How The Life Lease Strategy Works
In a life-lease project, an individual or couple acquires the life lease through a single upfront payment called the entrance fee. In addition, they are responsible for paying a monthly common fee towards the management and upkeep of the property and a monthly rent amount if the entrance fee is less than the retail value of acquiring the suite.
Life-lease residents are neither owners nor renters. They have a leasehold interest in their accommodation, which is defined in a contract, and giving them the “life-time” right to occupy their suite and to use various common areas and facilities. When a life-lease occupant moves out or passes away, the tenancy generally reverts back to the sponsoring organization. The occupants or their heirs receive the amount redeemable at the end of the lease. The sponsor then resells the rights to the unit to another individual or couple meeting the age requirements. In addition, some non profit life-lease sponsors may give preference to a community constituency.
There are various types of life leases. They are differentiated mostly by how the redemption value of the initial payment is determined. Different approaches will be more suitable to different seniors, depending upon such factors as their life expectancy, their equity and their concern about protecting or enhancing that equity. Similarly, different approaches will be preferred by different providers depending upon their objectives.
Heritage Life – Retirement Living offers both a Guaranteed Buy Back Option and an Equity Based Option both explained elsewhere in this information package.