I heard a story today that left me so incensed, that I couldn’t resist repeating it.
Some time ago, a local church built “a 15 story high-rise building offering enriched housing for seniors.”Apparently, the building is managed by “a voluntary board (hereinafter referred to as the board) independent of the church.The building contains 109 suites, 36 are subsidized rental units and the remaining 73 are “life interest lease suites.”For those unfamiliar with the life lease concept, a buyer buys the right to use the unit for their lifetime. When they are finished with the home, it’s sold back to the original owner, usually a non-profit organization, and the price is determined based on terms outlined in the lease document.
Here’s the story as it’s told to me by the daughter of a senior couple (hereinafter referred to as John and Mary) who purchased a life lease in the building. I have not seen the documents involved in this transaction.
It seems that in 1989, John and Mary had reached their senior years and decided that they were ready for condo living. They purchased a life lease for $83,000 and happily settled in. At the time of the purchase, their lawyer expressed some concern regarding the ambiguity of the resale clause which stated that John and Mary were obliged to sell their interest back to the board when they were ready to sell at a price “hereon depending upon the conditions prevailing” at the time of the sale. Apparently, the documents do not indicate what “conditions” the price is dependent on. I expect most would agree that “real estate market conditions” would be the obvious inference. Comfortable that they were dealing with the church, John and Mary felt good about moving forward. They did.
In 1998, John passed away and Mary became a widow at 78 years of age. Sometime in early 1999, Mary gets a call from the board. As she tells the story, she’s allegedly told that her documents have to be updated to remove John’s name from the life lease. Mary is all too happy to oblige and signs the documents placed before her with the understanding that the only alterations to her original agreement are the names.
Mary’s most recent statement from the board is dated January 2005 and it shows the “current market value” of her unit being $100,300. Between 1989 and 2005, the average selling price of an east-side condominium has increased by 62%. For some reason, Mary’s unit has only increased by 20%. Further, it seems that some provision in her contract entitles the board to 50% of her equity gain. If true, this reduces her total return to just 10%.
Mary’s daughter is not pleased. She’s particularly troubled by the claim of entitlement to half of Mom’s equity, so she starts digging for paperwork. Low and behold she comes across the original purchase agreement and the updated agreement which was executed in 1999. She’s unable to find any clause which specifically addresses a sharing of the equity, but she notices that the first and second agreements are not the same. Where the initial agreement stated that the selling price was “hereon depending upon the conditions prevailing,” the second agreement has additional wording which states the price is to be determined at the “sole discretion” of the board.
It seems that the board has also contracted themselves with an “irrevocable assignment” to act as her attorney to deal with and make all decisions related to the disposition of the property.
Of course, I’m not a lawyer so I suggested that Mary’s daughter might want to meet with one real soon.
I'm always happy to answer your real estate questions.
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