Q:

What is a life lease?

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Quick Answer

According to Bankrate, a life lease is a senior housing option where rather than purchasing or leasing an apartment, the tenant purchases the right to occupy a unit and pays a monthly rental or maintenance fee. Bankrate notes that the tenant's agreement allows for the tenant to occupy the property for an undetermined amount of years, the remainder of his life or a specified amount of time, such as 50 years.

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Full Answer

Rather than purchasing the property, the tenant is purchasing the leasehold interest in the property. The state of Ohio notes that the amount of money invested in a life lease is considered an asset for estate purposes. Bankrate states that there are typically four kinds of life leases available: market value, declining balance, fixed value and index-based. A market value life lease allows for the tenant to purchase leasehold interest in the property on the open market. Declining interest life leases occur when the upfront purchase amount loses value over the course of time, allowing for a reduced refund in the event the tenant ends the lease. In a fixed value life lease, the total purchase amount is refunded at the end of the lease, minus administration fees. Index-based life leases allow the tenant to earn interest on the purchase amount. When the lease is terminated, the tenant is refunded the purchase amount plus an additional index-based amount.

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