Which form of tenure makes
the most sense?

 

In Ontario numerous forms of tenure are in use and the laws of the province govern them all.


Freehold
The simplest and most straightforward tenure, meaning that the purchaser owns his home, as well as the lot on which it sits. The municipality is responsible for the care and maintenance of the streets, garbage removal, water and sewage, while the homeowner is obligated to maintain the property to municipal standards and is required to use the home only as permitted by municipal zoning. Property taxes are calculated on the value of the home and the land.


In the context of a freehold adult lifestyle community, however, there could be restrictive covenants, usually set forth as a condition in the Offer of Purchase and Sale, which are subsequently registered on title. These could include the number of permanent residents occupying the dwelling and/or compulsory contribution to the care and maintenance of a common area, such as a community centre. Failure to pay one’s share of scheduled fees is lienable by the residents’ association and has withstood legal challenges.


Condominium
We tend to associate this word with high-rise buildings. However, condominium tenure can also apply horizontally. There are numerous leisure communities offering homes with condominium tenure.


On this basis, the word condominium refers to ownership of a home up to the inside walls, with the exterior of the home, including care, maintenance and landscaping of the lot, being the responsibility of the condominium corporation.


There are certain advantages in living under this form of tenure, not the least of which is that one can truly savour a leisure lifestyle, as the condominium corporation performs all the maintenance. And yes, the costs are higher than freehold tenure. In addition to having to pay for the various maintenance tasks, corporation members must also provide a monthly stipend earmarked as reserve funds to cover the costs of future repairs.


The up side is that there are fewer things about which you have to worry and as a shareholder of a condo corporation you enjoy greater purchasing power when it comes to general repairs.


Condominium tenure also means that you are obligated to pay taxes on the value of your unit, as well as your percentage share of the common areas and amenities.


Freehold Condominium (also known as vacant land condominium)
There are numerous communities that are located outside of an urban envelope where municipal services such as water, sewage, garbage removal and road maintenance are not provided. In this case the developer will often opt for freehold condominium as the preferred tenure. Freehold condominium means that instead of owning your home to the inside walls of the home, the condominium boundary extends to the property line of your lot. You are thus responsible for the care and maintenance of your entire home and lot and are also financially responsible for your portion of the care and maintenance of the common areas. In addition, you are obligated to pay a portion of the cost of garbage removal, the community water supply and the sewage treatment facilities.


Municipal taxes are calculated in a similar fashion to regular condominiums in that your assessment will be based on the value of your home as well as a percentage of the common areas.


Land-Lease
Land-lease means that you own your home and you lease the lot it sits on. This makes perfect sense in situations where the home is portable, as with a manufactured home.


Land-lease tenure offers some real advantages. For instance, under land-lease you purchase and pay for the home and then lease the lot on a monthly basis. Therefore you can afford to spend more for the home, enabling you to enjoy greater luxury, or you can invest the money you save on the lot and use the proceeds to help pay for your monthly land-lease. Land-lease communities fall under landlord/tenant legislation and as a lessee in such a community you would enjoy the same protection and obligations that other renters do. In addition to the monthly land lease, you will also have a maintenance and common area fee. In addition, the owner of the community usually passes on the municipal tax assessment of your lot.


Land-lease communities also find it easier to maintain the integrity of the community through restrictive covenants in the lease that imposes limits on the number of permanent residents.


Many lawyers tend to be unfamiliar with land-lease tenancy and discourage their clients. If you are considering a land-lease community and want legal advice, find a lawyer who understands it, so that the pros and cons are clearly explained. People who require mortgage financing in a land-lease community will have difficulty finding a bank that is willing to finance a home without being able to secure the property it sits on.


Life Lease
This form of tenure works best with affinity groups, such as a registered, charitable organization that provide reasonable housing to seniors.


Life-leases require the tenant to pay a significant portion of their total lease in advance. So, if a life lease is for a 20 year term and the agreed upon monthly rental for a suite is $800.00, a life-lease that calls for prepayment of half the lease amount, or $96,000 is paid to the builder in advance of beginning construction.


In some cases this could be a risky venture, as there is no guarantee that once the money is paid, the builder will fulfill his end of the bargain. This type of residence is not covered under the Tarion New Home Warranty Program. When entering into a life lease agreement, make sure that the group leasing the residence is on the up and up and be sure to have a competent attorney.


The best way to avoid pitfalls is to get independent legal advice from a reputable lawyer and don’t make any decisions until all your questions are answered.


Written by Klaus Rohrich

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