As regular readers will know, I am a long-time “student” of senior living options generally, and Continuing Care Retirement Communities (CCRCs, also sometimes called Life Plan Communities) specifically. I believe that a well-run CCRC is a beauty to behold — and for more than 20 years I’ve been hearing from residents who have convinced me that CCRCs can offer a dynamic opportunity for aging in the right place, in the right ways.
At the same time, in the instances where a CCRC becomes insolvent, especially if the CCRC is in bankruptcy court, residents may rightly be frightened.
In Port Washington, New York, one CCRC has had a particularly long and frustrating history. The Harborside (formerly Amsterdam House Continuing Care Retirement Community, Inc.) has hoped to find a new operating group, one capable of overcoming more than 10 years of economic ups and downs, and one with the resources and experience needed to turn around the declining occupancy ratio. My review of the pleadings makes it clear to me that many current residents have paid large entrance fees ($700k+), fees that were marketed, at least in part, as “refundable.” But the strongest bidder that was promising to honor refundable fee contracts on certain terms, Life Care Services, has pulled out of the bidding. The bankruptcy court and the New York regulators for CCRCs (which includes the Department of Health) are now facing creditor claims from the full gamut of service industry providers, creditors who have priority over the residents. These priority creditors stand to lose more “if ” the residents are promised more by a successor owner. Lots of tough math for business interests, the regulators, and the court in this fact pattern. But delay makes the possibility of a solution harder with every day that passes.
At the same time, this segment of the senior living industry does not look good, when the very reason for the existence of CCRCs — to provide a safe place for all levels of care for the residents’ remaining lives — is challenged. Residents “bought into” CCRC living because of promises made or implied throughout the marketing phases of the CCRC-Resident relations. But refundability of entrance fees, the availability of phased care, unique on-property services, and the simple “existence” of the community as something other than an apartment complex are at risk in this kind of a long-running history of insolvency. Tough choices for residents, too.
There is a big court hearing scheduled for November 20. It will be interesting to see if some solution emerges.
As I read about this history, I keep being reminded of other tough insolvencies for CCRCs and other forms of senior living. Residents of CCRC rely on the actual and implied promises of financial stability of their communities. Reliance is a hallmark element of fiduciary duty law, which is separate from and, perhaps above, contract law.