Life Leases: What In The World Are They?

If you or your loved ones are approaching retirement and have been investigating different housing options, chances are that you have come across the term Life Lease.

What are Life Leases?

In basic terms, a life lease is a form of prepaid rental housing.  The owner of a life lease purchases the right to occupy a unit and use the common facilities for as long as the lease remains in place. The length of the lease term could be for life or for a fixed number of years. Depending on the contract structure and jurisdiction, as we will learn later in the article, a life lease is a legal agreement that usually lies somewhere between renting and owning a residential premises.

Depending on the legislative environment, the occupant of a life lease unit may be referred to as the purchaser, lessee or tenant.  The developer or owner of the life lease units may be referred to as the sponsor, lessor or landlord. A life lease is not equivalent to the ownership of a condominium or strata unit even if the life lease project has been registered with a condominium or strata plan.

Typically, life lease projects are targeted at those over 55 and may also be targeted at specific ethnic or religious groups.

A life lease may, depending on the terms of the lease (see below) be sold, either to a third party or to the lessor. Construction of new life lease projects may be undertaken by for-profit or not-for-profit entities.  Where a for-profit entity develops a life lease project, ownership of the project is generally transferred to a not-for profit entity after completion.

Few jurisdictions have legislation covering life lease projects.  In most jurisdictions, the life lease is simply a contractual arrangement between the lessor (generally a not for profit entity) and the lessee.

Advantages of Life Leases

  • Most commonly provides accommodation for seniors in a community of seniors.  Amenities are generally geared to this target market.
  • May allow lessees to obtain “ownership” of a property at below market levels.  This can occur because land may be donated or sold to the sponsor at below market rates or the sponsor may not earn the usual developer’s profit on the project.  New construction may not always provide this opportunity as sponsors are often inexperienced and profits given up by a not for profit developer may be partially or wholly offset by increased consultant costs.
  • Can allow individuals on fixed incomes to tailor level of rents to their incomes.
  • Generally not subject to the will of a condominium or strata council.
  • Life leases may avoid land transfer tax in some jurisdictions where this applies.
  • Redemptions by, or sales back to, the lessor (which may have a waiting list) may reduce market risk.

Disadvantages of Life Leases

  • Units may not be freely marketable (e.g. lease may require units to be sold back to the lessor at predetermined prices).
  • Lease transfer restrictions (such as a requirement for new lessees to be “approved”) may depress resale prices.
  • Title is held by the lessor and registration of a lease on title may or may not be possible (in jurisdictions with land transfer tax, lease registration generally triggers tax payment).
  • New construction is generally not covered by the usual new home warranty program.  As such, deposits are often used to fund development costs and are uninsured (i.e. the lessee risks losing the deposit if the development is unsuccessful).
  • Lessee does not have input into operations through a condominium or strata council.
  • Lessee generally does not have registered title to his/her unit.
  • It may be difficult to obtain residential mortgage financing of a life lease unit.
  • Lessor may not have liquid assets to fund redemptions.
  • Lessees who wish to vacate may need to find their own substitute tenant.

The Life Lease Ownership Process

  • Applicable terms and conditions of life leases vary widely but the general features are similar.  Life leases should not be confused with ownership of a dwelling unit on leased land.
  • The lessee of a life lease unit pays a sum of money to the lessor.  The amount of money paid may be the full cost of the unit leased or it may be a lesser amount.  If the lessee pays the full cost of the unit, then (subject to the terms of the lease), the lessee will generally only pay a monthly maintenance fee (roughly equivalent to condominium or strata fees).  If the amount paid by the lessee is less than the full cost of the unit, the lessee will also pay a prorated rent (e.g. if the cost of a unit is $200,000 and the lessee pays $100,000 up front, his/her rental payment will be approximately equivalent to a payment on a $100,000 mortgage plus the monthly maintenance fee)
  • Most not for profit lessors of new life lease projects expect full payment in order to cover construction costs.
  • The lessee does not generally obtain title to the unit.  Some leases do not permit the registration of the lease but, where this is permitted, registration of the lease generally triggers the payment of land transfer tax.

