Many people have often heard about a life lease community, however they don’t often know how they work and why people would choose a life lease community over a condo or traditional apartment. A life lease community is a rental arrangement where a tenant makes a cash contribution called an entrance fee, these fees can range from as low as $10,000 to $200,000; when the tenancy ends the cash contribution is returned to the tenant (or to the estate in the event of death).
The entrance fee is held in trust by a trust company, as the project reaches full occupancy; a Landlord can use the equity to fund construction. The Landlord much keep a certain number of deposits with the trust company as a float to repay tenants moving out in the future in case a new tenant cannot be immediately found to take the vacant unit.
While the tenant has put equity into the community, they still pay a monthly rental amount that is less than it would be in a traditional rental community. This monthly rent covers the maintenance costs, property taxes, water and other common area costs for the community.
In times of property appreciation, one might ask why someone wouldn’t buy a condo instead of choosing a life lease community. The most common answer to this is while life lease holders do not gain equity in times of property appreciation, they do not have to worry about selling their unit in a down market and can be free and clear of their life lease commitment with 90 days’notice, rather than risking selling their condo in a down market should their lifestyle or health change.
What are some other benefits of Life Lease Communities?
- Tenants find they are part of a community of likeminded people with common interests and of similar age and values
- The entrance fee generally allows for tenants who care for the property and take pride in the appearance of their community
- Although the entrance fee is not earning interest, the contribution itself helps by saving monthly rent as a portion of the equity required for the project is funded by the life lease holders.
Brandon’s newest life lease community is being built on the North Hill just east Grand Valley Church. The Summit will feature two 18 suite buildings with underground parking. For more information please visit www.vhproperties.ca.
Vionell Holdings Partnership (VHP) provides rental housing and property management for an array of residential and commercial customers, including Condominium Management. VHP currently has over 3,000 units under management in Manitoba.