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Canadians may be intrigued by life lease arrangements, but they are often puzzled by this "neither fish nor fowl" tenure option for a number of reasons.

Although life lease is not a new concept, it's relatively new to Canadians. While the mature consumers these housing projects target are attracted by below-market pricing and affiliations with nonprofit development sponsors such as the Royal Canadian Legion, consumers are confused by the "neither owner nor tenant" status associated with life lease. Sometimes incorrect comparisons to condominiums fuel confusion.

Unlike condominium arrangements, life lease residents are not owners of their unit. Instead, they purchase the "right to occupy" a specific unit -- anything from a suite to a bungalow -- subject to eligibility criteria set by the sponsoring organization.

Residents are not merely tenants. The life lease agreement gives them security of tenure that goes well beyond renting, a popular feature with mature residents.

Interestingly, Canada's life lease projects usually discriminate in favour of those +55 or older. Some life lease facilities cater to those who need a degree of assistance, such as meal preparation, housekeeping or personal care services, to remain independent and in their own home. However, a "life-lease" label does not automatically mean residents can live there for the rest of their lives or age in place, that is, stay in their home instead of moving into an institution.

If you are considering life lease for yourself or a relative, read the rules and regulations carefully to find out exactly what conditions might trigger an eviction. Since eligibility is usually subject to conditions which include a specific level of personal independence, a loss of mobility, a decrease in cognitive ability or the onset of serious illness may lead management to request that a resident move out.

Like snowflakes and finger prints, no two are alike. To add to the confusion over life lease, each arrangement -- whether a renovation or new construction -- is unique. Each gives residents and the sponsor a distinct set of rights and responsibilities. Therefore, every life lease arrangement must be thoroughly investigated to discover the specific rights and responsibilities of residents and management.

Each sponsoring organization also brings distinctive elements to the life lease it develops. The sponsor owns the life lease facility, therefore, the organization's solvency, management acumen and community record will have a dramatic impact on quality of life during the decades of residency ahead. To ensure a secure future, many consider it prudent to carry out due diligence on the sponsor, even if it is a nonprofit group, ethnic association or religious institution.

Residents may provide input through an advisory committee, but they usually have little or no say in the actual running of the life lease. The sponsoring group, which may work through a contracted management team, charges residents a monthly fee to maintain the facility. Personal and support services may be covered in this charge or may be offered separately to interested residents.

The financial arrangements also differ from one life lease project to another. When the resident wants to move or dies, treatment of the initial lump-sum investment may vary from complete retention by the sponsoring organization to the sponsor buying back the occupancy-right at the original price or including some or all of the appreciation in market value, to a sale on the open real estate market.

Since property rights are a provincial concern under the Canadian Constitution, different life lease interpretations exist across the country. For instance, the growing popularity of life lease prompted Manitoba to enact a law on December 1, 1999 to protect consumers by classifying this tenure as a variation on rental tenancy while Ontario continues to deliberate life lease "ownership" and legislation.

Don't be surprised if life lease arrangements seem puzzling at first. However, before you sign an agreement, aim to eliminate any and all confusion. Ask a lot of questions and get the details in writing. For instance,

  • What is the non-profit or for-profit sponsoring group's track record and how are they guaranteeing the long-term security of the project?
  • If you sell, do you get your initial investment back or receive market value for your unit?
  • What handling fees or commissions will be deducted from this amount?
  • What rights will you have as a resident and which of the rights you held as a home owner will you relinquish?
  • What do your legal counsel and tax professional say?
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