What is a life lease?
Simply stated, purchasing a life lease gives the holder of that lease the right to a property as long as it is in effect, which is typically for the life of the holder. Normally a life lease has eligibility requirements, such as:
- Age: typically older adults, who must be between 50 and 65, or higher
- Independence: the owner must be able to live independently.
Primarily for older adults who are able to live independently, these are an alternative housing option to living in a retirement home or long-term care facility. A life lease allows an individual or individuals, typically spouses, to live on their own in a home, independently and with the freedom that comes with living on ones own.
They have increased in popularity over the years after beginning in Canada in the late 1970s. There are now over 130 projects in operation in Ontario, and over 300 of these projects Canada wide.
Life lease housing is usually a self-contained community, and can be houses or condominium style properties, most often developed and operated by non-profit or charitable organizations, referred to as “sponsors.” The purchaser will sing an agreement with the sponsor outlining the terms and conditions of the agreement. Owners will also pay a monthly fee for maintenance and property taxes, in addition to what they paid to purchase the life lease. This maintenance fee is used by the sponsor to maintain the community, provide social and recreations services and programs, and sometimes even meal services and other forms of care.
Maintenance may include snow removal, lawn care, home repairs and maintenance, laundry services, transportation services as well as other health care related services. All of these different services are dependent on the sponsor and makes it very important for someone considering the purchase of a life lease to do an extensive amount of research before making a decision.
Are you interested in becoming a mortgage agent or life insurance agent? If so, visit us at remic.ca and learn how you can enjoy a financially and personally rewarding career!
You own the right to occupy the property, not the property itself.
The purchaser isn’t buying the house, the land or anything else other than the right to occupy the property as long as the life lease is in force, which is typically the life of the owner. While the owner doesn’t own the property, they also don’t have to worry about market downturns and the other pitfalls that can accompany home ownership and that might be difficult for them to handle. If the owner passes away, and the life lease is inherited, the beneficiary may apply to live in the property, however the beneficiary must qualify, primarily by being of a minimum age.
Life leases are not overseen by any regulatory body, so it’s very important for anyone considering purchasing one to do their own due diligence. Most projects in Ontario are owned and operated by non-profits and charities, including, but not limited to:
- service clubs
- faith-based organizations
- cultural organizations
- housing providers, and
- seniors’ organizations
Life leases are binding contracts, often referred to as either a:
- Life lease contract
- Life equity contract or agreement
- Life lease occupancy contract or agreement, or
- Right to occupy contract or agreement
Because the agreement is legally binding it’s important to have it reviewed by an experienced lawyer.
If an owner becomes unable to live independently, to the point of undue hardship on the sponsor, the sponsor typically has the right, on 30 days’ notice, to end the life lease. Most sponsors will work with the owner, however, to find another solution, such as long term care, etc.
Life leases: Conclusion
Life leases can be a fantastic way for an older adult or adults to live independently, less expensively than in their own house, and in a community focused on their specific needs and circumstances. There are, of course, many considerations to make, but at the end of the day this is another way to enjoy retirement living. Going into a life lease with eyes wide open and fully informed is the best way to go. Know the facts, and make your own best decision.
For even more information I suggest going to the province of Ontario’s official website at https://www.ontario.ca/document/life-lease-housing