Rent in a Life Lease complex is determined by a combination of factors: corporate debt (including mortgages), contingency funds (Reserve Fund, Replacement Fund, Refund Funds, etc.) and Annual Revenue/Expenditures. There is not supposed to be any profit margin in a Life Lease and the owners/sponsors are not supposed to accrue any direct financial benefit from the operation of a Life Lease complex. Just as there is no profit involved, likewise there is no cost accruing to the owners/sponsors. All accrued expenditures are the responsibility of the tenants.
The Board of Directors for every suite establishes the rent every year. (Usually with the help of a Management Company). The amount of that rent is a proportionate sharing of the total costs for the complex. Usually, costs are determined by the sum of:
Which specific costs get assigned to equal or proportionate sharing may vary from complex to complex. However, the actual rent each year will be known in advance of the fiscal year, according to legislation under the Life Lease Act. Future rents should increase or decrease only to adjust to actual expenditures and revenue anticipated and set forth in a budget.
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