Managing Your Matters

08/30/2020

Cost of Living Clause Affecting Seniors

Many seniors are now choosing to live in retirement homes.
This is an excellent solution for many of our elderly for a host of reasons, including safety and having assistance close by.

Upon entry into the residence, the occupant will be asked to sign an annual lease contract. It will include among other things cost of the rent, other related costs and terms of the lease.

One of the terms of the lease, which is very often overlooked is a cost of living increase. This is a clause that states the residence can increase the rent up to a certain percentage on an annual basis at their discretion, based on inflation.

This amount can be anywhere from 3% to as high as 6%.

This is a clause that is very important to consider. The percentage increase is compounded, which means that the increase is added to the first year, and the next year is a percentage of the increased amount of the year before and so on.

Taking the example of an initial rent of $4,000 a month, with a compounded annual increase of 6%.
After 10 years this would result in a monthly rent of over $7,000!

As a result of this clause, seniors particularly those on a fixed income find themselves being forced to move as they simply cannot afford the rent hikes. This can be a very difficult as the residence has become their home, and they are faced with leaving familiar surroundings and friends.

Finding a new home can be stressful but there are always good deals as residences are usually trying to fill occupancy and give market value deals on rents, plus incentives to attract new residents. This of course leaves current residents paying, what can be exorbitantly high rates.

It is important to be aware of this cost of living clause and to negotiate it at the signing of the contract. The residence managers don’t like to be challenged on it, but it’s obviously important.

I have a client who discovered that an identical unit in her building was being offered at a 30% lower rate to new residents. She went to management and furiously complained. Her rent been reduced substantially, although her trust in management of the residence has sorely suffered.

Please be vigilant and hold residences accountable for their fees.

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