Life Lease Housing in Toronto: What You Buy and What to Check

The short answer

Life lease housing in Toronto is a way to buy the right to live in a home without buying the home itself. You pay a lump sum up front. In return you get the right to occupy a unit for a long period, often for your lifetime. You then pay monthly fees and property taxes, much as a condo owner would.

The province describes life lease housing as usually developed and run by non-profit or charitable groups it calls sponsors. The sponsor usually keeps title to the land. What you hold is called a life lease interest.

This post walks through how the arrangement works in Ontario, what it costs, how you get your money back when you leave and how it compares with buying a Toronto condo or renting. Our complete guide to downsizing in Toronto covers the wider move, from selling the family house to choosing the next home.

The legal points here are general information drawn from the Province of Ontario’s guidance. Every life lease agreement is different. Have a lawyer who knows life lease agreements read yours before you sign.

What you buy with a life lease

Ontario’s glossary sets out the key terms in plain language:

• Life lease interest: the right to occupy a unit. This is what you own, rather than the unit property.
• Life lease agreement: the contract that gives you that right.
• Life lease holder: the person who buys and owns the right to occupy.
• Sponsor: the group that develops or operates the project and usually owns the land.

The province lists the kinds of groups that act as sponsors. They include faith-based groups, cultural associations, service clubs, seniors’ groups and housing providers. Sponsors usually keep ownership and management of the building after it is built.

Most life leases last until the end of the holder’s life or until the holder decides to move. A smaller number of projects use a fixed term, such as 49 years, with renewal expected if you stay longer.

The province also notes that when a lease holder dies, the life lease is usually extended for the life of the spouse. The spouse may need to meet the sponsor’s eligibility rules and may need to pay a transfer fee.

How a life lease differs from a condo and a rental

A life lease sits between owning and renting. The table sets out the main differences using the province’s descriptions.

Feature	Life lease	Toronto condo	Rental
What you buy	The right to occupy a unit	The unit itself	Nothing. You pay rent
Main law	The life lease agreement and contract law	Condominium Act, 1998	Residential Tenancies Act, 2006
Up-front cost	Lump-sum purchase price	Purchase price	No purchase
Monthly costs	Monthly fee, property taxes, utilities	Condo fee, property tax, utilities	Rent
Reserve fund study	Not required by law	Required by law	Not applicable
Selling	Set by the agreement and the sponsor	Open market	Not applicable

Three points from the province stand out.

First, no Ontario law is written specifically for life lease housing. The province says the Residential Tenancies Act does not apply when there is a direct relationship between the lease holder and the sponsor. The Condominium Act does not govern life leases either. Your rights come mainly from the agreement itself.

Second, some general laws still apply. The province lists the Fire Code, the Building Code, the Planning Act and the Ontario Human Rights Code. The Assessment Act treats life lease housing as residential for property tax. The Retirement Homes Act, 2010 may apply if the sponsor provides meals or personal care. If you are weighing a care setting as well, our post on condo vs retirement residence costs in Toronto explains how retirement homes are priced and regulated.

Third, you build equity in some models, as a condo owner does, yet you never own the unit outright. Residents usually have a say through a residents’ council that makes recommendations to the sponsor’s board.

What life lease housing costs

The purchase price

The province says life leases are usually priced lower than similar sized condominiums in the same area. It gives two reasons. Conventional mortgages are generally not available. The purchase is also exempt from land transfer tax in many cases.

On financing, the province’s buying checklist says loans may be available from banks or sponsors, but they may be different from a mortgage. Ask lenders and the sponsor early, before you plan around a sale.

Monthly fees

Monthly fees are usually based on an annual operating budget set to cover the break-even cost of running the project. The fee for your unit depends on its size, often charged per square foot, your share of common area costs and the services included.

The province lists what the fee usually covers:

• reserve fund contributions for repairing or replacing common elements
• property management, such as garbage removal and lawn care
• upkeep of hallways, parking lots and other common areas
• insurance on the common elements
• recreation and wellness programmes

It also lists what the fee usually leaves out:

• property taxes
• insurance on your own contents
• utilities in your unit
• personal support services
• repairs or renovations inside your home

Two rules matter here. No Ontario law limits how much a life lease project can charge in monthly fees. Life lease sponsors are also not required to conduct reserve fund studies, while condominiums are. A low fee today tells you little unless you can see the budget and the reserve fund behind it.

Land transfer tax

Ontario Regulation 88/04 exempts the purchase of a life lease interest from Ontario land transfer tax in set conditions. The owner of the development must be a non-profit or a registered charity. Each buyer must be acquiring the interest to use the unit as a principal residence. The unit can also be the principal residence of the buyer’s parent or spouse. Your lawyer claims the exemption when registering the transaction.

