An introduction to retirement schemes
By Zerlinda van der Merwe
In this article, we will be taking a look at retirement schemes which are regulated in terms of the Housing Development Schemes for Retired Persons Act 65 of 1988 (“the Retired Persons Act”), which ensures security of tenure, protection of investments into the scheme, and a high standard of management and facilities.
When purchasing into retirement schemes, the purchaser obtains a housing interest, however only a retired person, defined as a person who is fifty (50) years or older and the spouse of the person, may take occupation within the scheme.
The 3 most popular forms of retirement schemes are based on either sectional title, share block or life rights.
Sectional title
In a retirement scheme, established in terms of the Sectional Titles Act 95 of 1986 (“the STA”) and managed in terms of the Sectional Titles Schemes Management Act 8 of 2011 (“the STSMA”), the retired person is the owner of a unit in the sectional title scheme, who is bound to adhere to the provisions of the STA, the STSMA and the registered rules of the scheme.
The rules will restrict the occupation of the unit to a retired person and their spouse, however, unless the rules state otherwise, the unit may be alienated to a person other than a retired person.
Share block
In a retirement scheme registered as a share block company, in terms of the Share Blocks Control Act 59 of 1980 (“the Share Blocks Control Act”) the retired person is a shareholder of the share block company, and obtains a personal right to the exclusive use of a part of the property owned or leased by the share block company.
The use rights of the shareholder are determined by the share block company’s governance documentation, such as the use agreement, rules and Articles of Association or Memorandum of Incorporation.
Unless, the use agreement, rules of Articles of Association or Memorandum of Incorporation provide to the contrary, the shares in the share block company may be alienated to a person other than a retired person, however the right of occupancy may only be exercised by a retired person or their spouse.
Life rights
A retired person in a retirement scheme based on life rights acquires the exclusive right to occupy a part of the retirement scheme, as well as the use of the common areas, for the duration of their lifetime, unless terminated earlier by either agreement or due to breach or cancellation of the agreement.
This right of occupancy stems from a life rights agreement, entered into between the beneficiary of the housing interest and the grantor of the housing interest, the beneficiary making an interest-free loan to the grantor, 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.
Occupation is restricted to the retired person, their spouse or any other retired person specified in the agreement.
As you can see from the above, retirement scheme living can be quite complicated, and should you require our legal services in the form of a written legal opinion or consultation, contact us via email at consulting@paddocks.co.za or telephonically on 021 686 3950.
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Thinking Inside the Box 
I would have loved if you had discussed those housing developments under the Act referenced, with own title.I have purchased in such a scheme which also has a sectional title development. As far as I understand the Home Owners Association (based on common association rather Companies Act) falls outside the control of the Sectional Title Management Act, although the Sectional Title units are affected and have to have certain reserves, and so forth but the HOA itself falls outside such legislation which is a little confusing. Is there any talk of bringing such HOA under additional control and requirements? I would be pleased to hear your views and thanks for this forum
I fully agree with you. You even find that complexes are registered as sectional title at the deeds office,was endorsed according to 4C of the Act 65 of 1988, sold under conditions of act 65 of 1988 and its regulations and then the developer refuses to adhere to the latter. He states that as sole owner of the units under sectional title ” occupiers” have no say in the running of the complex.
Can you please discuss the following: The definition on community schemes mentions retirement schemes. Does that also include old age homes, mid care accomodation and frail care homes?
If you look at the acts and regulations for these it also include a lot of the stipulations as indicated in the sectional title act i e committees to be formed, financial control etc.
When you look at some of the advertisements for retirement centers it indicates age limits i e you can only occupy if you are older than 50 but not older than 75
Is the latter discrimination on ground of age?
What is the regulations where Life Right buyers live in a sectional title registered scheme where the development consists of 145 units where 20 units are sold as sectional title units and the rest to life rights owner.
Dear Corrie,
Thank you for your comment. We are more than happy to help, however we do not give free opinions / advice. Please email us on consulting@paddocks.co.za with regards to your matter, and we can provide you with a no-obligation quote, so that we can assist you.
Kind regards,
Paddocks