Assisted Living Facility Can Charge Upfront Fees Without Violating Security Deposit Law

Massachusetts’ highest court rules that although the state security deposit law applies to assisted living facilities, facilities may also charge additional upfront fees for assisted living-specific services. Ryan v. Mary Ann Morse Healthcare Corp. (Ma., No. SJC-12708, Dec. 5, 2019).

Julia Ryan leased an apartment in an assisted living facility. Before she moved in, she was required to pay the first and last month’s rent and a non-refundable “community fee” of $2,800. According to the residency agreement, the community fee covered upfront administrative costs, an initial service coordination plan and move-in assistance, and building improvements.

After Ms. Ryan died, her estate filed a class action against the facility, arguing that the facility violated security deposit law by charging a community fee. State landlord-tenant law sets limits on the amount of a security deposit and what can be done with a security deposit. The trial court granted the facility’s motion to dismiss, concluding that the security deposit law did not apply to assisted living facilities. The estate appealed.

The Massachusetts Supreme Judicial Court reverses, holding that while the security deposit law applies to assisted living facilities, assisted living facilities may impose additional upfront fees. According to the court, the differences between assisted living facilities and landlords combined with the language of the statute allows “assisted living facilities to charge incoming residents initial fees that correspond to initial [assisted living]-specific services inapplicable to ordinary landlord-tenant relationships, without violating the security deposit statute.” Because the court finds there was a question of fact as to whether the fee in this case was appropriate, it remands to the trial court to determine “(1) the actual purpose and use of the fee, and (2) whether such purpose and use are for distinctive [assisted living]-specific services, rather than general maintenance or other aspects of a generic residential tenancy.”

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