Senior living facilities garnered an important legal decision
in their favor this summer when the Illinois Appellate Court upheld the decision
of the Circuit Court of Cook County that protects "extended care facilities"
from liability for interest on building entrance fees. In an opinion written
by Judge Francis Barth, the Appellate Court held that the defendant, Classic
Residence Management, LP, an affiliate of Hyatt Corporation (and
the other named defendants) were released from the provisions of the Chicago
Residential Landlord Tenant Ordinance (RTLO) because the property in dispute
was an exempted "extended care facility."
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"Although the American public is quick to step forward in
defense of the elderly, it is equally important to protect the institutions
that care for them."
—Eric Macey |
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In May of 1998, the plaintiff, Lucille Antler, a resident of Hallmark, a 340-unit senior living facility, filed suit against the defendants alleging that they had violated the RLTO by refusing to pay her hundreds of dollars in interest on her building "entrance fee" and by failing to attach a summary of the RLTO to her residency agreement.
The allegation relied on the assumption that the facility's residents were protected by the RLTO, thus requiring the operators and owners of the facility to pay interest on the entrance fees that should be considered "security deposits" under the statute. The initial case was dismissed by the Circuit Court, but the decision was appealed.
Eric Macey, the attorney who represented Classic Residence in the case said, "This decision will protect the assets of "life care facilities" throughout the country that operate in cities where a similar Residential Landlord Tenant Ordinance is in effect."
The allegations presented by the plaintiff could have impacted the life care industry nationally. Because the term "life care facility" used by the Hallmark facility is not specifically defined within the RLTO, the defendants were challenged to prove how the facility differs from a normal apartment complex. Like many senior living facilities, Hallmark provides its residents with a variety of special services, including escort services, medication reminder service, assistance with bathing and dressing, on-site medical consultation, and in-unit emergency services notification, in addition to more standard apartment services like laundry, housekeeping, and scheduled transportation, etc. As a facility operating under the Life Care Facilities Act (210 ILCS 40/1), the Hallmark is responsible for assuring that resident's care requirements are ultimately met, either within or outside the facility. Because of this, the residents receive priority status at a nearby long-term care facility if such care is needed. Based on this level of care, the Appellate Court determined that the Hallmark, and facilities like it, should be set apart from traditional landlord-tenant agreements.
The court's decision should be a welcome one to all companies that own or
operate life care and extended care facilities for the elderly. According to
Macey, "Although the American public is quick to step forward in defense
of the elderly, it is equally important to protect the institutions that care
for them."
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At the Half — REITs and REOCs Up 15 Percent
At the midpoint in the year, REITs and publicly traded real estate companies
had outpaced most other market indexes. Through June 30, the NAREIT Public Equity
100 Index climbed 15 percent. That performance was well ahead of the Dow Jones
Industrial Average, NASDAQ Composite and S&P 500, all of which were in negative
territory. Only utilities rivaled REITs and publicly traded real estate during
the first half of 2000.
NAREIT Vice President and Director of Research Michael R. Grupe explained that,
"Returns of the other major indexes were more subdued as the outlook for
inflation, Federal Reserve interest rate policy and corporate earnings became
more uncertain, and as investors appeared to become less comfortable with the
valuations of at least some high-flying technology stocks."
"The REIT rebound is now well established and, with strong and stable
earnings growth, that bodes well for the remainder of the year," he added.
NAREIT's Public Equity 100 Index tracks the performance of the 100 largest public
REITs and real estate operating companies (REOCs) in the United States. The
index can be accessed on the NAREIT web site at nareit.com/research/dailyindexes.htm. |
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