Life rights and
financial peace of mind
Two of the most important considerations as one gets older are one’s finances and the availability of appropriate care. Moving into an Auria Senior Living community offers security and peace of mind on both these fronts.
With regards to financial planning, one of the main benefits of moving into a senior living community is that it allows for certain costs to be reliably estimated upfront for the remainder of one’s life.
Costs are divided into two categories: ‘upfront costs’, which cover the purchase of your unit, and ‘ongoing’ monthly costs, which work like a levy but are far more inclusive in nature and cover many services and benefits exclusive to a senior living community.
In this document, we set out how it all works and clarify how the upfront and ongoing costs are determined, to give you peace of mind and predictability when making your decision.
Life Rights Explained
Auria Senior Living operates on a Life Rights model.
You pay an upfront amount which secures the right for you to occupy and enjoy your unit for the remainder of your life / lives. During this time, a monthly levy is payable to fund general operating and common area maintenance costs.
This levy allows Auria Senior Living to take care of community management, maintenance, security and the provision of services in the senior living community, which means that you can enjoy hassle-free living.
What is a Life Right?
Purchasing a Life Right grants exclusive use of a property for the lifetime of the occupant and their spouse/partner.
A Life Right scheme differs to a Sectional Title or Full Title property in that ownership of the property is held by the Life Rights scheme owner/operator, which, in this case, is Auria. Even though legal ownership of the property is not transferred to the Occupant, a Life Right is sold under a secure legal framework, which essentially provides the Occupant with all the legal protections of full ownership of the property during their lifetime.
When purchasing a Life Right, a market-related capital sum is paid to the Life Right scheme owner for the right to use the property for the remainder of the Occupants’ life. When the Life Right terminates, which is either on the passing of the Life Rights holder, or if they move out of the Auria community, the original capital sum or a portion thereof (dependent on contractual terms) is returned to the Occupant or their estate. There is no transfer duty or VAT payable upfront.
Unlike Full Title or Sectional Title schemes, any capital appreciation in the property accrues to the scheme owner, and not the Occupant. As a result, the scheme owner, Auria in this case, is always incentivised to maintain and operate the scheme optimally and to the highest standard to ensure overall property capital appreciation. As a result, the interests of the operator and the occupant are aligned.
Life Rights are regulated by the Housing Schemes for Retired Persons Act (Act 65 of 1988) which gives residents further protection and peace of mind about their security of tenure, and their capital.
How does a Life Right work?
This means that a minimum of 70-80% of your original capital is returned on exit. The Deferred Management Levy is earned by Auria over a 4-year period, at a rate of 5-7,5% per year.
*This rate differs depending on your community.
This works out as follows, assuming a 20% DML (ie 80% payback of capital):
- If you leave in Year 1: 95% of your capital returned.
- If you leave in Year 2: 90% of your capital returned.
- If you leave in Year 3: 85% of your capital returned.
- If you leave in Year 4: 80% of your capital returned.
If you leave any time after Year 4 there is no further Deferred Management Levy so you still always get 80% of your capital back.
A Life Right is like prepaying all your rent upfront for your lifetime stay.
The capital growth which accrues to the Life Right operator rather than the resident can be viewed as “rental”. However, because this is only received by the operator when they resell the unit, it is essentially a “pay on exit” model – which means that this is less of a strain on your capital base (i.e. your cash) during your lifetime.
Benefits of a Life Right
Life Rights FAQs
Is my capital in my Life Right secure?
Yes, absolutely. With our model, you are guaranteed to get 70% to 80% of your capital back. The law protects you in this: the Housing Schemes for Retired Persons Act (Act 65 of 1988) protects your security of tenure and your capital.
Is my capital in my Life Right as strong as a title deed – or is it as good as ownership?
Yes – in fact a Life Right can be endorsed against a title deed – like a mortgage bond – it is a real right of occupation, for life, supported by the Housing Development Scheme for Retired Persons Act.
Can I transfer my Life Right to someone else?
No, the right of occupation is for the natural life of the Life Right Holder (or their spouse or life partner). It is not transferable to a third party.
Can I purchase a Life Right if I don’t move in, and rent the property to someone else?
One doesn’t have to move in immediately, but one cannot rent a Life Rights unit – it is intended that only the Life Right holder lives permanently in the unit. Provided one is willing to pay the monthly levy as required, one doesn’t have to actually occupy the unit.