The City of Toronto charges its own municipal land transfer tax on property purchased in Toronto, in addition to the provincial tax. The City’s information page does not mention life lease interests. Its exemptions are set out in Toronto Municipal Code Chapter 760. Ask your lawyer to confirm how the municipal tax applies to the project you are considering before you budget for closing.

Compare that with a resale condo in the City of Toronto, where a buyer normally pays both the provincial and the municipal tax.

How resale works: the five life lease models

The way you get money back when you leave is a key difference between projects. The province describes five models.

Model	How the price and refund work
Market value	You or your estate sell the interest. You can make a profit or take a loss.
Price index	The sponsor buys it back at your price raised each year by an index, usually the Consumer Price Index, less an administrative fee.
Fixed value	The sponsor buys it back for what you paid, less an administrative and refurbishing fee.
Declining balance	The refund drops by a set amount each year until it reaches zero. You can stay for life after it reaches zero.
Zero balance	The up-front payment prepays rent for your expected remaining life. Nothing is paid back to you or your estate.

Market value

Under the market value model the sponsor may help with the sale by valuing the unit, contacting buyers on its waiting list and brokering the sale. It keeps a percentage as an administrative fee. Any real estate agent’s fee is extra. Most market value agreements let the interest pass to the estate. Anyone who inherits it must meet the sponsor’s eligibility rules before living there.

Price index and fixed value

In both of these models the sponsor buys the interest back, so heirs do not have to sell the home or keep paying the fees. The estate loses the interest once it is repaid. The province points out that under the fixed value model your money loses value over time because of inflation.

Declining balance and zero balance

The declining balance up-front price is based on the value of the unit and your life expectancy. It is usually lower than in the other models. The province calls the zero balance model the least expensive form of life lease. The interest returns to the sponsor at the end of your occupancy and no residual value is paid out.

For an executor, the model decides whether the estate holds something to sell or simply receives a refund from the sponsor. Read that clause closely.

Rules and risks to understand before you buy

Eligibility rules set by the sponsor

The province says life lease housing is aimed at seniors and older adults. Sponsors set their own age definitions. Where a project has an age requirement, the province says either you or your spouse must meet it.

Sponsors also usually require residents to be able to live independently. The province notes that agreements typically let a sponsor end a lease on only 30 days’ notice if it decides a resident can no longer live independently, although this is rarely used.

Who can live in the unit

According to the province, sponsors generally do not allow lease holders to have children or grandchildren live with them, though exceptions can be made. Most projects allow caregivers, including family or a professional support worker, with the sponsor’s approval. Most sponsors do not allow residents to sublet their units.

Pre-construction deposits

Some life lease projects are sold before they are built. The province advises asking for floor plans, the completion date and the longest possible delay. Ask whether you get a full refund of the deposit if the project is delayed. Find out the conditions under which the sponsor can use your deposit and how it is protected.

If the sponsor offers no cooling-off period, the province suggests you avoid signing a life lease agreement on the spot.

Selling later

When you sell, the buyer usually has to apply to the sponsor and meet its eligibility criteria. The sponsor may keep a percentage of the resale price as a transfer fee. Both points affect how quickly you can sell and how much you keep.

How to check a life lease project in Toronto

Ontario’s checklist for life lease buyers lists the documents to ask the sponsor for. Gather each one yourself. Our post on the condo status certificate in Toronto shows the kind of financial picture a condo buyer receives. Use it as a model for what to request.

1. Confirm the sponsor is reputable and find out whether it is a non-profit or a registered charity.
2. Get the life lease agreement and the sponsor’s rules and bylaws. Have your lawyer review them.
3. Identify which of the five models the project uses and the transfer fee on resale.
4. Ask for a breakdown of the monthly fee, how it is calculated and any limit on annual increases.
5. Ask how much is in the reserve fund and whether an outside professional prepared a recent reserve fund study.
6. Request the annual budget, audited financial statements, details of any borrowing and the policy on surplus funds.
7. Ask whether the corporation faces any legal actions and get proof of the building’s insurance.
8. Confirm who maintains, repairs and replaces each part of the building.
9. Ask which services are mandatory and which are optional.
10. Hire a home inspector to look for physical problems.

Ask how disputes between residents and the sponsor are resolved. The province lists this among its quick tips.

What to do next

Start with the question that shapes everything else: which model does the project use and what will you or your estate get back. Then compare the full monthly cost with a condo in the same part of Toronto. Our list of Toronto neighbourhoods for downsizing can help you compare areas. Our Toronto downsizing guide covers selling your current home and planning the move.

Book time with a lawyer before you sign anything or pay a deposit. If you would like to talk through selling your Toronto home before a life lease purchase, contact us.