Refundable Entrance Fees and Refund Funds
A refund fund is a fund the landlord sets up to refund entrance fees when tenancies end.
Is a landlord required to have a refund fund?
For an existing life lease complex, a landlord is not required to have a refund fund. If the life lease requires the landlord to refund entrance fees, the landlord may have a refund fund. The landlord may name a trustee to hold the money or they may hold it themselves.
For a new life lease complex, if the entrance fees are refundable, the landlord must have a refund fund.
Are all entrance fees refundable?
Not necessarily. For an existing life lease complex the life lease agreement should set out the details of any refund of entrance fees. For example: how much will be refunded, if any; when a refund will be paid.
For a new life lease complex, if the landlord is not a non-profit landlord or the term of the lease is for the tenant’s life, the landlord must refund at least 95% of the original entrance fee. Before the tenancy begins, the landlord is required to tell the tenant, in writing, the details of refunds of entrance fees and refund funds. The landlord must name a trustee to hold the money. The landlord decides how much money will be kept in the refund fund. The Life Leases Act does not set a minimum amount for a refund fund.
What is the tenant of a new life lease complex entitled to know about the refund fund?
If the tenant signs a life lease agreement before the occupancy date of the complex, the landlord must tell the tenant:
- the amount the landlord will place in the refund fund;
- the name of the trustee for the refund fund.
If the tenant signs the life lease agreement after the occupancy date of the complex, the landlord must tell the tenant:
- how much is in the refund fund;
- how much the landlord owes in refunds to former tenants;
- the amount the landlord placed in the refund fund before the occupancy date;
- the name of the trustee for the refund fund.
If an entrance fee is refundable, when does the landlord have to refund it to the tenant?
A tenant is entitled to be paid the refundable portion of their entrance fee. The refund is to be paid after the tenant’s priority date as soon as funds are available from the refund fund. The tenant may be entitled to the refund sooner if the life lease agreement says so.
What is a tenant’s priority date?
In a case where a tenant cancels their lease because the rental unit was not ready for occupancy 30 days after the landlord said it would be, the date the tenant gives the landlord proper notice of cancellation is their priority date. If more than one tenant cancels their lease in the same month for this reason, their priority dates are the last day of the month they gave the landlord the cancellation notice.
In any other case, the tenant’s priority date is the date the tenancy ended, or the last day of the third month after the tenant or landlord gave notice to terminate the tenancy, whichever is later.
Why does a tenant need a priority date?
Sometimes there isn’t enough money in the refund fund to refund all of the entrance fees owing to tenants who have ended their life leases. In that case, the trustee will refund the entrance fees in the order of the tenants’ priority dates. It’s also possible that more than one tenant has the same priority date and there is not enough money in the refund fund to refund the total amount owing to them. Then the trustee will refund the entrance fees on a pro-rata basis in proportion to the amounts owing to the tenants.
If there isn’t enough money in the refund fund, what happens next?
For some existing complexes, the landlord may have registered a mortgage to secure the refund of tenants’ entrance fees. If the landlord can’t refund an entrance fee as required by the life lease agreement, they must let the tenant know if the tenant has the right to ask the mortgagee for the mortgage to start mortgage sale and foreclosure proceedings to recover the entrance fee.
For new complexes, if there isn’t any money in the refund fund and the landlord can’t find a new tenant, the landlord has up to two years to pay a former tenant. The life lease may say that the landlord has to pay sooner. If a tenant doesn’t get their refund on time, they can ask the trustee of the refund fund and mortgage to take action to recover the entrance fee. The trustee can demand that the landlord pay the tenant within 30 days. If the landlord still doesn’t pay, then the trustee can start to foreclose on the property. Before doing so, the trustee must make sure that:
- the former tenant wants to proceed with a foreclosure; and
- the current tenants don’t want to ask a judge of the Court of Queen’s Bench to give the landlord more time to pay the former tenant.
Can the landlord use money from a refund fund for something other than refunding entrance fees?
A non-profit landlord can use some of the money in a refund fund for other purposes in the complex, like operating costs. They can do this only if there’s enough money in the fund to cover:
- the minimum amount the landlord told the tenants they would keep in the fund; and,
- the entrance fee refunds of tenants who cancelled or terminated their leases.
Landlords, other than non-profit, must leave the money in the refund fund.
After a life lease tenant moves out, can a landlord keep any of the entrance fee to pay for damages or unpaid rent?
A landlord can’t deduct money from an entrance fee for damages, rent arrears or any other loss related to the tenancy unless:
- the tenant agrees to the deduction; or
- the Residential Tenancies Branch has awarded the money to the landlord, before the date the landlord is required to return the entrance fee to the tenant.
If a landlord believes a tenant owes them money, the landlord should notify the tenant of their claim. If the landlord and tenant cannot agree about the claim, the landlord can file a claim against the tenant at the Branch. The Branch will hold a hearing to decide if the landlord is entitled to compensation from the tenant. The Branch will issue an order.
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