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What is a Life Lease?

Life lease projects cater mainly to adults 55 and over. This is an opportunity to move to smaller and more affordable housing. One enters into the lease with a single up front payment. This gives one the right to occupy the suite until death or a decision to move.
The occupancy also includes the uses of common facilities, lounges, workshops and dining rooms. The properties are often owned by non-profit faith organizations, but not always.

The unit occupant has a leasehold interest as defined in their contract. Upon death or moving, the unit reverts back to the organization and the lessee or their heir receives the initial “up front payment”.

During the life-lease, the tenant is responsible for paying monthly fees towards the management and upkeep of the property; it is usually just a monthly expense fee. Unlike condo agreements, there is no joint ownership of the common areas. Life-lease residents are neither owners nor traditional type of renters.
 

How do we Insure Life Lease Units?

The usual way is a Tenants Package policy with a special “Waiver of Subrogation Endorsement” added to the policy. This is done so that the life lease corporation does not want the life lease holder’s insurance company to subrogate against the corporation. This is a valid endorsement.
The usual tenant’s package policy will suffice covering personal belongings. If your client makes any improvements, such coverage can be added. What are the insurance obligations under the terms of the life lease for the unit itself and the common areas?
What coverages is an insurance company prepared to provide?
Finally, have the terms of the life lease reviewed and explained by the assured’s lawyer before agreeing to the life lease.