned to which the right relates, has been endorsed by a Registrar of Deeds, to the effect that such land is subject to a housing development scheme.
A “proposed” housing interest can be described as an interest in a housing development which has not yet been erected substantially in accordance with an approved building plan or which is not sufficiently completed for purposes of utilisation of the housing interest concerned and therefore it is not an alienation of a right of occupation.
However, a developer must, in the contract of sale entered into with a retired person, specify the latest date on which he will furnish the retired person with:
A certificate issued by an architect or quantity surveyor stating that the building has been erected in accordance with the approved building plans and has been sufficiently completed for purposes of utilisation of the housing interest;
A certificate issued by a Practitioner confirming that the title deed of the land to which the right of occupation relates has been endorsed as contemplated in Section 4C of the HDSRP Act.
This date may not be later than two years from the date of conclusion of the contract.