Wednesday, May 20, 2015

Massachusetts Case Demonstrates Significance of Contracts in Senior Living Options

This week I attended the 16th Annual Meeting of the Massachusetts Life Care Residents Association (MLCRA) near Boston.  Having last met with the group in 2011, I was impressed with the residents' on-going commitment to staying abreast of legal and practical developments affecting life care and continuing care (CCRC) models for senior living.  Their organization has some 800 individual members, representing a majority of the communities in the state. 

MILCRA Annual Meeting 2015In 2012, MLCRA was successful in advocating for passage of amendments that substituted "shall" for "may" in the laws governing key disclosures to be made to prospective and current residents. 

My preparation for the meeting gave me the opportunity to read one of those troubling "unpublished" -- but still significant -- opinions that shed light on attempts to make consumer protections stick.  Here the "contract" trumped the statute. 

In a February 2014 decision in Krens, v. 1611 Cold Spring Road Operating Company, a son who sought refund of his deceased mother's $282,579 partially "refundable" Entrance Fee was denied relief by a Massachusetts appellate court, despite the fact that Massachusetts law expressly mandated that a continuing care contract "shall provide" for a refund to be paid "when the resident leaves the facility or dies." The reasoning? The actual contract provided merely that the refund could be paid "within 30 days of actual occupancy of the vacated unit by a new resident." More than three years had elapsed since the mother's passing, apparently without the unit being "resold" or rented, and therefore the CCRC operating company took the position that no refund obligation had been triggered.

The Massachusetts Court of Appeals ruled that despite the unqualified refund right mandated by state law, the son was bound by the contract he and his mother signed as the son had failed to seek "rescission" of the contract as  his remedy.  (How is that for a technical final exam question on contract law remedies!?) 

In discussing this case with the representatives of Massachusetts' communities, I said that regardless of the correctness of the law with this ruling, the result demonstrates a very significant, practical challenge for CCRCs. On one hand, it is understandable that the company will try to maximize its financial position.  On the other hand, when the "next generation" of potential CCRC residents -- here represented by the son himself -- gets burned by a noncomplying contract on a very key term, how likely is it that the next generation will move in?

It seems to me that MLCRA residents have some important additional topics to address with the legislature, such as the continuing need for "teeth" in a state's continuing care law, to make intended protections more than an illusion. The Massachusetts chapter of LeadingAge, the trade association for CCRCs and other major senior living industry players, worked with MLCRA on the last round of statutory amendments.  Let's hope they will be a helpful partner in any next effort.

Consumer Information, Estates and Trusts, Ethical Issues, Health Care/Long Term Care, Housing, Property Management, Retirement, State Cases, State Statutes/Regulations | Permalink

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Thank you for this blog post. Commenting as arguably the best-informed baby boomer in Washington State on the subject of legal protections (and absence of same) for consumers in the landscape of senior living and services, this resonates with me.

I appreciate how you keep aging baby boomers in one state cognizant of what is happening in another state.

Posted by: Liz Tidyman | May 20, 2015 3:02:14 AM

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