laws concerning the setup of retirement villages
Province: northern cape
Do you need to quote the acts or how a retirement village is setup?
I am in the process of developing a retirement village in the Northern Cape. I want to know what is the laws concerning the developing of such village and what requirements are set by law to be met in this case.
This in itself is very wide question to answer and for the scope of this legal opinion nearly impossible. The reason is quite simple you will need specialist in every field of development to help you put this together. Attorney, Quantity Surveyor, Town Planner, Land Surveyor, Architect and Builder. Cover all the aspects of each individual discipline is impossible in relation.
However i will give you start up pointers and overview
Retirement villages are usually situated in pleasant surroundings and may offer amenities such as sports facilities, care for the infirm and unwell, central preparation of meals and special transport arrangements. There are also the attractions of the company of people of similar age and financial circumstances, and there may be greater security than in other forms of cluster housing that are usually more or less deserted during working hours. There is also the prospect of financial advantage in the sale of a larger property and the purchase of a smaller one at a retirement village, and the assurance of having a suitable home in which to spend the remainder of one's life.
The risks involved
In an attempt to safeguard investors in retirement villages, the Housing Development Schemes for Retired Persons Act, 1988, was passed. However, despite the assurances of well-produced brochures, there are certain risks attached to buying into retirement villages. Over the past few years a number of retirement village developments have become insolvent. Where this occurs, residents stand to lose all they have put into the scheme, as well as their new homes, and may end up as no more than concurrent creditors with a claim against an insolvent estate.
The essence of any retirement village is that people may purchase premises, or the right to the use of premises, in return for a fixed sum and a variable monthly levy proportional to the extent and nature of the special amenities offered. Typically, a village may consist of 30 or more residential units, each of which may contain a bedroom, sitting room, bathroom and kitchen and, perhaps, a garage and garden. Retired persons - defined by the Act as persons of 50 years of age or older (although not necessarily retired) - may purchase a 'housing interest' in which they own or have exclusive usage rights to their own units, and the right to the use of common property such as dining halls, corridors, driveways and recreation areas.
Villages may be developed by private individuals, financial institutions, charities or service organizations. There are three basic ways of participation in a retirement complex - by sectional title, by the share-block scheme or in terms of life rights. You need to start to decide which one by taking in account the factors in 3rd paragraph.
When a scheme is sold under sectional title, buyers acquire sole ownership, registrable at the Deeds Office, of particular units. They also acquire joint ownership, with other participants in the scheme, of an undivided share in the common property. Subject to the conditions regulating a particular scheme, buyers can sell their units or bequeath them in their wills. This is the most secure system, because it offers the greatest statutory protection and because unit-holders actually acquire ownership of real estate.
Share block scheme
In a retirement complex sold by share block scheme the developer forms a company in which retired persons buy shares. Each 'block' of shares entitles them to exclusive right of occupation, in perpetuity, of a particular unit. Ownership of the shares also confers the right to the use of the common property. The shares may be resold or bequeathed. The company remains the owner of the property and shareholders do not own or acquire the title to their particular units. If the company becomes insolvent, the danger exists that shareholders may lose both their money and their occupation rights. In 1991 a law was introduced to ensure that, whatever happened to the company, right of occupation by the retired person would be guaranteed. A share block scheme can be converted to sectional title.
Although this system usually appears to be the cheapest, only the developer makes any capital gain under it. The retired person advances money to the developer, usually as an interest-free 'loan', and receives in return the lifelong right to sole occupation of a particular unit and joint right to the use of the common property. When unit-holders move away or die, the developer refunds them or their estates the amount originally advanced. A disadvantage of this scheme is that the developer remains the owner of the property. Fortunately, the law guarantees the protection of the money and place of residence of the unit dwellers should the developer become insolvent.
However the scheme is marketed, a deve-loper may not receive any portion of the purchase price of a unit unless he or she has given the buyer a certificate from an architect or quantity surveyor. This certificate states that the scheme has been erected in accordance with all relevant building and planning laws, and that the unit has been completed and is capable of being registered. Until this certificate has been issued, money may be paid only into a trust account or against an unconditional bank guarantee. This means that, should the developer become insolvent, buyers can have their money refunded. Buyers may also, if they wish, withdraw from the contract if the certificate is not provided by an agreed date.
The monthly levy
The levy paid each month goes to fund the village's upkeep and to pay salaries. Although the projected levy for the first two years must be shown on the contract, it is likely to increase substantially, especially where extensive or costly facilities or services are provided. Some developers have aimed at standards that are unrealistically high and will require large sums of money to maintain.
Where units are being sold by developers or their agents, or are being sold for the first time, the law requires that the contract of sale should contain detailed information in respect of the buyer, the seller and the property. It must be stated, for instance, whether there is a mortgage bond on the property and, if there is such a bond, the name of the mortgagee and the amount owing.
The 'location, nature and extent of any facilities or services' - such as bowling green, television lounge, house bus or sick bay - must be stated, together with the buyer's rights and obligations in respect of them. If any additional fee is payable before they can be used, this must be stated. The date by which the facilities and services will be provided must also be stated.
The contract must set out the basis on which the amount of the monthly levy has been calculated, and an estimate, for two years in advance, of the amount of that levy. The contract must also include a detailed projection of estimated income and expenditure.
It must be stated that the scheme is a housing scheme as outlined in the Housing Development Schemes for Retired Persons Act, and it is not just an ordinary sectional-title or other scheme in which the buyer may, perhaps, be afforded a lesser degree of protection. There must be a clear statement as to whether purchase of the housing interest will convey ownership rights which would allow it to be registered at the Deeds Registry.
An important provision is that developers must state in the contract with which other housing development scheme they have been involved, in any capacity. This provides prospective buyers with an opportunity to investigate a developer's earlier work and make enquiries among its residents.
Where a scheme is marketed under sectional title or a share block scheme, the laws in respect of the body corporate or the share block company apply. In the case of a life-rights scheme, a management association is formed. From the date that a developer of a retirement village sells the first housing interest, a management association is automatically established for that scheme. Together with the developer, all initial and subsequent purchasers become members of the management association for as long as they retain ownership of their housing interest.
The management association's duties include responsibility for the enforcement of rules, and the control, administration and management of the entire scheme for the benefit of all members. The association must insure the buildings, take out other insurance which may be necessary, keep a register of members, establish the levy fund and see that levies are paid by the due date. Other powers involve the operating of a current and savings account, the appointment of employees and the expansion of the scheme or of its various facilities and services.
In practice, a committee is appointed from members of the management association and may be re-elected or changed at the next annual general meeting, which must be held within 15 months of the last annual general meeting. The first meeting must be convened by the developer, within 60 days of the establishment of the management association. At the meeting, the developer must produce a certificate from the relevant local authority confirming that all rates and taxes on the property have been fully paid, up to the date of establishment of the association.
Because the participants in a retirement housing scheme may not have the ability or time to arrange and monitor the many tasks required of the management association, the law requires that a managing agent be appointed. The managing agent may be appointed by the developer or by the management association, initially for the period of one year. The managing agent carries out the practical aspects of decisions that are taken by the management committee.
You are proberably asking were do I start. My suggestion is go see an attorney, he will be able to advise you which one of the above mentioned 3 will fit your property the best. The attorney will also help you start the process as they normally well connected and would have done it previously.
IF you found the answer help full please give me a bonus.
BProc, LLB and MBA
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