By Zerlinda van der Merwe – TVDM Consultants
In the January 2021 newsletter, we took a look at homeowners’ associations, in the
form of Common Law Associations, governed by its constitution, and non-profit
companies registered in accordance with the Companies Act and administered in
terms of its memorandum of incorporation. Due to the fact that each association is
administered and managed by a different governance document, it is obvious that
when it comes to participation, representation, liability and responsibility, the contents
of these regulations must be reviewed and adhered to. In my opinion, the biggest
difference between this type of community scheme and sectional title and retirement
developments, is that as an owner of an erf within an association, your responsibility
extends to the entire boundary of the erf and the buildings erected on it, as well as
your share of the common areas of the scheme, whereas in sectional title schemes,
your responsibility and liability extends to the median line of your section, your
exclusive use area and your pro rata share of the common property within the scheme,
and in a retirement development, it can be even further limited.
With this in mind, let’s take a look at retirement schemes, which are developed in
accordance with the Housing Development Schemes for Retired Persons Act, which
ensures certainty of ownership or holdership in such a scheme and a maintainable
standard of management and services. It is very important to point out that when
deciding to become part of a retirement community, you obtain, not ownership in the
normal course, but rather a housing interest, when such a community is subject to only
life rights. There is further a difference between a housing interest and occupation, as
a unit within such a scheme must be occupied by a person who is fifty (50) years of
age, as well as their spouse, if applicable.
Such a retired (subject to debate) person in a retirement scheme, based on life rights only, acquires the exclusive right to occupy a part of the retirement scheme, including the common areas, for the duration of their lifetime, unless terminated by agreement or due to breach of a life rights agreement, which is entered into between the beneficiary of the housing interest and the grantor of the housing interest. As opposed to a purchase as we know it, the beneficiary makes an interest-free loan to the grantor, at times repayable in full or part at the termination of the agreement, after the grantor has entered into an agreement with a new beneficiary as a replacement.
Other than solely by life rights, a retirement scheme can be established in terms of the
Sectional Titles Act and managed in terms of the Sectional Titles Schemes
Management Act. The retired person will be the owner, in the normal course, of a unit
in the sectional title scheme, and will be bound to adhere to the provisions of the rules of the scheme, which will restrict the occupation of the unit to a retired person and their
spouse.
A retirement scheme can also be registered as a share block company, in terms of the
Share Blocks Control Act, where the retired person is a shareholder of the share block
company, and obtains a personal right to the exclusive use and occupation of a part
of the property owned or leased by the share block company, as well as the use of its
common areas. The use rights of the shareholder are determined by the use
agreement, rules and articles of association or memorandum of incorporation of
the company.
The biggest feature of a retirement development, in my mind, is that the occupation is
restricted to a retired person, namely a person of a certain age. Of course, this is not
discriminatory or an unjustifiable limitation, as the interests of the residents of such a
scheme can be quite different to your “run of the mill” sectional title or HOA
development. There is further, under the Housing Development Schemes for Retired
Persons Act, protection offered to those with a housing interest in that financial
contribution is always under scrutiny and limited in the interests of those occupying
units, despite the fact that service delivery is exceptionally high in many of these
schemes, an attractive feature which serves in many becoming involved in such a
community.
In sectional title schemes, the use and enjoyment of sections as well as the common
property, participation, representation, liability and responsibility is strictly governed by
the Sectional Titles Schemes Management Act and the rules of each body corporate,
if amended, or prescribed by the Act. Many sectional titles schemes are accused of
having too many rules or not allowing enough freedom to its residents, the importance
of rules being to safeguard the best interests of each resident to ensure a harmonious
(or as close to it as possible) community. However, when the rules seem too draconian
in nature, the Community Schemes Ombud Service can be approached to resolve any
dispute, bearing in mind that any amendment to the rules of the scheme are reviewed
and approved by the Community Schemes Ombud Service.
