✨ Residence and Care Agreements

The reality of life is that most people don't read the contracts they sign. If you want to buy that new car, you accept the dealer's terms -- negotiating the boilerplate isn't an option. If you want to use that software you agree to the terms of service. In most cases consumers believe that the terms will be reasonable, and that they will be treated fairly. There is mutual goodwill, and an expectation that a business that abuses or cheats its customers will not prosper in a competitive marketplace.

With managed senior communities, prospective residents visit and talk with sales staff, meet residents, and generally try to be sensitive to the "vibe" of the place. They make assessments about the cleanliness, attitudes of staff they meet, and the hospitality that is extended to them as visitors. If it seems welcoming and looks like a nice place to live they presume that it will continue to be. In short, the decision is largely based on the experience they have first-hand and the curb appeal of the physical plant.

But the commitment is not the same as buying a car or a home. For financial, emotional, and social reasons it's not easy to reverse the decision. We can't start over. It may be impossible to replace the nest egg invested. We don't want to separate from friends again, deal with the stresses and chaos of another move, and our physical resilience and health may factor in.

It's better to make the right decision the first time. Prudent prospective residents have an attorney review the contract and explain the potential risks, and clarify the rights and responsibilities the contract guarantees.

In this thread, I invite readers to comment on their experience. Did you have attorney review of your contract? Did you fully understand it? Were you surprised or disappointed by matters that came up subsequent to becoming a resident?

Richmond Shreve

NaCCRA Board Member

Forum Moderator

Agreed - it is so important to read the contract. Having a background in writing and negotiating inter-utility contracts I always read any contract before signing. Happily, at least when my husband and I moved in Jan., 2022, to La Vida Llena (LVL), a CCRC in Albuquerque, NM, the contract was quite reasonable. It is my understanding that most CCRC contracts have a provision to get a declining percentage of one’s entrance fee back over the first 4 or 5 years if one moves or dies (in which case their estate would get the partial refund). That is also the situation at LVL and I have seen a resident take advantage of that provision; however, I would say that 99.5% of our residents are very happy they made the choice to be part of LVL.

I went looking for an attorney to review a CCRC Residence and Care agreement for a for-profit community in Southern California. I found one who said, via email, that he had reviewed several and would do it. Said they billed hourly and the cost typically $3,000 to $4,000. Does this cost seem reasonable? I realize this is not alot of money to be comfortable with a $1M transaction and a lifetime of comfort. I will likely move forward with this after I get at least one other quote.

Check out NAELA. Your lawyer must not only know the meaning of the language used in the contract, they must also know the case law and the regulatory environment. Elder law attorneys focus on the laws, case law, and regulations that pertain, so they may not require so many hours to do the review. They may also know the reputation of the places you are considering.

Richmond Shreve

NaCCRA Board Member

Forum Moderator

Hi Richmond,

When my husband and I signed our CCRC contract with the owners of Medford Leas in Medford, New Jersey it was 2015 and we were in our 60s. We took 8 years to choose Medford Leas - condos in Florida, a CCRC in Princeton, New Jersey, another CCRC in northern New Jersey, and other local CCRC. Medford Leas was the best option at the time. About 2years later I got breast cancer and my husband died of ALS nearly two years ago.

Kay,

I take it you are pleased with Medford Leas. You have faced difficult personal issues. I assume that the management and the residents were supportive. Would you say that's the culture, or was it the contract that produced your experience?

Richmond Shreve

NaCCRA Board Member

Forum Moderator

I think that it is at least equally important to have someone familiar with the world of finance look at the community's financial disclosure statement.

June,

I agree. It's not just finance and accounting -- when residents buy into a life care contract, actuarial estimates are involved. It is a grim calculus, but life care agreements are priced using informed guesses about end-of-life medical costs. Some of us will die peacefully and quickly, while others will need lengthy periods of care. Some CCRCs get into financial trouble because they don't maintain the reserves they should have to fulfill their contracts. Actuarial reports assess such assumptions and reserves in ways that generally accepted accounting practices (GAP) doesn't.

Richmond Shreve

NaCCRA Board Member

Forum Moderator

Back when I was considering various CCRCs, I became aware that their financial accounting had some unique aspects that most accounting professionals were not equipped to understand. I identified the few accounting firms that had audited the financial reports of a lot of CCRCs, and was able to get one of the auditing staff of one firm to scrutinize the report of one CCRC I was particularly interested in. (This firm was not the auditor for this CCRC.)

All she had to say was that in general, the CCRC was in good shape. This was disappointing in that I had hoped to get a detailed picture, with explanation of why certain things were favorable, or unfavorable. She would not provide this, nor would she bill me, even though she had, at least, provided an opinion.

Another way of getting an understanding of a CCRC's financial health is to purchase the publication put out by CARF International, "Financial Ratios & Trends Analysis”. It provides a thorough explanation of the financial ratios that CARF uses as benchmark data for the CCRC field. With a CCRC's financial report in hand, you can calculate the ratios yourself. It also provides various graphics to show context and trends for each ratio. Also tables of median ratios for all CCRCs covered by CARF, broken down by contract type, Fitch ratings, etc. (But no data on any individual CCRCs.)

I wonder if good financial means the CCRC won’t go bankrupt like Harborside did.