The
Area A Seniors Housing Project Society is exploring the possibility
of using a life lease tenure option to raise capital to build
the Pender Harbour Abbeyfield House.
Disclaimer: The following information is provided
only for the purpose of describing how a life lease works is not
an offering for sale. It is acknowledged that such an offering
can only be made after filing a disclosure statement with the
BC Superintendent of Real Estate.
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What is
a life lease?
A life
lease is a legal agreement that permits purchasers to occupy a home for
life (or until they are no longer capable of living there) in exchange
for a lump sum payment and subsequent monthly payments to cover the ongoing
project management fees and maintenance and operating expenses. The major
difference between condominiums and life leases is that the title to life
lease units remains with the sponsoring organization, not with the occupant.
All life leases in BC are owned and operated by non-profit organizations.
Life
lease is a common form of tenure in all provinces west of Quebec.
Different Types of Life Leases
There are five different types of life leases but only two are common
in BC:
No Gain – outgoing residents or their estates get
back exactly the same amount as they paid when they moved in, less an
amount for refurbishing etc, and incoming residents pay the same initial
entrance fee. This model is often used by sponsors wanting to create and
maintain affordable seniors’ housing in their communities. In a
variation of the No Gain model, outgoing residents get back the same amount
they paid when they moved in, but units are resold to incoming residents
at market levels. If prices have increased, the Society uses the gain
to further the objectives of the Society; if prices have fallen, the Society
funds the redemption from other sources. This is a risky model for small
societies.
Market Value – units change hands throughout the
life of the building at whatever the market will bear. This is the model
almost universally used in Ontario but it is less common in BC. In two
cases in BC, units change hands for whatever the market will bear, and
outgoing residents and the life lease share any capital gain. The societies
use their share of the gain to buy units that are then rented at SAFER
levels to low income seniors.
Renter or Owner?
Life leases
are a cross between renting and owning. Although they do not have title
to their units in BC, life lease purchasers qualify for the Home Owner
grant. Life lease residents are not covered by the Residential Tenancy
Act, which does not apply to lease terms longer than 20 years.
Consumer
Protection
Manitoba
is the only province that has enacted life lease legislation. In BC, the
major piece of legislation of interest to sponsors of life leases is the
Real Estate Development Marketing Act (REDMA), which also governs the
development of condominiums and equity coops. Consumers are well protected
by the REDMA.
What
is the Point of a Life Lease?
There
are two major advantages of life lease compared to other forms of tenure.
The first is that it provides a way of generating the capital that is
needed to develop a residential project. The second is that it provides
an initial and ongoing role for the non-profit owner of the project.
On completion,
the Area A Seniors Housing Project directors will manage the operations
and maintenance of this facility.
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