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Life lease is a unique housing option for mature adults and seniors. A life lease project provides an opportunity to purchase an interest in the project and to "share" in any appreciated value of the building and property. The market value life lease model, provides seniors with the potential to earn a return on investment similar to the equity growth in a private home, without the headaches and worries associated with the maintenance of private property. Life lease communities create a sense of security and well-being for residents. The sponsoring organization of a life lease project is typically a non-profit corporation or charitable institution. Actual ownership and title to the life lease development remains in the name of the sponsoring organization which provides property management and maintenance services to ensure long-term benefits for all residents. Life lease residents are not tenants. Conversely, life lease residents are not owners. Life lease residents own a leasehold interest in the development through a contract with the sponsoring organization of the development. Life lease residents through their leasehold interest in the development have certain rights and privileges including:
These rights are established to ensure that the development is reserved for the target population, (typically, people 55 years of age and older). Through their leasehold interest, residents are provided with either a specified or non-specified time frame. When a time frame is not specified, the lease terminates upon the death of the owner of the leasehold interest or transfers to the estate. The leasehold interest is granted to the resident according to criteria which is established by the sponsoring organization. A common criteria is age. For example, all residents must be at least 55 years of age. The rights provided by the leasehold interest are given in exchange for a lump sum prepayment. Each resident contributes only the funds necessary to construct the individual unit desired, as well as a proportionate sum for the development of the common areas. The resident under a life lease housing arrangement may also have the right to transfer the right to occupy to a future resident. To ensure the integrity of the residential complex, this right of transfer is subject to certain conditions established by the sponsoring organization. When a life lease resident wishes to transfer his or her leasehold interest, the sponsoring organization retains the first right of refusal to purchase the life lease interest. Funding for construction and operation of a life lease housing development comes from its residents. Residents desiring smaller and more modest accommodation pay less towards the construction and operation of the project than those who desire larger or more elaborate units. Because the sponsoring organization acts as the developer of the project and there is no profit margin built-in to the price; residential units can be offered at break-even cost. When construction is completed, residents contribute to the cost of maintenance in proportion to their respective shares in the project through a monthly occupancy fee. Depending on how the operating budget is structured, this monthly fee could include; maintenance and repair of facilities, common utilities, insurance, property taxes, replacement reserves for capital items, and administration costs. The success of the life lease housing community depends primarily on the credibility, resources and efforts of the sponsoring organization undertaking the development of the project. The project is managed by a Board of Directors, comprised of active community-minded people, and in some cases, members who intend to become future residents. This organizational structure ensures the residents' interests are looked after and the community that is created is successful. In a recent report, Canada Mortgage and Housing Corporartion (CMHC) praised this unique housing alternative, stating that the life lease approach has great potential for reducing costs. CMHC - has provided small grants to help groups with feasibility studies and other project development/administration costs. "In some cases, as well, we're insuring construction loans. Life-lease is one of the things we've looked at as innovative," says Bill Beatty, Manager, Multiple Underwriting with CMHC's Ontario Region. Canadian Property Management, VOL. 12 No. 4, July 1997 For more information see www.life-lease.com.
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