A Primer on Life Rights Agreements
A life rights agreement (also known as a life estate) is a real estate term that means living in a space for the rest of your life while keeping the right to be there. But it’s a bit more technical than that. A life rights agreement is made when a senior person agrees to stay with a relative, usually a child. In exchange, the senior will have their mortgage, taxes, or utilities paid by the relative. This type of estate nearly always has the senior’s needs at heart.
A life rights agreement doesn’t have to be a family agreement. It can be a friend living in a basement, an elderly parent living in their child’s home, or even an adult child living in their parents’ home.
On the other hand , life rights agreements are sometimes used for less altruistic reasons. People are sometimes forced out of their home under duress and sign an agreement as a way of keeping the peace or because they don’t understand what is going on. In many cases, a life estate is the beginning of what will become elder abuse. In those situations, an attorney should be involved to draft the agreement and to determine whether an elder abuse alert should be issued.
A life estate gives the older person a 100% right to live in their home for the rest of their life. It should be a specific legal term using specific words; otherwise, the agreement might allow future use or possession of the home by other people.
The Legal Implications of Life Rights Agreements
The legal importance of securing life rights cannot be overstated. A life rights agreement provides protection to both the developer and resident. For example, the developer is provided with a guarantee from the resident that they will not be seeking any further property after death of the resident’s surviving spouse. As for the resident, a life rights agreement can prevent any assertions of ownership which would jeopardize the rights of the developer in re-selling the home or life care unit upon the death of the resident.
For example, in Lee v. Life Care Centers of America, Inc., No. 12-cv-00512, the plaintiff and her husband signed a residency agreement for a life care community, which provided for joint tenancy in unit 111 or a community fee. The plaintiffs chose to pay the community fee which entitled them to occupy a home in the community until such time as they could no longer do so. Plaintiffs paid a transfer fee which, according to the terms of the residency agreement, was nonrefundable.
The plaintiffs’ husband died in 2009 and his estate attempted to recover the transfer fee. Upon the death of the surviving member of the married couple, the residency agreement would terminate and the home became subject to resale by the developer. The developers agreed to refund a portion of the transfer fee.
The developer sought dismissal of the action arguing that the plaintiffs must abide by the life rights provision of the residency agreement. The court held that the admission agreement was enforceable against the estate of the deceased resident even though the agreement appeared to be largely one-sided in favor of the developer. Furthermore, the court found that the plaintiffs were adequately protected in their decision to purchase an existing unit or not by having the full amount of the transfer fee refunded should they choose an existing unit.
Litigating life rights agreements can be difficult and costly for the developer. Without having a life rights agreement in place to protect it, a developer’s ability to utilize the home for another occupant will be stifled, and it may lose several new residents.
Essential Components of a Life Rights Agreement
The skeletal framework of a life rights agreement must provide clear guidance to the parties on how and when the transfer of rights and responsibilities will occur. The following is a general guide to the basic provisions that should be included in a life rights agreement:
- Transferor – The definition of the individual transferring the interests in their home through the life rights agreement; the identification of the agent who has authority to act on behalf of the individual for the purposes of transferring and receiving compensation under the agreement, i.e., an attorney-in-fact for health care.
- Transferee – The person receiving the interest in the home through the life rights agreement, subject to the rights of the income and principal beneficiaries of any trust created by the transferor or a previous life rights transferor, or under any separate assignment of the proceeds from the life rights agreement, and/or to the rights of any tenant (or tenant’s representative) residing at the real property, to the extent the fixed rent is equal to or greater than the expenses for utilities, taxes and insurance (including hazard and title insurance). The level of specificity will depend upon how detailed the compensation and other clauses are in the preceding or succeeding sections.
- Scope – The specific rights to be conveyed or assigned under the agreement; general terms and conditions of rights of occupancy and current use of the real property subject to common law and statutory provisions affecting the rights of tenants, landlords and life tenants; the nature and extent of the transferee’s management rights; and the obligations of the transferee, including maintenance, care and repair obligations.
- Compensation – The description of the consideration to be paid to the transferor, including the timing and method of payment, and if appropriate, the determination of the value of the real property subject to the agreement at the time of transfer, the amount of any outstanding loans or mortgages pertaining to the real property, and the net proceeds to be paid to the transferor or the trustee of the transferor’s trust to whom the net proceeds are paid.
- Duration – The duration of the rights of the transferee, including the timing of the transfer and the term of the conveyance or assignment, whether the conveyance or assignment is revocable, and the conditions for the termination or modification of the agreement.
- Termination – The termination of the rights of the transferee, under what circumstances and by whom they can be exercised, including the right of the transferee to sell or convey the real property without further obligations to the transferor or the agent of the transferor, and the right of the transferor or his or her agent to receive the proceeds from the exercise of such right, including a right of first refusal by the transferee to purchase the real property.
