The Life Lease Solution
It used to be when you wanted to move out of your house and do away with the chores like cutting grass or shovelling snow you had two choices. Rent an apartment or buy a condo. Now there is a relatively new option- life lease.
Most people are familiar with what renting or buying entails but are not so familiar with the concept of a life lease. A life lease is when you enter into an agreement that gives you the legal right to occupy a unit. It is a type of agreement that is between renting and owning a unit. People who enter into life lease arrangements are neither tenants nor owners.
Residents buy a life lease or leasehold interest in their accommodations, giving them a right to occupy the unit and use all the communal amenities, such as dining rooms, games rooms and lounges. Residents also pay a small monthly occupancy fee depending on the size of the unit.
Typically when residents leave a unit, they are refunded the original amount of their deposit subject to the terms of their lease.
As with buying or renting, there are advantages and disadvantages to entering into a life lease. While there are many, the three main advantages to a life lease are affordability, speed and safety.
A life lease can offer more affordable accommodation, particularly for seniors, than owning your own home. After paying your deposit, residents typically pay monthly fees that can cover everything from electricity, taxes, heating and the use of building common areas.
When entering into a life lease agreement, check carefully to see what is and isn’t covered by the monthly fees. Some agreements cover virtually everything in the monthly fees while others cover much less.
With a life lease when you decide to move out, typically your initial deposit is refunded to you within 90 days depending on the conditions of your lease. You do not have to wait for your unit to sell, which can take sometimes years to happen. You have access to your money almost immediately. This can be a real benefit to seniors who can no longer live independently and suddenly find they need an increased level of care.
When you move out a resident does not have to deal with real estate agents, lawyers and all the fees and costs associated with them. A resident is able to leave, cheque in hand without all the hassles and frustrations of selling. If a resident passes on, the money goes to their estate, saving their relatives time and energy when they are often grieving.
A life lease offers residents safety of their initial deposit. They do not have to worry about rising rents nor falling real estate prices. Residents of life lease, unlike condo owners, do not have worry about unexpected cash calls due to unforeseen expenses to the building. This can sometimes amount to tens of thousands of dollars over multiple years and make your unit difficult to sell.
Another advantage to life lease arrangements is less hassle. There are no condo boards to join or monitor, no meetings to attend. Better still, unlike condo owners, life lease residents won’t be surprised by huge special levies for repairs that can effectively make their unit unsellable.
Under a life lease arrangement, building management and maintenance is someone else's responsibility. At any time you are not satisfied with the management, your neighbours, maintenance or even where they put the coffee pot in the common room, give your notice, take your money and move.
A disadvantage to a life lease is that while you are protected from falling real estate prices, you do not benefit if real estate prices increase. All you get back is your deposit when you move out.
Another disadvantage is you have limited input in decisions affecting the building. For example, if you think the hallway carpet in your hallway should be lime green, it is not something you or your neighbours get to decide.
Not all life leases are the same and can vary. As with any legal agreement, it is a good idea to take the lease to a lawyer and have them go over the agreement and explain any parts that are not clear before signing.
All in all, a life lease offers many advantages and is a great third option for people who don’t want to rent or buy. It may be the solution you are looking for.