The Retired Persons Act’s over-zealous demands on property developers result in South African retirees losing tens of millions of rands every year.
Despite its best intentions, the Retired Persons Act architected by the South African government is failing to protect the very people it is written to protect – our country’s senior citizens, says Dan Brown, head of retirement projects at Century Property Developments.
Despite its best intentions, the Retired Persons Act architected by the South African government is failing to protect the very people it is written to protect – our country’s senior citizens, says Dan Brown, head of retirement projects at Century Property Developments.
Collectively, retired investors in South Africa lose money annually to unscrupulous (or poorly financed) developers whose estates fail to materialise or where the retirement village promised doesn’t materialise in its promised form.
Brown explains in the last five years the number of mature lifestyle estates under development has grown exponentially to meet an ever increasing demand.
However, there has been a commensurate increase in the number of retired investors who lose money – upwards from R100 000 in deposits.
With waiting lists of up to 15 years to gain access into some of the country’s leading retirement estates – villages that are accredited under the Housing Development Scheme for Retired Persons Act - the majority of retirees are forced to buy into estates that are newly on the market, he says.
However, buyers beware. All too often the individual buying into a new development is not protected under the Housing Development Scheme for the Retired Persons Act, points out Brown.
He says the reason behind the Act’s inability to protect the majority of buyers is that the demands made on developers are simply too onerous.
Before the developer can sell even a single unit, the Act requires that all facilities are complete.
Hundreds of millions of rands must be invested in constructing facilities for the care of debilitated persons (frail care) as well as any promised additional facilities such as a club house.
Consequently, very few new developments seek accreditation under the Act and this in turn, renders the purchasers vulnerable, he says.
Before the developer can sell even a single unit, the Act requires that all facilities are complete. Hundreds of millions of rands must be invested in constructing facilities for the care of debilitated persons (frail care) as well as any promised additional facilities such as a club house.
Brown encourages retirees to do their research before investing.
“Obviously risks associated with buying into an existing, fully functional retirement scheme are lower where the facility has a proven track record.”
He says retired investors buying into a development under construction must look carefully at the credentials and track record of the developer.
Ask questions such as 'does the company have experience in building a workable retirement village' and if not, 'are the plans for the frail care realistic?'
Brown says that in 60 percent of cases frail care facilities either don’t materialise or the facility closes within five years of launch due to poor planning.
A frail care facility with fewer than 30 beds is unsustainable and will, at best, be a financial drain on all those residents who don’t currently use or need the facility through a subsidy, which will inevitably become necessary to keep the care facility going, he says.
“Investors who buy off plan in a retirement estate face multiple risks.”
There are risks present at the time of conclusion of the agreement between the developer and the purchaser, risks when the purchaser parts with his or her funds, those arising after the person takes occupation of the housing or apartment unit (risks concerning the management and administration of the scheme after it has been created) and risks arising upon death of the retired person or on resale of the right/property, he adds.
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