Dear David,
I have bought and sold a number of homes. The last home I sold was a townhouse with a life lease. There is not much information out there for the consumer, other than what they are told by the seller. I thought this would be a perfect fit for me, but if I knew then what I know now, it wouldn’t have been my choice. There are a few life lease complexes in the KW area, what can you share about them? – EYES WIDE OPEN
DEAR EYES: When you purchase a typical freehold home, you’re buying a house and the land it sits on. With a life lease, you’re buying the right to occupy a unit and use its common elements, but the associated land belongs to someone else. Although quite appealing to many retirees, there is no actual physical “ownership” in a life lease, which many people have a hard time wrapping their heads around. As a resident, the experience is similar to renting, except that buyers maintain equity in the property and can possibly sell their rights in the future if they wish. Many people think of life leases as condos, but life leases are not regulated under the Ontario Condominium Act and have no government oversight.
Life leases tend to be more affordable than comparable housing options, and the lease itself usually lasts for as long as you choose to be there. Buyers make an up-front lump sum payment to purchase the rights to their unit, and also pay a monthly fee for maintenance and operating costs. Buyers are often responsible for property taxes and repairs, and these expenses are quite often rolled into the monthly fee.
Life lease complexes can be operated by for-profit, non-profit or charitable organizations. Depending on the community, they usually include outdoor services like lawn care and snow shovelling. Some may provide extras such as meal preparation, transportation, housekeeping, or even personal care.
When it comes time to sell, a life lease may have several layers of resale restrictions. The sponsoring organization sometimes holds the option to buy the unit back, and may be entitled to limit membership to a select demographic (55+ for example). Unlike when you sell a freehold house or condo, the organization will likely have a lot of say in certain scenarios, and you may not be able to choose your own buyer. There is also some potential for sellers to experience delayed payouts if they have to wait for the organization to find a new resident before they get their proceeds. On the upside, the organization typically sets the selling price based on market value, which is good for themselves and the residents.
PRO TIP: When it comes to life leases, there are infinite variations. Many of these organizations are a great fit for retirees, but you’ve got to do your homework before making a commitment. Speak to other residents in the complex if you can, and make sure you are comfortable with the buying and selling process. Have your lawyer review your agreement and the costs associated with buying and selling, so when it comes time to sell, you are prepared. #Advice #AskDavid #TheNegotiator
David is a top-selling Broker in Kitchener-Waterloo Region. He works personally with you when selling or buying your home. Moving? Get it right. Ask David today! Call or text 519-577-1212.