- Assignment – Restrictions on the transfer of interests in the property under the life rights agreement, including the concurrent right to the net proceeds by the transferor or his or her agents.
- Default – Events of default of the life rights agreement by either the transferee or the transferor, including the expiration of court proceedings by which the transferor is challenging the validity of the life rights agreement, that would affect the transferor’s status as owner of the real property.
- Limitation of Liability – Any limitation of the transferee’s liability under the life rights agreement for the transferor’s or transferee’s failure to comply with the plan set forth in the agreement for the transferee’s care, treatment and supervision. See generally, ABA Commission on Law and Aging, Consumer Tool Kit for Senior Housing (2002).
Life Rights vs. Other Common Agreements
Licensing Agreements: While life rights are one variety of licensing, there are many other licensings that can be granted by the spokesperson. Many times the similar subject matter may overlap between life rights and other licensing agreements (which itself is a broad term). For example, one can get a licensing agreement to use an individual’s trademark or symbol to sell a product – like a celebrity’s name or image on a toothpaste. People even buy trademarks and then grant sub-licensing or agency agreements. Another example is when you grant a license to use your likeness – which indeed may be similar to a life rights contract, but not always. Sometimes the license for the likeness is limited in nature and does not reach multiple forms of media or for the purposes you would imagine. For example, if you enter into a license agreement to use a celebrity’s likeness to sell Bobblehead dolls, that would be relatively limited in scope and you might negotiate a broader life rights deal separately. Life rights contracts are typically more broad and involve agreement over a greater number of media than a likeness license.
Right of Publicity: In many states, individuals can have a right of publicity, which protects against the unauthorized commercial use of an individual’s name, photograph, voice, or likeness. If used in this context, one arguably may not need a life rights agreement, but the law is not clear on whether the scope of using a name or image for commercial purposes (as opposed to biographical use). The law also may vary in different jurisdictions. For example, in New York, if you are using an image or name for purposes other than a biography (such as a reenactment done in a television commercial), you may need permission to use that name or image for commercial purposes.
Life Rights Agreements: What to Use Them For
In the media and entertainment industries, life rights agreements are most frequently used in the context of film, television programming and publishing (books and periodicals).
Life rights agreements grant authorizations for producers to use in film and television, or authors to use in a book, the rights to the personal experiences, the reputations and even the photographs of a person – most commonly a deceased celebrity or public figure. In exchange for an author or producer obtaining these rights, a typical life rights agreement requires that author or producer pay a fee, or otherwise provide some other form of compensation to the life rights holder.
In film and television, these agreements may be broad, granting all rights to a life story , or may be narrow, i.e., granting the right to use a photograph of an individual without licensing the full scope of rights.
The most frequent use of life rights agreements in film and television is in connection with a biographical film or television series. In this capacity, the life rights are often granted by the celebrity’s estate or survivors (nearest family members, such as spouse, children or grandchildren). The accord can be included as a contractual obligation in a settlement of a probate case, or simply be negotiated as part of an estate planning effort with the goal that that property, and/or the ability to exploit it commercially, will be used in accordance with the wishes of the decedent, even after his or her death.
Practicing Life Rights Agreements
Whether either the book or the movie option has been purchased, it is time to negotiate a life rights agreement. Usually, the showrunner, producer, or studio will draft the life rights agreement. The creator’s agent or attorney may send it over to an adviser for revision or comment. If the creator does not have an agent or attorney, it is very important for the creator to retain one who is experienced in entertainment law and who has experience negotiating life rights agreements. It is important to have someone with experience in negotiating both types of life rights agreements if possible. The life rights agreement for motion pictures and television will be based on the life rights taken for television. Aside from that, there will be a number of factors that will be specific to the motion picture or television production. The first list below contains the typical items to consider in a life rights agreement:
· Compensation: If possible, a producer should seek payment up front instead of a percentage of the profits.
· Approval of screenplays and other written materials.
· Changes to materials.
· Sign-off by decedent’s heir(s) or successor(s).
· Restriction on use of biographical information after the term of the agreement.
· Right to consultation with producers, director, and actors.
· Right of entry onto property.
· Written approval of other aspects of productions – i.e., studios and filming schedules.
Some of these rights will not be as important to the creator with the movie option or other limited life rights. For example, compensation and approval of screenplays will be more important to the creator with the life rights. Often, they can be contracted out of the agreement. For either side, items to negotiate in favor of the writer include:
· Duration of the agreement.
· Limitations on the rights being transferred to the producer.
· Limitations on the territories in which the writer’s name and likeness could be used.
· Negotiated for approval of promotional materials.
