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Residents Versus Tenants: Fee Fairness at Assisted Living Facilities

A landlord of residential property is restricted on what fees can be charged to a lessee, but are these restrictions the same for assisted living facilities (ALFs)?  ALF/resident relations differ from traditional landlord/tenant relations. (For the purposes of this blog, ALF residents will be referred to as residents and landlord lessees as tenants.) While the two relationships share many similarities, ALF residents are provided with additional healthcare monitoring and services that a landlord would not be expected to provide.

The Massachusetts Supreme Judicial Court was recently presented with the opportunity to distinguish between the permissible charges landlords and ALFs may charge their tenants/residents. Landlord-tenant law falls under the restrictions of Massachusetts Security Deposit Statute, where ALFs are bound by the state’s ALF statutes – both laws being very similar in nature. (ALFs are called assisted living residences (ALRs) in Massachusetts.  For purposes of this writing, the more common ALF will be used.) Courts in the state were split on the issue of the extent that the security deposit statute might apply to ALF residents; and, if so, whether ALF statutes permitted additional charges beyond those listed in the security deposit statute.

Case Brief

The executor of a resident’s estate sought to recover specific fees charged to the resident as a “community fee,” arguing that the charges violated the state’s security deposit statute. The ALF argued that ALFs are not bound by the security deposit statutes, only the ALF statutes, and its motion to dismiss was granted. Because the state had been split on the issue, the Massachusetts Supreme Judicial Court transferred the case to its court by its own motion.

Here, the resident signed an agreement that included payment of the first and last month’s rent and a “community fee.” The “community fee” was said to include administrative costs, coordination plans, moving services, and a replacement reserve for building improvements.

Massachusetts Security Deposit Statute

The security deposit statute limits the permissible charges to first and last month’s rent, a security deposit the amount of the first month’s rent, and the cost for the purchase and installation of a lock and keys. This statute is applicable to traditional landlord/tenant relationships; however, its applicability to ALFs, if at all, was the basis of the question presented.

Massachusetts ALF Statute

ALF-level attention rests somewhere between age-restricted living and nursing care institutions. The ALF statute outlines a few specific charges that are permitted and references other “applicable” laws, but do not include particulars on what those laws are. One question that this case presents is whether the security deposit statute is an “applicable” law within the bounds of the ALF statute. Logically, without some sort of consumer protections, ALFs could potentially charge outrageous entrance fees and those residents would be significantly disadvantaged compared to a similarly situated peer residing in an independent living situation or one living in a nursing home facility (both of which are protected by consumer protection laws).

The ALF statute’s architects are presumed to have been aware of existing laws, i.e. the security deposit statute, when the law was enacted and the “applicable” laws language was included. The ALF statute does not explicitly name the security deposit statute within its text, but not including it in its interpretation would create a disadvantage for the residents of ALFs. The Court determined that the security deposit statute was intended to be included within the ALF’s limitations.

Fees Beyond the Security Deposit Statute

Since the court determined that the security deposit statute is incorporated into the ALF statute, does this prohibit other fees beyond those enumerated? According to the security deposit statute, only charges for the first and last month’s rent, a security deposit the amount of the first month’s rent, and the cost of locks and keys are permitted. One would think that this is all that an ALF could charge as well; however, ALFs provide additional services over and beyond that of a traditional landlord.

ALF’s must assess the needs of the potential resident to see if the ALF is capable of servicing the individual’s needs – something landlords are not required to do. The prescreening for the needs of a landlord’s potential tenant was not an underlying intent of the security deposit statute; but it is for the ALF statutes. The ALF statutes outline very specific requirements that potential residents undergo pre-admittance. Thus, charges for the ALF-specific assessment services, those unrelated to charges listed in the security deposit statute, are permitted charges under the ALF statutes.

Community Fees

After determining that the security deposit statute applied to the ALF setting to the extent that the services were related to those found in the traditional landlord/tenant relationship – but did not apply to charges specific to the ALR setting and its required assessments of potential residents – the court moved onto whether the ALF’s “community fee” charge ran afoul of the security deposit statute, or if it were sheltered by the additional permissions of the ALF statute.

The answer: it depends. The Court decided that the motion to dismiss should not have been granted because the vagueness of which the “community fee” is described in the ALF agreement. This leaves question as to whether the items – particularly the “building maintenance fee” – are saved by the ALF statute, or if they violate the security deposit statute limitations. This Court reversed and remanded the case to the Superior Court.

In Sum

The Court’s final goal was to harmonize the intent of the security deposit statutes with that of the ALF statutes. Ultimately, the laws regulating the traditional landlord/tenant relationship and the ALF/resident relationship align in regards to the security deposit statute, but diverge in regards to charges outside the scope of that law – i.e. charges related to ALF assessment costs. The Court determined that the resulting understanding is that “the security deposit law was meant to be incorporated by the ALR statute to the extent that it is applicable to ALRs, but ALRs may also charge additional upfront fees for the distinct services that such facilities provide that are not applicable to ordinary landlord-tenant relationships.” Whether the “community fee” in this case is permissible or not under the foregoing opinion will now depend upon the details found by the lower court.

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