Argentum’s State Partner, the Massachusetts Assisted Living Association (Mass-ALA), secured a major victory last week with a ruling by the Massachusetts Supreme Judicial Court to dismiss the class action in its entirety and that assisted living providers may charge upfront non-refundable community fees to their incoming residents if those fees “correspond to initial ALR-specific services inapplicable to ordinary landlord-tenant relationships.”
Mass-ALA submitted an amicus brief last year in response to the case, Ryan v. Mary Ann Morse Healthcare Corp, urging the Supreme Judicial Court to reverse a precedent-setting lower court decision that deemed the fees unlawful and to be returned with over $2.6 million in compensatory damages and legal fees. In a new landmark decision in favor of assisted living providers, the SJC has reversed that lower court decision and ruled in favor of the defendant, a Mass-ALA member assisted living residence.
In 2019, the Supreme Judicial Court decided the case Ryan v. Mary Ann Morse Healthcare Corporation (“Ryan I”), wherein it ruled for the first time that assisted living residences organized and licensed under Massachusetts’ Assisted Living Law, M.G.L. c. 19D, were also subject to state landlord tenant law, and specifically M.G.L. c. 176, Section 15B, known colloquially as the Security Deposit Law.
At issue in that case was the legality of an assisted living residences’ practice of charging one-time, non-refundable upfront “community fees” to new residents. The resident who filed the lawsuit had tried to argue that since the Security Deposit Law only permitted residential landlords to collect four kinds of charges at the beginning of a tenancy—(1) first months’ rent, (2) last month’s rent, (3) a security deposit, and (4) a key and lock fee—any charges over and above these permitted charges, such as “community fees,” are illegal under the Security Deposit Law.
The court declined to prohibit the charging of community fees altogether and instead struck a balance between the state’s Assisted Living Law and its Security Deposit Law. Ultimately, the court ruled that, in Massachusetts, assisted living residences can charge upfront non-refundable community fees to their incoming residents, but only if those fees “correspond to initial ALR-specific services inapplicable to ordinary landlord-tenant relationships.”
After the Ryan I ruling, some assisted living providers in Massachusetts either paused collecting upfront fees or changed their residency agreements to clarify that these charges were solely for services related to assisted living residences—not for typical landlord duties. Despite these changes, residents have continued to file lawsuits post-Ryan I. Their attorneys have introduced several novel interpretations of the decision that have found support in lower courts. For example, one argument asserts that if ALRs mix community fee income with other types of revenue, such as rent or ancillary fees, they are violating Ryan I, making those fees entirely unlawful. Another position claims that such charges are illegal unless they exactly reflect the costs incurred by the ALR when onboarding new residents who pay them.
The Ryan I case was subject to extensive litigation as a certified class action over several years. Ultimately, a lower court issued a multi-million-dollar judgment against the provider due to its failure to segregate community fee revenues from other income streams. Rather than satisfying the judgment, the community elected to appeal, and the matter returned before the Supreme Judicial Court.
Mass-ALA submitted a brief to the Supreme Judicial Court for this appeal, presenting a unified stance of its Massachusetts member communities. The Supreme Judicial Court released its decision in “Ryan II,” overturning the lower court’s ruling and dismissing the class action entirely. The court stated that while an Assisted Living Residence cannot invent a connection between an upfront fee and specific intake services after the fact if such a link did not originally exist, the community in question had not done so. According to the court, there was sufficient evidence showing the community charged fees for resident assessment, preparing service plans, and other onboarding activities.
The Ryan II decision is a positive development for assisted living providers, and forecloses liability under the Security Deposit Law in circumstances where an ALR can prove both that the fee was charged for assisted living residences-related services that typical landlords do not provide. The Supreme Judicial Court rejected the premise that the amount charged as a community fee must mirror the assisted living residences’ costs exactly, but declined to express any view one way or the other on circumstances in which fees are charged in amounts exceeding the cost of providing intake services.
Although the Ryan II ruling is a step forward, it does not entirely overturn Ryan I. Massachusetts law still limits upfront fees to assisted living-related services. The Supreme Judicial Court simply refused to require separation of community fee revenues or tracking onboarding expenses to individual residents. The Mass-ALA member succeeded in Ryan II by proving substantial spending on qualified staff for pre-admission assessment, planning, and orientation for new residents, even without tracking every dollar collected.