Financial Fairness

There is a presumption that businesses that operate on a basis of trust will be trustworthy and will seek to provide equity to their customers. Despite this popular impression, there is little in the law to protect people from making bad choices. That is as true for Continuing Care Retirement Communities (CCRCs) as it is for perfume.

One common law concept does provide some protection. That is known as the covenant of good faith and fair dealing. It’s assumed that the parties entering into a transaction with each other will do so in a spirit of openness consistent with the good faith that they expect of each other and the fair dealing that what is promised will be delivered. The alternative is trickery.

Man8_8107744Of course, manipulation can be part of the sales process. Many salesmen have suggested that unless a buyer acts immediately the terms will never again be as favorable as they are right then. That is manipulative behavior to try to encourage prospects to act without delay. It’s the kind of ruse that wise buyers expect when they are bargaining with a salesman whose interest is different from their own.

Making the decision to move to a CCRC, however, is more personal than many other purchase decisions. We expect to haggle when buying a car or even a Christmas tree, but haggling is not part of the prospect in choosing a trusted provider who is going to house and care for you for the rest of your days.

Purchasers of publicly traded securities are shielded by an elaborate web of regulations mandating that material information affecting an investment must be disclosed. Unfortunately, there are no such protections for people who invest in Entry Fee Continuing Care Contracts, even though such investments often require people to sell their homes to raise the money and the investment may well take the bulk of an individual’s or couple’s life savings.

Several of the NaCCRA Model Laws provide needed protections to prospective and existing CCRC residents. Of course, fairness is implicit in many of the proposed laws, but it is more central to some than to others.

Among the model laws are the Model CCRC Transfer Act, the Model Governance Act, the Model Nonforfeiture Act, the Model Financial Responsibility Act, and the Model Prepaid Medical Reserve Act.

In addition, there are model standards for contract provisions, new ventures such as continuing care at home, and provisions by which investments of at-risk ownership capital in the form of Entry Fees can provide resident ownership.