· Limitations on the time in which a life story can be published before it becomes part of the public domain.
· Limitation on use and unlawful appropriation and wrongful interference.
· Liability for misrepresentation or claims for appropriation of personality.
The following list contains items that are typically negotiated only by the producer or studio:
· The right to make unlimited adaptations from the original life story.
· The right to assign the life rights to a third party.
· The right to use the writer’s name and likeness for publicity and advertising without approval.
· No sign-off from heirs or successors is required if the writer is deceased before the execution of the agreement.
· The right to a certain number of credits in promotional materials without approval.
Potential Challenges and Legal Issues
One of the primary challenges associated with life rights agreements is that they are typically terminated upon death. If the family disagrees with a long-term care facility’s decision regarding the termination of a life rights agreement, it may be difficult to obtain an expedited injunction to block evictions in certain jurisdictions. In California, for example, there are statutory requirements exempting certain types of disputes from expedited proceedings. Thus, even if the family is able to pay upfront legal fees (which could be a substantial amount of money), it may take some time to secure an early hearing on the dispute.
An additional complication arises when a dispute arises between an independent resident and either a family member or family members of another independent resident that may threaten the independent resident’s tenancy. An example would be when the family matriarch resident has a son who threatens to evict his mother’s neighbors if necessary. Here, the independent resident will typically find herself protecting her right to live out her life in a unit she paid for, which may not be the same as blocking an eviction that would impact the entire community. The independent resident may wish to protect the family matriarch resident from losing her home, but may feel conflicted with her own interests, especially if her family had no role in preserving her right to remain in the community and the cost of litigation is not de minimis. When the family member or members are encumbered with caregiving responsibilities, this can also complicate the dynamics.
In addition, obligations to accommodate the needs of residents with disabilities under the Fair Housing Act ("FHA") may require actions that conflict with the management’s property management obligations under the FHA. For example, if one of the non-traditional residents has a disability, she may need to use service animals, which may violate the property management obligations or the terms of the life rights agreement. Families should pay close attention to situations that call for accommodation under the FHA because when family members begin using service animals, it may implicate the right of other independent residents to quiet enjoyment and peaceful possession of their units. Such situations usually arise when animals are used in uncontrolled settings or if animals are used that are physically disruptive, such as snakes, wild birds, or larger dogs.
The most significant challenges arise when the management team and residents have a very different understanding of the resident’s intent and expectations. In these circumstances, a legal dispute is usually unavoidable. Issues may arise over transfers of personal property (especially if the resident signed over title to his or her vehicle which a family member plans to keep for his or her own use) or the management team may be found to have failed a resident in terms of addressing life quality considerations.
Case Studies In Life Rights Agreements
One of the most famous life rights agreements was the one that involved actor James Stewart. When his father died, Stewart inherited a lucrative real estate holding. In exchange for a portion of the income that he collected from the real estate, Stewart provided his brother with a life estate on the property. The agreement guaranteed the brother the right to stay in the property until he died. This division was in keeping with the intention of the father and also served to preserve the cash flow from the estate.
One of the more publicized life estates was the case of the deceased artist known as Amedeo Modigliani. Modigliani was a painter who lived in Europe. When he died, the issue of his estate became a legal dispute. Because there was no will, the court was asked to determine the proper beneficiaries. The dispute also pitted the artist’s former common-law spouse and their child against a woman who claimed to be a descendant. In the end, the courts awarded the artist’s common-law spouse the right to live in the artist’s property in Paris owned by the estate until she died.
The issue of the life estate at first appeared to be cut and dry because the prenuptial agreement signed between the common law wife and the artist named this property as belonging to that particular heir. Then a group of the artist’s heirs filed suit claiming that the property belonged to them . They were not the heirs named in the original will. What ensued was a legal battle that actually served to benefit the artist’s common law spouse and the child. The court allowed the widow to reside in the apartment until her death. By this time, the custody of the child had been decided. The property served to dramatically enhance the judgment awarded in that case. The court also ruled that the artist’s common law spouse could continue to draw the rents from the property until her death.
The case of Ruby Mae Long v. Regional Staff Services, L.C. is another example of a prominent life estate agreement. Virginia authorities removed a 95-year-old retired social worker from her home for the elderly, while she was recuperating in the hospital from a broken leg. Long had delegated the responsibility of her financial affairs to her daughter. Without her daughter’s knowledge, the nursing home administrator recycled the durable power of attorney form and appointed the daughter to the position. The administrator also selected a new physician to serve the resident. The family had no idea that their mother had entered a life estate agreement with the nursing home until it filed an ejectment action and brought the octogenarian before the court. The court dismissed the ejectment action and awarded the Long family legal fees in the sum of $180,000.