No need to give up the joys of living in your own home when you get older. You can sell that expensive house in the suburbs or uptown condo and move to a life lease unit. You’ll have more independence than in other seniors’ housing options, without the worries of a mortgage or yard to care for.
Leasing Your Home
Life leases are a downsizer’s dream. They look like condos or homes and, because they are a newer option, are usually in great condition. Imagine having a home with no kids or young people allowed, but plenty of space for family and friends to visit. Since religious or cultural groups often develop the projects, you could live in a community of seniors who share your beliefs, cultural values or language.
Having a Home for Life
If a life lease sounds a lot like a condo, that’s because it is. With one exception — you buy the right to live in your unit, not to own it. Just as the name implies, you lease your unit. Your name never appears on a property title. You are exempt from land transfer taxes and don’t have to qualify for a mortgage.
How Life Leases Work
Your life lease agreement gives you occupancy rights for “life”. That can mean until you pass on or sell or when the lease expires. In exchange, you make a lump sum payment of 20% to 30% of the unit’s value and monthly lease payments to the owner. Just like a strata fee, your monthly payments go towards the building’s upkeep and a reserve fund for capital improvements. You may also pay a security deposit in your unit is damaged or service fees for extra amenities.
Where Your ‘Purchase’ Price Goes
Buying a brand new life lease unit starts with the deposit. Non-profits or private operators choose the land and housing design and work with a developer to build the property. Your pre-lease deposit is used as equity to get the construction loan. You pay a share of the construction costs (called an entrance fee) when the building is ready to occupy. The non-profit owner may be left with a mortgage-free property or charge monthly rent to cover their financing costs.
You Get What You Pay For
Of course, some life leases are more luxe than others. Paying more could get you a swimming pool, chef-quality meals or organized excursions. Laundry, housekeeping or maintenance services like unplugging the sink may be available as part of the entrance fee or an extra charge.
Your Housing Responsibilities
So if you don’t own the unit, why are you paying property taxes? Because unlike a month-to-month tenant, you own the right to lease the unit for life. You buy your own appliances and are responsible for unit repairs, utilities, phone, cable or Internet and insuring your belongings. If the building needs a new roof, the cost comes from your monthly reserve fund contributions. Like a renter, you can be evicted if you bother other tenants. But otherwise, as long as you pay the monthly fees, you can stay for the life of the lease.
Managing a Life Lease
You manage your unit. The owner manages the operating budget for the building, for example, landscaping, snow removal and maintaining common areas. You may get a copy of the budget, but you won’t be involved in building decisions. Even if the building is a condo corporation, as many are, the board of directors is picked by the non-profit owner.
Buying Personal Care
Life lease holders often arrange and pay for their own personal care and housekeeping services or pay a service fee to the non-profit. It’s really the perfect choice for seniors who want to live independently. You can make your own decisions about how to manage your care. Unlike assisted living, as long as you don’t need long-term care, there are typically no restrictions on how long you can stay in your unit.
The Economics of Life Leases
Life leases can be good value for the money if you are looking for affordable, lifelong housing. You have the assurance of staying as long as you want, without worrying about mortgage payments, renewals or being evicted. GTA life leases are no more expensive than a condo in most cases. If flipping or maximizing your estate is the goal, you may want to look elsewhere.
What Happens When the Term Expires
That depends on your lease. Some leases give back part or the whole entrance fee when you leave or it expires. Others can be passed on to your spouse, if they are 62 or older and independent, or your estate. The agreement will state if it is:
- Zero balance – If you get no money back from the entrance fee and your estate doesn’t benefit.
- Declining balance – The amount you get back declines over time, to zero when the lease expires. The unit reverts to the sponsor, not your estate, when you die.
- Fixed value or no gain – You get the full entrance fee back and the owner gets your unit in return. As the name suggests, increases in the value of your unit aren’t passed on.
- Price index – The sponsor buys back your unit over the life of the lease, based on increases in the consumer price index. You won’t lose money, but you also won’t make money if your unit’s value increases.
- Market value – You get full market value, minus fees for upgrades or marketing it. Your estate pays the monthly fees until the unit sells, but get the profits after expenses.
Selling or Transferring a Life Lease
The sponsor often has rights of first refusal if you sell. Since they own the unit, they are responsible for transferring it to the new lease holder. Instead of an agreement of purchase and sale, you assign the lease back to the sponsor and they sign a new lease with the buyer. Check your agreement to see if a transfer fee applies.
Since life leases aren’t protected by the Ontario Landlord and Tenant Board, mediation or going to court are your options in a serious dispute. Your rights are protected by common and contract law, human rights law and local bylaws. Your sponsor may have a residents’ committee or you could appeal to the board, hire a mediator or talk to a lawyer about taking legal action.
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 an agreement of sale and purchase for a life lease property. 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.
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