PROMINENT attorney Peter Champagnie, King’s Counsel, in rising to the defence of elderly residents in strata communities at risk of losing their homes because they can no longer afford maintenance fees, has nudged banks to consider offering reverse mortgages to these individuals.

The attorney, who was reacting to Jamaica Observer reports emanating from the special select committee of the Senate now examining proposals for an Elderly Care and Protection Act last Tuesday, said the facility would act as a buffer for “elderly persons who live in a strata where they can no longer afford monthly maintenance fees, which tend to increase over time”.

“The concept of reverse mortgages should be a portfolio that’s offered by banks. That is, an elderly person in such a situation should be able to get the cash value of their property in hand/or in their account, which would sustain their existence until death, and after which the property would go to the bank,” Champagnie said in a social media post last Wednesday, which was endorsed by numerous individuals.

Speaking further with the Sunday Observer, Champagnie said, “Experience has shown in many strata corporations or in many residences that have a strata system in place, over time, the maintenance fee increases to the point where it is equivalent to what rental would be for the unit, and in those circumstances, where you have a retired elderly person… who may have committed to a set budget, in such a situation now they are no longer able to afford the cost of these maintenance fees, which are, indeed, necessary to maintain and upkeep the complex.

“So I am fully supportive of a culture where lending institutions would consider having as a part of their menu reverse mortgages, where if it is there is an elderly person whose property, for example, values $50-60 million, then they could give a reverse mortgage where that amount of money is given to them in their account and they are able to exist from it; and then, upon the death of the individual, the property goes to the bank. That’s a simple concept, in terms of the explanation of it, but in other jurisdictions it is employed,” the senior advocate added.

As to concerns that this approach might irk surviving relatives, Champagnie said: “The concern about beneficiaries and them being upset, that to me is a non-issue because an elderly person would only seek to utilise the portfolio of reverse mortgages in circumstances where their ‘loved ones’, for want of a better term, are not able to sustain them or perhaps the relationship that exists doesn’t encourage that or perhaps, in some instances, they really don’t have anyone. So it is always left to the owner of a property, once they have their mental faculties together, to decide how they dispose of their properties in the final analysis once it is registered in their name.”

In the meantime, he said the move would improve the image of banking institutions and help with the issue of estate planning.

“Over the last couple of years, banks, in general, have been in the spotlight in terms of the excessive interest rates that are charged, in terms of the fees, and I think it is high time now; yes, they are commercial entities and they are all about commerce, but I think it is important also, from a public relations point of view and for good services, for them to offer that kind of facility.

“It would certainly enhance their reputation. It would certainly be part and parcel of estate planning, and it would also deal with issues where elderly persons die without leaving a will and then you have that other issue in terms of it being a great concern of the State. So I am of the view that this is the way to go, because let us be frank about it, the pension that anyone gets, while it might for today be sufficient, as time progresses it will not be and if you have that asset then this is the best way to treat it,” Champagnie declared.

At the same time, the veteran attorney said protective legislation for Jamaica’s elderly “is long overdue”.

In 2016, then president and chief executive officer of Sagicor Group Richard Byles urged the Government to consider implementing a reverse mortgage programme as an additional source of funds for retirees. Byles said a reverse mortgage would empower a wide cross section of Jamaican seniors who are homeowners, as it does not require a monthly payment and would make up for any shortfall in pensions due to inflation.

Byles recommended that the Financial Services Commission (FSC) should look into the regulatory guidelines that would be required to develop such a programme.

“Many pensioners own a house and they should have the option, under the right regulatory framework, to be able to extract the equity from their houses and to use it as they see best,” he noted then.

In 2021, Petal James, chief of branches at JN Bank, said a reverse mortgage can provide much-needed funds for seniors whose net worth is mostly tied up in the value of their home.

She further explained that the proceeds from this loan can be used to supplement the borrower’s income, to pay monthly utility bills, as well as medical and other living expenses.

“If you are a retired homeowner who is 65 years or older and in need of money for your monthly living expenses, then a reverse mortgage is an option to consider,” James said. “Essentially, the homeowner would be borrowing against the value of their home and would receive the funds as fixed monthly payments for a specific period.”

She noted that, unlike a forward mortgage — the type used to buy a home — a reverse mortgage doesn’t require the homeowner to make any monthly loan payments. Instead, the entire loan balance and interest become due and payable at the end of the reverse loan period, which is agreed on by the borrower and the lender.

“At JN Bank, we offer a few options — two, three, four, or five years,” James stated. “Therefore, the loan period would be no more than five, but a minimum of two years.”

She said a part of the discussion that the bank will have with a potential borrower is how they plan to repay this loan at the end of the reverse mortgage period.

“This is called the exit strategy. Now it could be converted into an equity loan or you could add a guarantor in the form of a family member to the loan. This means the homeowner’s children, or other family members, may agree to repay the loan on their behalf,” she explained.

James also said that there are situations in which people have opted to sell their property to repay the loan.

“In this case, the person may decide to downgrade, so, for example, they own a five-bedroom home and decide to sell, pay off their reverse mortgage, and purchase a smaller property,” she said.

The banker added that a part of the qualification process is for the bank or lending institution to assess the existing property to determine its marketability.

JN Bank, said James, offers a reverse mortgage on a case-by-case basis.

Last Tuesday, more claims of the horrors endured by elderly Jamaicans — ranging from being turned out of their homes to being preyed on by developers who resort to criminal tactics to get their properties and lawyers making off with their retainer fees — captivated the attention of the special select committee.

A representative of Matilda’s Corner District Consultative Committee (MCDCC) in the Corporate Area, appearing before the parliamentary body at Gordon House in Kingston, in zeroing in on what she described as “the problem of accommodation”, called for more involvement on the part of the Commission of Strata Corporation in defending such individuals.

“In terms of policy, we would like to see the strata commission more involved in solving problems where other units in the strata seek to take advantage or even dispossess the elderly because of their vulnerability. So you could have a situation where they do investigations to find out what is the source of the problem and assist the elderly, because many don’t really understand the mechanisms involved or even have the information necessary to help themselves, so they become frustrated and develop all sorts of illnesses because they don’t know what to do,” the individual, who is also a justice of the peace, told the committee.

A strata, also known as a strata corporation or strata property, refers to a form of property ownership common in condominiums, townhouses, and apartment buildings. In a strata property, individual owners possess a portion of a larger building or development, typically referred to as a strata lot, while also sharing ownership of common areas such as hallways, elevators, and recreational facilities. Each owner is a member of the strata corporation, which is responsible for managing and maintaining the common areas and enforcing by-laws and rules governing the property. Strata properties are governed by specific laws and regulations to ensure orderly management and maintenance.

According to attorney Peter Champagnie, King’s Counsel, experience has shown that in many residences that have a strata system in place, over time, the maintenance fee increases and in circumstances where you have a resident who is a retired elderly person, who may have committed to a set budget, they are no longer able to afford the cost of these maintenance fees.