✨ Residence and Care Agreements

Our community is part of NSC (National Senior Communities - which in essence is a way to maintain a not-for-profit status for Erickson Senior Living communities)

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Our community is part of an "Obligated Group" that includes 2 communities in NJ, 2 in MA and 1 in PA. The other 3 communities in Virginia are not included I suspect because they are still in "development stage". The Erickson communities in Maryland were not included, since Marylend law prohibits a CCRC from incurring liability for another community.

The group was able to issue bonds at a favorable rate, partly due to the financial strength of our community. We have a very strong balance sheet and didn't really need to issue any bonds, but the "group" did help the weaker community. Issuing the bonds also allowed NSC to invest surplus funds from the strong communities into a "Trust", to be used for future (as yet unspecified) development of the "Enterprise" (whatever that means).

Fortunately in our case, four of the six communities maintain occupancy rates of 98%+ in IL, and consistently generate budget surpluses, which is virtually built in, since Erickson specifies that the annual budgets are based on no more than 95%. The likelihood that one of the group communities would default on it's bonds is low.

I would agree with Douglas' suggestion that a Federal Law is needed, although I doubt that would be a priority in the upcoming Congress. Until that Utopian day, efforts need to be made at the State level, since local reps might be more approachable / receptive.

Of the two possible rationalizations given for using funds provided by the residents of one community for use by a second community, only the second (using funds from one community to prop up a second established community that is facing financial difficulties) seems justifiable. Even here, I think that the decision should involve the consent of the residents of the community providing the funds, and should follow 'best business practices' of 'loaning' the funds to the stressed community (even if at 0 interest), with at least some real assurance by the financially stressed community of 'paying back over time' the funds advanced.

I can well understand the dismay of CCRC residents about their funds being used in support of other communities operated by the same organization, when they entered their community with no awareness that that could happen.

Certainly, prospective CCRC residents should be informed up front in detail about how this works before they make a decision about entering a particular community.

But this sharing of resources occurs in two different ways: either to finance the start-up of a new community or to help an established community that is experiencing financial difficulty.

The latter could be an advantage, in that if the residents’ own community were to fall on hard times, help would be available. This is a form of insurance—paying into a common fund to mitigate the risk for all participants.  Some prospective residents might view this positively.

It’s similar to the CCRC type A arrangement itself, in which all residents pay more for the assurance of future more intense care at the same independent living rate, even though they may never need the extent of care that is available.

Unfortunately, the injustice of using funds paid to one CCRC (community) being used for expenses of a separate CCRC (under the same corporate management) appears to be altogether too common. Here in New Mexico, we have several instances of this, with the CCRC I'm a resident of in Santa Fe being one.

While it is unfortunate that the Oregon case was settled out of court (rather than with a ruling by the court), the fact that laws relating to CCRCs are state issues means that the legal battle has to be fought case-by-case (which is highly problematic to the residents bringing the action, being the much disadvantaged partner in the CCRC contract). While from the resident's standpoint the case may be a clear misuse of funds, the consequences can be dire, sometimes leading to loss of the resident's stake in the CCRC when the corporation declares bankruptcy. At the very least, it means the resident will be paying for expenses that are of no benefit to them.

What appears to be needed is a federal law that clearly states that resident fees paid to a named life care community cannot be used by the corporate entity for expenses of another, separate community.

The nonprofit HumanGood has about 77 senior living communities, both affordable housing and life plan communities. They have grouped the facilities into "Obligated Groups". It is my understanding that each facility in the "Group" is financially obligated to the rest of the group to help with bond repayment, if necessary. I don't know to what extent this happens.

There was an interesting case in Oregon where CCRC resident fees were being used to  finance an unrelated facilities. This case and related issues were clearly described by Dan Seeger, former NaCCRA President, in a webinar https://www.youtube.com/watch?v=xxtOPrsqeqQ&t=57s.

This is still an issue today and it would be interested in hearing about specific cases and their resolution.

Daniel Ancona

NaCCRA Board Member

The corporate entity holding the property (and providing services) to the resident campus with which I signed my Type A contract has now added a second campus, with a Type A contract tied to residence at the second campus. In the process, the parent corporation has used funds from my contracted campus to fund massive expenses of the second campus, which I believe violates the terms of my individual contract with the corporation (in my reading of the contract, the only legitimate use of the funds I pay are for the ownership of the named campus, operating expenses thereof, and payment for services rendered under the contract to the residents of the campus). In other words, it appears to be strictly a matter of contract law. Are any NaCCRA members aware of court rulings on this issue?

Doug Thayer