South African Associations
of Retired Persons

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Retirement Villages

A quick look at some management issues and priorities

Management of Retirement complexes in an efficient financial manner isn’t an easy target to achieve. There is no governing body or even Association in the RSA that provides any sort of benchmark. These things do exist in other countries, however, although the comparison isn’t really possible because legislative differences make the aims of these bodies totally diverse.
There are a number of facets to the situation that can have an effect and which one should be aware of before even trying to look at a purchase because you must compare what is there with what your needs are now as well as looking into the future as far as you can.
These matters amongst many others are:

  • What is the ownership format (Life Right, Sectional Title, Individual Title or Share Block)?
  • What do the rules look like? (Constitution and House Rules)
  • How & by whom is the budget done?
    (a) Is the financial projection and control based on a long term view or only short term savings?
  • Have the members considered paying higher levies and building up an “improvement fund” over a fairly protracted period? (A good subject for a special meeting if they haven’t)
  • Is there a Frail Care Facility in the Village & what size is it bed wise? Is it big enough to cope, or too big and accepting outside patients to balance the budget?
    (a)Is there a medical service delivery menu for home care which is acceptable?
    (b)Is there any type of subsidy from the Trustees? (This costs in terms of levies)
  • Does the Village employ full-time staff or work on contractors coupled to a Service Level Agreement? The former can cost quite a bit more if not very carefully structured due to things like
    (a)Outstanding leave reserves and Sick Leave and maternity leave benefits.
    (b)Labour disputes are a potential problem area.
    (c)Productivity becomes a management and motivation issue – not a contractual requirement.
    (d)Training requirements in terms of legislative changes become a management responsibility.
    (e)Successor planning becomes a management issue and not a contractor’s problem.
    (f)A solid record keeping system is required and has to be managed.
  • When correctly done, sales “levies” paid back to a stabilization fund become a condition of ownership and disposal and not a rip-off. (Bear in mind a Trust never dies and the property may not change hands for generations, so in some instances, this reality may be seen as “unfair” by certain parties.) This can be a good way of ensuring the surviving residents have adequate reserves to cover more than just basic necessities.
These are just some of the questions one should ask and look at and a comparison with any “luxury” higher-priced development will in any event show what money can provide. At the end of the day it all revolves around the money available and the priorities upon which it will be spent. It is, therefore, a management and planning issue with consistent follow through that provides the solution.
The rule is to ask, ask, ask and get the answers in writing. Then a decision in terms of a personally weighed and approved strategy in conjunction with family, and a well-qualified financial advisor. Paul Rosenbrock paul@saarp.net