Definition of Life Lease Occupancy Agreement
A life lease is a residential lease in which the tenant pays an entrance fee and monthly fees in exchange for exclusive use of a unit for her life, a long period of time or indefinitely, according to legal website USLegal.com. Life leases are used most often in retirement communities sponsored by non-profit organizations.
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Contracts Vary
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Life leases vary with the development with which they are associated. Some run the length of the tenant's life. After the tenant's death, the development sells another life lease on the unit. Others run in perpetuity; the tenant's heirs take over the lease or can sell it back to the development or on the open market. Some run for a specified period of time expected to mirror life expectancy. At the end of some leases the tenants or heirs get back some to all of their entrance fees. In some, heirs share in appreciation of the unit. Some contracts allow the tenant to choose among several entrance fee options. The associated monthly fee is less for those who pay larger entrance fees and more for those who pay lower entrance fees. Life leases may include services such as meals and activities.
Benefits
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A life lease ensures you will have a home during your retirement years without having to personally deal with maintenance issues associated with owning a home. Communities that employ life leases usually maintain rules that limit occupancy to similar age groups to enhance shared values and lifestyle preferences. Shared amenities such as lounges, pools and community rooms offer opportunities for activities and social interaction. Some life lease facilities are associated with residential care facilities and home health services as older occupants transition into phases of life requiring more outside help.
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Challenges
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Like timeshares, whose monthly maintenance fees can mushroom far beyond the initial payments, monthly payments associated with life leases may not have ceilings. Especially if your entrance fee is low, your monthly fees may exceed your budget in later years. If your life lease does not provide for equity sharing or return of entrance fee when you leave, you may have trouble finding a new facility you can afford. Unlike home ownership, a life lease may not allow other family members to move in with you if they were not a part of the original lease. Not all pets may be allowed. You may not be allowed to remodel the unit as extensively as you might remodel a home you own outright.
Finding the Right Contract
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The key to a life lease is the contract itself. Read it thoroughly, with the help of family members and a financial planner or attorney, to understand if the contract makes the most of your retirement savings and income as well as your personal preferences for retirement living. Although the development you are considering may not want to make changes to the agreement, there may be other developments with contracts that more closely match your needs.
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References
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