Thursday, June 3, 2021
With lockdowns being lifted in commercial arenas, I'm once again hearing from residents in Continuing Care Retirement Communities (CCRCs), also sometimes called Life Plan Communities, as well as other similar senior living settings. The most frequently raised concern is "how can management of my community make major changes in services and amenities without asking us if we agree to a new contract?" Sometimes I am able to recommend local legal counsel for the callers.
As a matter of theory, there's a traditional "law-based" answer to this question, with state-specific tweaks. And then there is what happens all too often in real life.
Generally speaking, the law provides that unilateral attempts by one party to make significant changes in the parties' duties under a contract are not legally effective. Here's one state Supreme Court's typical statement of the rule of law (written in the context of considering an employer's unilateral attempt to change an employment contract):
The cases dealing with employment contracts are merely part of the general rule that recognizes no difference between an express and an implied contract.... As a result, to effectively modify a contract, whether implied-in-fact or express, there must be: (1) an offer to modify the contract, (2) assent to or acceptance of that offer, and (3) consideration."
Demasse v. ITT Corp., 984 P.2d 1138, 1144 (Az. 1999). As my law students know, "consideration" is a legal term of art, and generally means a "bargained for exchange." In the context of modification of existing agreements, this often involves new financial terms or mutual concessions in the parties' respective duties.
But, the real-life situation is that the party with the greater bargaining power simply ignores the bargaining process altogether. In employment contexts, that's the employer. They treat their notice of major changes as "the new agreement" simply because no one objected. That's not how the rule of law is supposed to work, but it does, all too often. Indeed, I will confess that the very reason I started teaching Contract law was my growing familiarity with disputes in senior living scenarios that made me wonder if there was something about contract law I'd missed back in my own days as a law student. There wasn't (although the full explanation would require a law review article) -- but the world keeps spinning along with the more powerful party in many commercial contexts able to avoid the contract because they are "in charge."
Residents don't, however, have to put up with this. Resident groups in individual CCRCs and those living in states where there are regional organizations have learned to flex their considerable muscle, both in negotiations with management and with state regulators or legislators. I'm also hearing from more attorneys who are representing residents in negotiations, or when necessary, in arbitrations or on lawsuits alleging breaches of contract and fiduciary duties. Plus, I'm hearing from more states officials who are asking good questions.
It not a secret that I like CCRCs and I like them a lot. I've visited CCRCs throughout the U.S. and they tend to be vital examples of senior living, offering community engagement, social networks, friendly-settings, caring service providers, and the reassurance of assistance if needed. Many forms of senior living options are struggling with the impact of the pandemic, with enhanced pressures on facilities to balance their budgets. This is probably triggering a new upswing in attempts to make unilateral changes.
I have worried, long before the pandemic, that an episodic history of paternalistic or peremptory changes by management in CCRCs can undermine public confidence in this format as a viable alternative for seniors. CCRCs have their highest value for consumers when residents are making the transition before becoming too frail to appreciated the amenities and services. New residents may be unlikely to "invest" in CCRCs if they lack confidence that promised services will be available when needed.