Recent media reports exposed gaps in consumer protection for life leases in Alberta, leading to May 2024 amendments to the Consumer Protection Act in an attempt to address these concerns.
Within the past year, you may have heard about Alberta seniors trying to get their life savings back after signing up for life leases. As reported in the media, there were growing concerns about gaps in consumer protection for life leases in Alberta.
For those unfamiliar with life leases, they are a type of housing agreement where a person buys the right to occupy a dwelling unit in a particular development. The lease is typically for life or until a person leaves, and it requires paying an upfront lump sum and monthly payments.
On March 18, 2024, the Alberta government introduced protections for life leases through Bill 12: Consumer Protection (Life Leases) Amendment Act, 2024 (the Act) in the Legislature. It passed third reading on May 8, 2024 and came into force on May 14, 2024.
Defining life lease terms
The Act itself is not standalone legislation. It amends Alberta’s existing Consumer Protection Act (CPA) to include rules and definitions about life leases.
The Act defines a “life lease” as a written agreement where:
- an entrance fee is paid or payable for a residential dwelling, and
- the leaseholder (the person under the life lease) gets the exclusive right to occupy the dwelling, as well as use common areas, for life or until the lease operator or leaseholder terminates (ends) the life lease.
The Act also defines other key terms such as:
- entrance fee: The initial payment from the leaseholder to the lease operator, not including occupancy fees.
- lease operator: The person granting the leaseholder exclusive occupancy rights to a residential dwelling and the right to use common areas under a life lease.
- leaseholder: The individual with exclusive occupancy rights to a residential dwelling and the right to use common areas under a life lease.
- occupancy fees: Payments made by the leaseholder to cover operations, maintenance, services, or dwelling upkeep and cleanliness.
- pre-lease payment: The deposit to reserve a dwelling before entering a lease.
- trustee: Person or entity the lease operator appoints to receive, manage, and disburse funds on their behalf.
Life lease requirements
The Act has requirements for life leases entered into or after May 14, 2024, including about:
- Entrance fees, including their collection, use, and return
- Cancellation rights, including a minimum 10-day cancellation period after signing and cancellation notice requirements and conditions
- Termination rights, including notice requirements and conditions
- Occupancy fees, including fee increase rules, notice requirements, and allowable increase frequency
- Lease operator obligations
- Leaseholder obligations
- Compliance with the Act, including Section 41.5 of the Act (which addresses standard content of agreements, forms, other documents) and related regulations
A lease operator must also use a form of life lease that meets the Act’s requirements and regulations.
Return of entrance fees
One of the issues driving this legislation was the return of entrance fees. The Act now sets out rules for lease operators about when to return entrance fees after a life lease ends.
Lease operators must return the leaseholder’s entrance fee within 180 days of the life lease ending. If the lease operator does not return all or part of the entrance fee within that time, interest will accrue on any unreturned amount.
This 180-day return for entrance fees applies to life leases entered on or after May 14, 2024 (the coming into force day of the legislation) and those already existing on May 14th and ending after that date. It does not apply retroactively to life leases that ended before May 14, 2024.
For example, if you entered a life lease on or after May 14, 2024, a life lease operator must return all or part of your entrance fee to you within 180 days of the life lease termination. The same 180-day return rule applies if you have an already existing life lease on May 14th and ending after that date. However, if your life lease ended before May 14, 2024, this rule requiring a lease operator to return your entrance fee (or part of it) within 180 days does not apply.
That said, the legislation has an amendment trying to keep the order of entrance fee repayments for those in line for the return of their entrance fees. In other words, the 180-day return should not affect the order of entrance fee returns for life leases that ended before May 14, 2024, and those existing on May 14th but ending after that date.
Consequences for not following the rules
If a lease operator does not follow the rules set out in the Act, they are guilty of an offence and there are consequences. They may have to pay a fine of up to $300,000 or three times the amount they earned by breaking those rules, whichever amount is more. The lease operator could also go to jail for up to two years.
A few gaps remain
The Act is long-awaited consumer protection legislation for life leases, making Alberta one of the few provinces in Canada to have legislative protections in place for life leaseholders. While the forward-looking protection for life leases is a first step, it is not without its issues. One issue is that the Act does not apply retroactively to life leases that ended before May 14, 2024. So unfortunately, it does not address the concerns of seniors who may still be trying to get their entrance fees back from life lease operators.
The legislation’s attempt to keep the order of entrance fee repayments also raises some questions about how it will actually work. For example, let’s say you ended a life lease before May 14, 2024 and are waiting to get your entrance fee back – in this case, the 180-day rule does not apply to you. Then say there are others with life leases existing on May 14th that end after that date who are also waiting to get their entrance fees back – in these cases, the 180-day rule does apply to them. There’s no set time under the Act for when you’ll get your entrance fee back. But the new Act says the order in which you get your entrance fee back isn’t supposed to change, even if others are waiting under the 180-day return rule. If there’s no set time for you to get your entrance fee back and you’re ahead of others waiting under the 180-day return rule, does that mean you will get your entrance fee back within the 180 days? But then again, if there is no set time for you to get your entrance fee back, could that lead to other life leaseholders not getting theirs back in time?
The Act gives the government power to make regulations about life leases, giving them flexibility to supplement the Act. For example, the government may introduce regulations about further life lease requirements, maximum allowable entrance fees, trust account requirements for life lease operators, among other things. At this point though, there are no regulations. So, we will have to see what further rules (if any) may come.
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DISCLAIMER The information in this article was correct at time of publishing. The law may have changed since then. The views expressed in this article are those of the author and do not necessarily reflect the views of LawNow or the Centre for Public Legal Education Alberta.
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