Financing a Life Lease Home

A senior who went looking for affordable, life-long housing got more than she bargained for. Her life lease agreement ran out when she flinched at the financing. It could happen to almost anyone.

Why Life Leases Make Sense

Life leases are good value for the money. You can stay as long as you want, without worrying about mortgage payments, renewals or being evicted. Personal care or housekeeping services can usually be had, all-inclusive or for a fee. Best of all, life leases are no more expensive than a condo. 

Finding an Affordable Retirement Home

When “Kayla” (name changed to protect her identity) decided to retire from her bed and breakfast business, she listed her Meaford home for sale and made a deposit on a charming brick cottage at Maple Meadow Homes. The four- and six-plex townhouses sit on 16 acres of mature trees and wildflowers. Web promos emphasize their easy access to the Georgian Trail for hiking, cycling and cross-country skiing. Golfing, boating and fishing are nearby. It sounds like nirvana.

Buyer Understood Real Estate Business

Kayla had been a successful businesswoman and knew a bit about buying real estate and planning home renovations. “She was by no means a neophyte,” the Ontario Superior Court of Justice records show.

Making a Deposit for a Life Lease Unit

When Kayla discovered the Meaford life lease project, construction of the phase one townhouses was about to start. She was offered a 21-year, fixed term life lease plan. She signed up for the basic unit at $144,900 and was advised upgrades and associated taxes were extra. Her life lease reservation agreement came with a $5,000 deposit and the opportunity to move in when construction was complete. 

Hiring a Mortgage Broker

The former business owner expected her bed and breakfast to sell quickly so she could pay the balance owed when she signed the life lease occupancy agreement. Kayla hired a mortgage consultant to find financing. The Bank of Montreal and Toronto-Dominion Bank both turned her down. Mortgage financing was, quite simply, not available for life lease homes. What some life lease purchasers had were personal loans, for up to 20 years, for a maximum of 65 per cent of the purchase price. 

What to Do If Your Mortgage Stalls

Kayla carried on and made the mistake that would cost her and Maple Meadows Home financial and legal grief. Talking to her sales representative, she revealed she had hit a roadblock finding mortgage financing. He offered to return her $5,000 deposit. That would relieve her of liability for the 25% deposit the occupancy agreement required. She declined. She was sure her Meaford house would sell in time to close the transaction.

Remortgaging Your Home Before it Sells 

So it was that, a month later, Kayla agreed to sign a life lease occupancy agreement. She gave Maple Meadow Homes a $31,225 deposit and committed to pay the balance within two months. She had gotten the money by placing a second mortgage on her Meaford home.

Customizing Your Life Lease Home  

Kayla was a decorator at heart and upgrading her new home was exciting. She ordered custom made kitchen cupboards, countertops and fireplace, planned a dining island and finished the basement. She reconfigured the bedroom and main bath. Closets were deleted, storage added and a second bath installed. By the time she was done, the fifty-something business whiz had created a home only the owner could love.

When Financing Falls Through

Kayla now had a custom home and no mortgage loan. Adding another $10,000 to her debt, she negotiated a five-week extension to take possession. The extension was timed to coincide with the closing date for the sale of her bed and breakfast. Duly, Maple Meadow Homes sent her an adjusted statement that included the custom upgrades and taxes. She now owed $126,535.53, above and beyond her $36,225 deposits.

Custom Changes Tip the Balance

The bill was the domino that set the court action in motion. Kayla had only made $33,018.50 from the sale of her home and her broker had been unable to find a mortgage. Maple Meadow Homes terminated her lease, as the occupancy agreement gave them the right. They kept the deposits and charged her GST.

Extending a Life Lease Agreement

Again, Kayla persisted. She pressed her mortgage consultant to find financing. The broker reassured Maple Meadow Homes a mortgage wasn’t far off. The developer had both Kayla’s deposits and a custom unit unsuited to older lease holders and difficult to resell. Again, they agreed to a new closing date six weeks away.

Breaking a Life Lease Contract

It was too little, too late. With no financing in place, Kayla and Maple Meadow Homes met in court. The judge found Kayla had committed to buying a unit she couldn’t afford. The lost deposits were reasonable compensation for the delays and being left with a unit so unique that 18 months later it still hadn’t sold. Maple Meadow Homes had little hope of recovering their development costs or a profit. Kayla, who thought a life lease was her retirement dream, was out two homes and legal costs. 

Get Legal Advice on Buying a Life Lease

Axess Law Ontario real estate lawyers can advise you on your obligations and liabilities when you sign a life lease reservation agreement. Make an online video call from anywhere in Ontario, 7 days a week. Book an appointment by dialing toll-free to 1-877-552-9377 or 647-479-0118 in Toronto or use our online booking form. In person meetings are available at our Toronto, Scarborough, Vaughan, Etobicoke, Ottawa, Mississauga Winston Churchill or Mississauga Heartland law offices. 

Click here to learn more about Axess Law’s real estate law services.

Photo by Michel Müller|Pixabay.

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