Fixed levies for life
2008-11-20
THE lifestyle retirement village Vredezicht, developed by Pieter Smith Property Group’s (PSPG) in Wellington, will have a fixed levy for life to give buyers peace of mind in an uncertain financial climate. Brett Levine of PSPG’s marketing division says a major worry for many people considering moving into a retirement village is whether they will be able to afford future levies driven up by inflation, which will outstrip increases in their monthly pensions. “PSPG has therefore adopted a proven financial model to give buyers on a fixed income the assurance that they will have a roof over their heads for the rest of their lives. They will never have to pay a cent for the exterior maintenance, repainting or refurbishing of their homes or the common areas. “They will also receive a discount on the cost of health care for the duration of their stay at Vredezicht,” he says. In the first phase of development at the Wellington lifestyle estate, the monthly levy or service fee for nominated occupants of each unit will be fixed at R1 850 plus VAT. “This means that someone aged 55 years old could live in the village for 30 years, and at the age of 85 would still be paying R1 850 per month - the equivalent of about R300 in today’s money,” he says. In each subsequent phase or when a unit is resold, the fee will be fixed for the new purchaser at a progressively higher amount, relative to increases in costs caused by inflation,” explains Levine. The fixed service fee will cover insurance of all buildings; 24-hour security; rates and taxes in respect of the common property (not those relating to individual properties); common water and electricity charges; maintenance of gardens; provision of administrative staff to manage the village; management of the accounts; reception facilities; nursing assistance with dressings, medication, injections and a transport service for residents. Levine explains that the operating company established to run the village will meet any shortfall between Vredezicht’s income and expenditure each month. To recoup the shortfall and replenish the funds needed to keep the fixed service fee system going, about 30% of the profit from the resale of each unit will be paid to the company. Vredezicht will be managed as a business, and not left to be run by an elected body corporate, to ensure greater accountability. He points out that while developers often leave with no further involvement after a retirement complex is built and sold, PSPG CEO Pieter Smith’s interest in Vredezicht will continue as he has a 50% shareholding in the operating company that will own and maintain the health care centre and assisted living suites. Nick Baines, Smith’s partner in the venture, has been involved in the management and operation of retirement villages for 20 years, and helped to pioneer the concept of fixed service fees. The business model has been adapted at Vredezicht to allow people under the age of 55 – the mandatory minimum age for residents - to invest in the development, Levine says. “Younger buyers can put in a tenant of the required age, and charge a rental and levy as though it were an ordinary property investment. Their levy will be fixed at the prevailing rate when they move into the development.” Set around a lake and with views over the valley, hills and surrounding mountains, the development will include a meadow with over two kilometres of meandering walking trails. There will be 280 units from R495 000. A clubhouse will also be built where residents can socialise, watch movies and sport, and attend functions. Facilities will include a bar, a restaurant with deck overlooking the lake, a library as well as a salon and a gym.
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