Types of Life Leases

  • Zero balance lease/life estate: the purchaser pays in advance for the right to occupy a unit for the duration of his/her lifetime.  No redemption value exists (i.e. the lessee or the lessee’s estate cannot sell the leasehold interest).
  • Declining balance redemption value: the redemption value of the unit is fixed and reduces on a pro-rata basis over a fixed term until a redemption value of Zero Dollars is reached.  Generally, if the lessee moves or dies while there is a redemption value, the unit is returned to the lessor and the lessee (or estate) has a claim for the redemption value.
  • Fixed value: the redemption value is constant for the life of the lease.
  • Indexed redemption value: the redemption value is based on an initial fixed value with periodic indexing to an inflation-sensitive index.
  • Future value:  probably the most common type of life lease.  The lease may be sold at market value with the lessor usually taking an administration fee to facilitate transfer of the unit.  The tenant may bear the market risk if the value of the life lease unit has fallen.

Who Develops Life Lease Properties?

  • Life lease project sponsors are often religious or charitable foundations.  While these may have been successful in raising the initial funds for the project, they may have limited development experience and they may lack the ability to fund cost overruns.
  • A full review of the history, resources and capacity of the developer should be undertaken by the buyer.
  • Life lease projects are often targeted at the constituencies of the charitable or religious foundation developers.  It is essential, therefore, to ensure that the life lease agreements are non-discriminatory.

As we can see, the concept of the life lease is very complex.

Because each development may have a different set of lease parameters, and many jurisdictions have no legislation governing the parameters of life lease developments, it is essential to get an informed legal opinion on the specific development to type of life lease contract that you are considering.



  1. I am considering a life lease – I do not know who owns the property. it is a non profit but I do not know who owns it – who I am paying for my life lease. who over see’s the manger – who do they answer to.

  2. Dianne,
    If the operator of the building is a non-profit, they will ultimatley report to a Board of Directors. You will want to ask for a copy of the life lease agreement so that you can be familiar with all of the terms and conditions of the lease – including, but not limited to what type of life lease it is (See above articel) and who ultimatley is entitled to the equity in the property!
    Good Luck!

  3. My husband and I are establishing a life lease for a future tenant, (VA) is it necessary that a real estate attorney draft the document? And if not, would it require a notary?

  4. The grateful parents of a young married man are granted a Life tenancy Agreement by the young couple drawn up by a Solicitor. After a long marriage the younger couple divorce, she buys him out and the parents live happily for quite a number of years! Now the younger wife decides to sell the unit and the parents are left frantically looking for another place to live. What is the validity of the Life Tenancy agreement in this case?

  5. My sister is considering a life lease that pays out 6% on the lump sum loan to reduce the monthly “rental” payment. Is the interest paid by the lessor deemed to be interest income, and required to be included as interest income on the lessee income tax return?

  6. My father, age 96, completed his contract on his life-lease agreement last May 22, 2017, having satisfied the 90 day required notice to vacate. The management acknowledges that a refund is due (over $200,000) but refuses to issue a check, or to even commit to a time when payment will be made. The contract also specifies no time frame for this refund. We have waited over 100 days now. Should we contact an attorney?

  7. I have a life lease which is recorded with the house title at the registry of deeds, how do I remove it?

  8. I recently purchased my sons home but we decided to keep it in his name due to my being elderly. My lawyer recently advised me to either draw up a lifetime deed or a lifetime lease. Which would be the better way to go. We are hoping not to have to pay additional taxes or penalties. I would appreciate any advice on this. Thank you.

  9. John Slagel. Any luck yet? Hope you hired an attorney, a group of MS13 bangers to hang around the leasing office, your state attorney general and invited the media out for a story.

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