Life-Lease Retirement Communities
Owning a stake in your community - and future
In recent years, these communities have become increasingly popular, since they meet the housing and support service challenges faced by the country's aging population. With life lease retirement communities being relatively new in the province of Ontario it is only natural that many seniors and their families have questions about this option.
Life lease retirement communities
There are a variety of life lease options available across Canada. Manitoba has its own provincial life lease model, regulated under its own Life Leases Act, instituted in 1999. As of 2007, life lease is a model only seen west of the province of Quebec, according to the Canadian Mortgage Housing Corporation (CMHC).
The phrase "life lease" means that once an initial lump sum is paid out as a deposit, there is very little change in rates, and the purchaser occupies the home for life, with subsequent monthly payments covering management fees, maintenance and other operating expenses. In essence, this is distinct from term leases, such as one year agreements, etc.
What makes life lease homes a popular place for seniors to move to?
In the past, life lease communities were age-restricted to people at least 55 or older, but this kind of discrimination is not legally feasible. In effect, though, these communities are intended for those 50 and older, and these communities are created where residents enjoy their retirement years surrounded by neighbours with similar tastes, needs, values, lifestyles and interests. In fact, the life-lease concept is more about creating a community than it is about building housing. As residents age, this community becomes an integral ingredient for a happy and healthy lifestyle, bringing a sense of belonging and peace of mind, as residents tend to look out for one another. Residents may also take an active role in managing the property and organizing activities and programs. This provides a sense of purpose that is not possible for someone isolated in a single family home or condominium.
- The majority of life-lease communities are developed and owned by non-profit organizations, charitable groups, service clubs or religious institutions.
- When a resident leaves or passes away, the lease usually can be sold to someone on the sponsor's waiting list or on the open market, or transferred back to the development's sponsoring organization. Some life-lease agreements permit the interest to be passed to the resident's family through their will. The estate can then decide whether to sell this interest or retain it for their retirement.
- Most Ontario projects operate under a "market value" life-lease model that means the seller will earn equity when they transfer their interest, similar to selling a private home.
- Other life-lease models, such as fixed value or declining value, vary depending on the terms of the initial lump-sum payment and the resident's entitlement to the increased equity at the end of the lease; lower initial purchase costs sometimes linked with a lower percentage share of the equity when lease is transferred or sold.
- The sponsoring organization typically applies a percentage administration fee on sale and transfers, typically ranging from three to 10 per cent.
What amenities are usually available in life-lease communities?
Life-lease projects have extensive amenity areas to encourage the community aspect, like workshops, hobby and craft rooms, libraries, fitness centres and raised hobby gardens. Building designs and programming usually allow for future support services to help aging residents remain independent for as long as possible. Quality of life is enhanced through on-site wellness centres, dining rooms, housekeeping and cleaning services, personal care and transportation, among a number of services offered. With a minimal level of such services, 65 per cent of residents can enjoy their later years without moving to a retirement home or nursing facility.
Homes listed on this page may not all be strictly life lease retirement homes; some may be leased while others may be for profit. Consult each retirement residence for details, and fully research life lease before making any commitments.
What do life-lease retirement communities cost?
- Varies widely, depending on the community and its amenities
- Generally more affordable than purchasing a similar unit in the traditional housing market due to the not-for-profit orientation of the sponsoring organizations
- Minimum 25 per cent deposit usually required at start of construction for most projects; money is needed to build the development, so the deposit is not held in trust, as it would be for a condominium
How should a life-lease community be assessed?
- What do I know about the sponsoring organization? Have I considered its strengths, credibility and reputation?
- Does the sponsor have a proven track record?
- How secure is the project in the long term?
- What happens to my security deposit if construction is not completed?
- What is the redemption formula and is my investment protected?
- Does the development have a formal dispute mechanism in place?
- What is the philosophy of the retirement community? Do I agree with it?
- How informative and helpful is the sponsoring organization in aiding my understanding of the specific details of this particular life-lease option?
- If I sell, do I get back my initial investment or a percentage of it, or do I receive market value for the unit?
- What administration fees or commissions come due when I sell or transfer my unit?
- What amenities and supports does the community offer? Does it match my wants and needs?
- Do I understand the rights and responsibilities I will have as a resident?
- Do I fully understand exactly what I am buying and all the terms of resale?
- To what extent can I be accommodated in the community if my physical or mental health fails?
- What do my lawyer and financial adviser think about the deal?
A checklist of ‘absolute musts’ when researching life-lease homes
- Do your research on all aspects of life lease.
- Talk to a lawyer and a financial adviser, especially if you are considering placing the life-lease in the names of your family
- Ask lots of questions and make sure you understand all the details of the specific life-lease option you are considering
- Get answers in writing
- Consider the initial lump-sum cost and whether it will affect your entitlement to retain the unit's full market value appreciation at the end of the lease
Will my life lease monthly rates really stay the same?
Life lease rates are often set by a non-profit who (by definition) has no motivation to raise rents for profit. However, monthly operating costs may go up due to increases in utility rates or civic property taxes. A non-profit life lease, though, is generally considered one of the most stable rental structures on the market.
A worst case scenario projected for a life lease in the province of Manitoba is an inflationary increase of 5% per year. Life lease focuses on operating costs only, so the monthly rate you pay is much lower than you would for renting, and an annual percentage increase still comes out much lower. A projected typical rate seen in Manitoba is $550 per month, where operating costs might (in a worst case scenario) rise to just over $635 per month over ten years. This is easily coverable through most seniors' OAS and CPP benefits. The same rental rate can increase by a total of 8% (or even more) per year (again, in a worst case scenario) and end up at over $700 per month.
Talk to friends who live in a life-lease arrangement and learn from their experiences. As noted by the CMHC, "life lease projects raise a variety of consumer protection issues," and there are also a variety of legal issues faced by sponsors, lenders and others.
Some resources to consider and consult:
Questions about life lease in Manitoba