One of the biggest hurdles land lease communities face is a lack of awareness Canadians may have about this housing option. Many do not understand how the arrangement works. Surprisingly, two in three Canadians are unaware that land lease is even a home-ownership alternative. Here are some frequently asked questions about land lease home-ownership, and answers that correct the myths.
1. What happens when your lease is up?
Some people mistakenly think that their lease could change dramatically, or worse, they could lose their home. At end-of-lease term, a homeowner can either renew their lease or continue on a monthly basis. If someone sells, it just starts a new lease. “We must follow the provisions set by the Residential Housing Act and Planning Act, which means increases and changes to the lease are governed by law,” says Robert Voigt, director of planning for Parkbridge. “Leases are typically 21 years in length, and depending on the project, we have mechanisms for creating longer-term leases. Our main focus is to work collaboratively with residents within the legal framework.”
2. Does the value of your home rise like freehold homes?
Homes in land lease communities go up in price the same way as other homes on the market. “In our experience, if you have a well-maintained home in Parkbridge, it will appreciate in value the same as freehold homes do in the same market,” says Voigt. “Homeowners sell their homes using real estate agents with support from the Parkbridge property team. As an example, our records show that for homeowners in the Antrim Glen community near Hamilton, well-maintained homes have experienced an average seven-per-cent increase in value per year over the past decade.”
3. Are people in land lease homes typically lower income?
“While perception may be that residents are lower income, in reality, they have simply chosen to leverage the equity in their home for the lifestyle they want to live or enter the housing market,” explains Voigt. They’re just looking for ways to make their money go the furthest and get more living space for less.
4. Does the 21-year lease make it difficult to get a mortgage?
Since most mortgages have a 25- or 30-year amortization, the 21-year lease for most land lease homes could require adjustments. “You may have to have a shorter amortization period based on your lease, which will mean higher monthly payments, but your home would be paid off more quickly,” says Voigt. “And it could still be less money than you’d spend monthly for a freehold home of equal value.” Parkbridge is working with financial institutions to support financing options.
5. Is it difficult to sell a land-lease home?
Not at all, says Voigt. “Homes go up at the same rate as freehold homes in the same area. If the home is well looked after, you should have no trouble selling it at a similar rate of return as any other house in your community.”
6. Is the community closed off from the larger neighbourhood?
These are not gated communities. “They are built to the same quality and look like other houses, streets and park areas in the broader local community,” explains Voigt.
To learn more about land lease opportunities, visit parkbridge.com.