Tag Archives: continued care retirement communities

Business Restructuring and Bankruptcy: The Challenges of Restructuring Continuing Care Retirement Communities

The economic downturn has significantly impacted continuing care retirement communities (CCRCs), which provide elderly retirees and other residents with an alternative to conventional assisted living facilities and nursing homes. CCRCs allow residents to live independently while they are in good health, and then to receive increasing levels of care as needed, up to and including levels of care provided in traditional nursing homes. Residents of CCRCs prefer this type of care because they can stay in one facility that they choose as their health deteriorates.1 As consideration for a promise of lifetime care, many CCRCs require residents to pay large entrance fees (in the six-figure range) and additional monthly payments. The initial entrance fee deposits provide cash flow to operate the CCRC, and are used to pay for a range of care services, meal plans and a variety of on-site amenities and activities. In addition, most resident agreement contracts with the CCRC permit the entrance fee deposits to be used to pay for debt service and to pay for the costs of construction of the CCRC. The resident typically retains a right to receive a refund of the deposit from the CCRC when the resident dies and/or the resident’s unit is sold to another incoming resident who pays a new entrance fee deposit and then reoccupies the unit.2 If, however, a CCRC sells unoccupied units, rents units to a new resident, cannot sell new units and/or is insolvent, the CCRC may not have sufficient funds or a legal obligation to refund entrance fees to residents that wish to leave the CCRC.

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