Continuing care retirement communities (CCRCs) allow residents to change their housing environment to meet changing needs without relocating to a new community. Healthy retirees live in a part of the CCRC campus that is devoted to retirement community housing, complete with amenities that may include swimming pools, housekeeping, and dining halls. The community takes care of landscaping and other property maintenance issues, leaving residents with free time to enjoy their retirement.

If a resident develops a disability that requires continuing care, the resident moves to an assisted-living facility on the same campus. If the resident eventually has a need for around-the-clock medical care, the resident moves to a nursing home within the CCRC. Some CCRCs also have memory care units for residents who suffer from dementia. Since all residential facilities are located on the same campus, residents easily maintain connections with friends and neighbors as they move from one facility to another.

While CCRCs provide a life plan solution to retirees who anticipate that their care needs will change over time, CCRC contracts can be confusing. Most CCRCs offer multiple contract options at different price points. Retirees who do not have experience interpreting contracts will usually benefit from consulting a lawyer so they can make a fully informed decision about the option that will best meet their needs.

Entrance Fees

Entrance fees are typically required to purchase the opportunity to live in a CCRC. After paying a substantial one-time entrance fee, residents make smaller monthly payments that may or may not change over time, depending on the contract they select.

The entrance fee funds care services the resident may receive in the future, including assisted-living or nursing care. The CCRC may base the fee on several factors, including the retiree’s age and health at the time the retiree enters the community and the level of service the retiree requests. Entrance fees are usually substantial, often approximating the cost of a home purchase.

Some entrance fees are nonrefundable. Others — known as declining scale refunds or amortizing entrance fees — can be partially refunded if the resident chooses to move out of the CCRC. The amount of the refund typically depends on the length of time the resident has resided at the CCRC.

Entrance Fee Risks

A recent 2023 lawsuit in Tennessee illustrates the potential risks associated with CCRC entrance fees. The plaintiff alleges that he relied on a website advertising a “beautiful senior living community” that featured trails, water aerobics, and musical performances in an auditorium. Missing from the website was information about the cost of entering the community.

The plaintiff contends that he was not given any information about entrance fees until he provided his financial information, including his income and the value of his home and investments. The plaintiff suspects that the CCRC owner does not calculate an entrance fee until it knows how much money a senior can raise. 

The plaintiff alleges that he believed his entrance fee of almost $700,000 was the purchase price of a unit in the CCRC. In fact, he only purchased the right to live in the community. He contends that he was misled by references to the “price” of a unit and the “closing” of a “sale.” The website also mentions the benefit of security “equity” in the property. That language caused him to believe he was purchasing something like a condominium when he was simply paying a fee to live in the CCRC.

The lawsuit claims that the plaintiff only learned that he didn’t own his apartment when he became dissatisfied with the CCRC and wanted to move. The CCRC characterized his entrance fee as an interest-free loan that it had no obligation to repay immediately.

As the case was not tried in court, the validity of the plaintiff’s allegations was not established. The contract included an arbitration clause, but the parties settled the case before it proceeded to arbitration.

Had the plaintiff reviewed the documents with a lawyer, he likely would have understood that he wasn’t buying property, wasn’t earning equity, and would not be entitled to an immediate refund of his entrance fee if he decided to move. The case illustrates the complexity of entrance fees and the importance of reviewing CCRC contacts with a lawyer so that decisions about residing in a CCRC are fully informed.