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Sample Life Lease Agreement
The fact is that most people enjoy the experience of living in a development of life. There is a high level of satisfaction. The typical life lease development project is a real estate development initiated by a service club or religious organization for the good and usefulness of its members and supporters. There may be private (for-profit) life lease projects, but they are the exception. The usual model is the financing of an apartment complex or condo project. The lessor, with the support of the organizing organization, obtains a bank loan to cover most of the capital costs. However, the entrance fees paid by the first tenants reduce the necessary contribution from the landlord. An evolution of 50 units and an entry fee of US$150,000 for each tenant offers the landlord a potential contribution of $US 7,000,000. Not all entrance fees can be used for construction purposes, as some of the funds must be held in a “repayment fund”.
The purpose of this fund is to reimburse the entrance fee at the end of the lease. But the landlord can usually rely on the replacement tenant to pay an entrance fee that serves to satisfy the responsibility of the outgoing tenant. b) There may be delays in the reimbursement of the entrance fee by the tenant – because there are too few replacement tenants. Most life lease projects cannot support a mass exodus of tenants. Not enough money set aside in the repayment fund. The Manitoba government has passed legislation (The Life Lease Act) and certain rules to ensure that when a tenant contributes to a life lease project, the funds are spent properly (many consumer protection provisions). They are used to pay for a portion of the construction costs, and some funds are set aside to reimburse entry fees when the Life Lease ends. There may be other safeguards for the lender. For example, the construction may have a condominium structure, so that in the event of foreclosure, the construction may be transformed into a condominium complex, and the units may be sold or leased separately, subject to the rights of subsequent tenants.
With the end of the lease, for any reason whatsoever, the tenant is entitled to the repatriation of his cash contribution. If the lease ends with the death of the tenant, the money must be paid by the landlord to the tenant`s estate. Once the project is operational, the lessor is required (mandatory) to provide annual financial information to the tenants. Rent increases can be made in the event of a cost increase, but all increases are subject to review. As a rule, there is a minimum age limit of 55, 60 or 65 years. This is a tenancy agreement, but this is unusual because the tenant makes a cash contribution (no investment) to the rental unit in an agreed amount – perhaps $US.c 150,000) The rent is reasonable and his financial contribution (the entry price) is safe from the goats of the investment market. a) The tenant becomes a resident of an evolution in which the owner actually takes care of the well-being of the tenants and the project is managed on a public utility basis. There will also be a second mortgage to insure the tenants` investment. If for some reason the development turns out to be a financial failure, the second mortgage is available to protect the interests of the tenants. The affiliate group creates a non-profit corporation that becomes the owner. The law requires that the tenant`s cash contribution – the entrance fee – be given to a licensed agent.
One of the tasks of the agent is to authorize the capital contribution or entry fees in the construction costs. . . .