Book 1 - Appraisal Institute of Canada

“Given theprojected growthin the seniorpopulation overthe next 20 yearsand the generalgood health ofseniors in Canadatoday, the demandfor this type ofdevelopment islikely to continue.”In design, most life lease units are similarto condominiums in the same locale. They areself-contained units with one or two bedrooms.The buildings have amentities comparable tonearby condo buildings. A study done for theOntario Ministry of Municipal Affairs and Housing(Simmons, 1999) found prices of life lease unitsin London and Toronto to be similar to those forcomparable condo units.Currently, all life lease housing developmentsin Canada are located west of the Ontario-Quebec border. The exact number of life leaseprojects in Canada is unknown; the number wasestimated at more than 200 in 2003 (LuminaServices Inc., 2003) and approximately 300 inearly 2007 in a CMHC study of life lease issues(GGA Management Consultants, 2007). As of2005, the Ontario government estimated thatthere were 125 projects (8200 units) in Ontarioalone. These numbers are estimates, since thereis no requirement for life lease developments tobe registered, but it indicates an increase of atleast 40% in the number of developments overa three year period. Given the projected growthin the senior population over the next 20 yearsand the general good health of seniors in Canadatoday, the demand for this type of developmentis likely to continue.Manitoba is the only province to have enactedlegislation specific to life lease housing: the LifeLeases Act, December 1999, amended June 2005.This legislation specifically designates that lifelease residents are renters and are subject to theprotections and regulations of other renters inthe province. Some regulatory mechanisms applyin other provinces within existing legislationnot specifically developed for life lease housing.Other than in Manitoba, this leaves residents withsome vulnerability to various issues discussed inmore detail in the online version of this article.One of the reasons for the rapid growth inthis form of tenure is the advantage to the developerin financing the development. Life leaseinterests are presold to prospective residents whosubmit a deposit. These funds can be used asequity in the development to secure constructionfinancing (some restrictions apply in Manitoba).Once the units are complete and occupied, residentscomplete the purchase and the additionalfunds are used to pay off the construction loan.The use of this form of tenure then leaves thedeveloper, usually a non-profit group, with nofinancing on the property.There are various forms of life lease arrangementsin place across the country. This articleconcentrates on the primary form of life leaseused in Ontario as the basis for the discussion(see online version of this article for informationon other forms of life lease arrangements). Lifelease purchasers in Ontario pay ‘market value’for their life lease interest. When they move outof the unit, they sell the life lease interest to anew purchaser for whatever market value is atthat time. The sponsor of the development oftencharges an administrative fee of 3-10% for thetransaction and may maintain a waiting list ofinterested purchasers.The life lease holder is greatly concernedwith ensuring the building is well managed, thatthere is continuing demand and a waiting list forunits, and that, ideally, the market value of thelife lease interest increases over time (or at leastdoes not diminish). In most complexes, however,the sponsor is the only entity that has any realcontrol over how the building is managed.40Canadian Property Valuation Volume 54 | book 1 | 2010 Évaluation Immobilière au Canadaclick here to return to table of contents