I have purchased a "life right" flat in ...

Asked by Gary on 26-02-2020 18:29:29
Question posted in the General Law category relating to Western Cape
Question value: R 300.00

I have purchased a "life right" flat in a retirement complex registered as a community scheme for retired persons. In terms of the contract I have signed with them in event of my vacating the flat for any reason whatsoever I get only the capital back. In terms of my agreement with them if I can no longer afford to pay the monthly levy it would be deferred against the initial capital outlay.

I have now reached the stage where I can no longer afford to pay the levy. The organisation running the establishment has agreed to defer the monthly levy against my initial capital outlay but will charge interest calculated monthly on the levy outstanding at the rate of prime plus 1% till my capital is depleted. Is this legal in view of the fact they have had the use of my money free of interest for 4 years and 9 months.

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Answer to the Question

Posted by Att. Patrick on 26-02-2020 18:46:17

Hi there and thank you for your question,

I am a practicing attorney based in South Africa and I will assist you with your question. Please feel free to ask as many follow up questions in order to clarify your question. If you have a new question, you must please open a new thread.

It really does depend on the terms of the agreement. 

If the agreement states that if you can't afford the levies, then the levy will be deferred against the initial capital outlet, then they can't charge you interest.

If however the agreement states that if you can't afford the levies, then the levy PLUS INTEREST will be deferred against the initial capital outlet, then they can charge you interest.

The fact that they have had the use of your money free of interest for 4 years and 9 months doesn't come into the equation, because that is what you agreed to, and our Courts bend over backwards to give effect to contracts entered into between 2 people.

If there is a part of the answer which you need more advice on, or clarity please continue in this same thread instead of opening a new question.

Att. Patrick

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Information provided by client

The issue of interest on outstanding levies is not addressed in the contract but however the pricing schedule for 2015 is referred to in our contract. In terms of this schedule we paid R897 000.00 for our "life right.' The pricing schedule specifies that should the purchaser no longer be able to service the levies the capital would be absorbed over 9.5 years. The interest of prime plus 1% that they intend charging would result in the capital being absorbed over a far shorter period. The contents of the deferment letter is inconsistent with the terms of the contract.

I have signed a copy of the letter to acknowledge the contents and that I have read and understood the contents thereof but I have not signed that I agree to the contents thereof. The organisation insists that the letter is an agreement between them and myself despite the fact that the letter is dated 16th October 2019 while we signed the contract on 24th May 2015. Could the organisation cancel the letter of deferment. The deferment letter in no way refers to the contract of 2015.

Answer to the Question

Posted by Att. Patrick on 27-02-2020 06:49:14

Then what you need to do is challenge their calculations, not because of interest or whatever, but rather because it was specifically agreed that the capital would be absorbed over 9.5 years.

No, the letter is NOT an agreement unless you accepted the terms thereof. 

One can sign a letter to acknowledge receipt, but that is again different to agreeing to the contents.

No, the organisation can't cancel the deferment because it is set out in your original contract.

It sounds to me as if they are trying their best to bully you. Do not let them. You have a contract with them. You need to tell them that they must stick to the wording of that contract. 

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