Understanding Residency Agreements – Part 1

Financial : Understanding Residency Agreements – Part 1

By Ryan Malone – www.insideeldercare.com
Part 1 is reprinted in part with permission of www.insideassistedliving.com, the authors of the critically acclaimed book, "By Families, For Families Guide to Assisted Living". See Part 2 of Understanding Assisted Living Residency Agreements for the discussion of Maintenance, Occupancy, Repairs, and Termination

What is a Residency Agreement?
One of the most daunting tasks of a transition to assisted living is the signing of the residency agreement.  Similar to a rental agreement or lease on an apartment, the residency agreement governs cost, services and termination options for your loved one’s stay in assisted living.
It always struck me as odd how little families pay attention to these agreements.  We spend hours test driving cars or strolling through the mall, but oddly, very few people read these agreements in detail.  And even fewer take them to an attorney for review.

By Families, For Families Guide to Assisted Living

Let’s pause for a brief disclaimer:
I am not an attorney.  I am writing these posts with the input an attorney who specialized in contracts.  The posts are not intended to provide legal advice, and I strongly encourage you to review any legal agreement with a qualified attorney.

Back to the fun…
If you Google search “assisted living residency agreement”, you will find many agreements from state or local agencies or assisted living facilities.  For the purposes of this article, I’d be walking through an agreement from a large, corporate-owned assisted living facility.  While many agreements may be smaller, this particular agreement is relatively thorough, easy to read and provides a great subject for discussion.  And with the consolidation occurring in the industry, it makes sense to start there.


Core Components of a Residency Agreement
A residency agreement has many specific sections, but they can be grouped for the sake of discussion into several topics.  They are:
•    Accommodations and Term. This topic deals with the actual unit being rented and the duration of the residency agreement.
•    Fees, Core Services and Meals.  This topic sets the fee schedule and identifies both included and extra costs.  This topic also discusses the “what, when, where, how” of meal service.
•    Residency Qualifications. This topic discusses the qualifications required to be admitted to the facility and maintain residency.
•    Maintenance and Use. This topic communicates the service levels regarding building and unit maintenance, and identifies how the rented unit is to be (and not be) used.
•    Termination, Legal Stuff and Arbitration. This topic sets how the agreement can be terminated and includes a lot of standard legal language. One important item discussed in this section it arbitration,

This sample contract is from a major corporate assisted living company.  Many of these contracts can be found by searching Google, but I believe this agreement serves as good example.

I. Living Accommodations
This section of the contract describes the unit and common areas to be leased by the resident.  The language in this section is fairly self-explanatory.

Some things to be aware of include:
•    Confirm the exact unit identified in the contract is the unit you’ve agreed to rent
•    Confirm your loved one, his/her friends and your family have the right to use common areas. These are areas of the facility that are freely available to residents, although some facilities put restrictions on who can use them.

II. Term of Residency Agreement
This section of the contract defines the term of the agreement and what happens at termination.  In the example contract, the resident’s rights to ownership are defined (there are none), the length of the agreement is defined, and the “what do to” at termination and with personal property is defined.

Things to be aware of in this section include:
•    The length of the agreement should be monthly.  Be cautious of longer agreements, especially if you have no termination rights in the event your loved one is no longer able to live there.
•    No auto-renewal.  In the event you agree to a term longer than monthly, ensure there is no auto-renewal clause.  As you may imagine from its name, auto-renewal automatically renews the  contract for a specified period of time, unless you notify in writing your desire not to renew.  If the term is monthly, then auto-renewal doesn’t matter as you’ll only have 30 days exposure financially.
•    Limit obligations at vacancy. Whether it be due to health or death, inquire about your obligations in the event your loved one is no longer able to reside in the community.  Some examples include: How long are you obligated to pay after your loved on has left? How long do you have to remove belongings?
•    Reasonable notice. Ensure your loved one is provided reasonable notice before the facility shows your unit to a potential resident.  24-48 hours is reasonable in most situations. Try to avoid anything that doesn’t require notice, as this can be stressful to your loved one.

These sections are fairly standard, but the above tips will help you ask the write questions and negotiate where you feel necessary.
BestAssistedLiving.com comment: Many large firms will say that their contracts were written by corporate and are not amendable. In that case you have to decide how important the issue is, and whether or not you can negotiate on some other aspect in its place.

III. Fees
The fees section of the agreement explains what services are provided and how much they cost.  Some costs are referred to as part of an Appendix.  This section should clearly articulate exactly for what the assisted living facility will charge you, the rules by which those fees are assessed, and the terms by which those fees can be modified.
I cannot stress enough - read this section of the contract in detail!

Some things you should be aware of:
•    Make sure you understand what factors may change the amount of the service fee.  For example, if the fee is raised, understand the amount by which fees can be raised and with what notice.   This may impact your budgeting.
•    You should have the right to terminate the agreement in the event fees are increased beyond a reasonable amount. Remember though, while termination may protect you from incurring additional financial obligations, it will mean you need to find a new facility for your loved one.
•    If there is a community fee payable in connection with processing the admission application, make sure you understand how much of that fee is refundable in the event your loved one chooses not to or is unable to moved into the facility.  Note: In our sample agreement, the applicant is only eligible for an 80% refund should the applicant decide not to enter the community after their pre-admission appraisal is processed.
•    If at all possible, try and negotiate a 100% refund, less any non-refundable deposit.

IV. Core Services
This section identifies what services and amenities are included for the base community fee.  This fee should have been identified in the prior section.

Some things to be aware of here:
•    Understand the real services included in the fees, asking for details about things such as meals, snacks provided between meals, whether residents need to pay for food outside normal meals, etc.
•    Clarify when community-provided transportation can be used.  For example, is it only available for planned events, or can it be used for individual resident doctor appointments or social activities? Is there a fee?  Some communities provide transportation to medical providers.  Find out whether there are restrictions on distance or whether the transportation benefit applies only to certain providers.
•    Are there any fees assessed when caregivers live with the resident?  Some facilities consider this to be another person and will assess heavy fees if private caregivers live with the resident.
The core services section is usually self-explanatory.  Read it carefully, brainstorm about what is not included, and ask questions when something is missing.  It is often effective to walk through multiple scenarios with the admissions director to understand how fees will be applied.

Part 2, Understanding Residency Agreements
discusses Maintenance, Occupancy, Repairs, and Termination.  For even more detail, check out Ryan Malone's highly acclaimed book, "By Families, For Families Guide to Assisted Living".