What is the difference between ownership rights in life rights versus conventional ownership?
Different property rights are recognised and constitutionally protected under South African law including “conventional ownership” and “life rights”.
The common law description of ownership is a complete, real right which gives to that property owner the complete and absolute entitlement to that property (notwithstanding that said real right can be limited by the law, by limited real rights or by creditor’s rights). As per the case, Gien v Gien 1779 (1), “ownership is the most complete real right that a person can have with regard to a thing” (my emphasis) as translated from Afrikaans to English by van der Walt and Pienaar in “Introduction to the Law of Property”.
A life right is a housing interest that is alienated to a retired person by way of a written and signed contract in terms of the Housing Development Schemes for Retired Persons Act, 65 of 1988 (“the Act”). A life right arises contractually in terms of which the life right holder has a right to occupy a property until their death or the death of a specified person (the life right holder’s spouse, for example). In other words, the life right holder purchases a preferential, lifelong right of occupation of the property. A life right confers upon the holder the same rights as a registered lease. This right of occupation should be endorsed against the title deed of the property at the relevant Deeds Office.
Whilst ownership of a property can arise in several ways for example, by way of a sale and purchase agreement or by way of inheritance, ownership of property is vested in the owner through the execution and registration of the owner’s name on the title deed of the property in the deeds registry by the registrar as contemplated in Deeds Registries Act, 47 of 1937.
As such, and from the outset, it is evident that the main difference between conventional ownership and life rights is that conventional ownership is the “most complete” real right that an owner has to its property, whereas a life right is a limited real right of a third party (“the life right holder”) in the property owned by another. In other words, the life right holder has a direct and recognised entitlement in respect of the property but ultimately is not the owner of the property.
As mentioned, a life right arises by way of a signed and written contract. This signed and written contract must meet the requisite formalities as prescribed in section 4 of the Act. This contract usually stipulates that the life right holder has a right to occupy a property until their death or the death of a specified person (a spouse, for example).
It is clear from the outset then that life rights are different to conventional ownership in that, an owner has real right to the property with the enjoyment of a full spectrum of rights in respect of that ownership (subject of course to the boundaries of the law, real limited rights and creditors rights), whereas a life right holder enjoys a housing interest in a property in accordance with the terms and conditions of that life right contract.
Conventional ownership (in sectional title schemes) and life rights are similar in that often the owner and life right holder will have to contribute (usually by the payment of a monthly levy) for the control, management and administration of the housing development scheme and all services concerned. In the case of a lease, usually the owner of the property will pay the monthly levy, but in the case of a life right, and depending on the terms and conditions of the life right contract, the life right holder will be liable to pay this levy.
Subject to the boundaries of the law, limited real rights and creditors rights, an owner can transfer their property to another person whereas life rights are not commonly transferable.
In conventional ownership, a property can be bequeathed to another in terms of the law of succession whereas, when the life right holder passes away (and on the assumption that the life right is not linked to the life of another person) then, and depending on the terms and conditions of the life right contract, the consideration of the housing interest may be conferred on a nominated beneficiary. In some cases, the contract may stipulate that the beneficiary may enjoy a percentage of the profits made by the owner on the resale.
Conventional ownership versus life right cheat sheet:
|Limited Real Right arising from a written and signed contract and in terms of the Housing Development Schemes for Retired Persons Act
|Registered as owner on the title deed in the Deeds Office
|Housing interest can be endorsed on the title deed
Ownership can be transferred to another person (subject to law, limited real rights and creditors rights).
As an aside, a good example of restrictions on an owner’s right to alienate their property as a result of the limited real rights of life right holders is traversed in Flower Foundation Pretoria Homes for the Aged NPC v Registrar of Deeds, Pretoria and Others (942/2020)  ZASCA 8; 2022 (6) SA 99 (SCA) (20 January 2022) which deals with the interpretation of S4B of the Act. It was confirmed that a property owner cannot alienate the property on which life rights are registered without 75% consent of the holders of rights of occupation.
|Housing interest cannot be transferred to another person
|Rights to the property is the most complete real right (subject to law, limited real rights and creditors rights)
|Rights to property is a preferential right to occupation and largely governed by the housing interest contract and the Act.
|All expenses relating to the property are ultimately for the owners’ account.
|Life rights holders may be required to pay levies and expenses as contemplated in the life right contract.
|After the death of the owner, normal rules of law of succession will proceed. Property may be bequeathed to a nominated beneficiary in terms of which the nominated beneficiary can take ownership of the property.
|After the death of the life right holder, and depending on the specific terms and conditions of the life right contract, the purchase price of the property may be received by a nominated beneficiary.