NBC 5 Responds

Proposed law aims to protect families owed large sums of money from retirement communities

Continuing care retirement communities tell NBC 5 Responds these refund delays of entrance fees, sometimes worth hundreds of thousands of dollars, were caused by the pandemic.

NBC Universal, Inc.

Many families across Illinois have come forward, voicing panic, frustration and fears over waiting years for large financial refunds they say they were promised by retirement communities.

It’s a common, contractual promise that’s part of most continuing care retirement communities' (CCRC) business model: Families agree to pay large sums of money upfront for a CCRC apartment unit – an “entrance fee” often ranging from $200,000 to $300,000 – on the condition that once their loved one moves out or passes away, and a new tenant signs a contract for the unit, a majority of that fee will be refunded (minus any repair costs necessary to rent out the unit.) 

But some families tell NBC 5 Responds they have been waiting years for those units to be occupied, with little to no communication from the CCRCs on their methods of showing those particular units that have refunds attached to them. The families say the refund timeline has stretched far longer than what was ever anticipated.

Retirement communities stress this is just an after effect from the pandemic; that this business model has worked for decades, and that it’s designed to help other residents who rely on these communities to take care of them, even when those residents’ financial means have run out.

Illinois House Representative Michelle Mussman (D-56th District) tells NBC 5 she’s heard from many families as well, and now, she believes there’s a need to protect these consumers by passing new rules for these kinds of refunds.

The new law was authored for families like Linda Horn of Lincolnshire, who said she’s still waiting for her entrance fee refund after her father passed away in 2021.

Horn’s father, Harold Pastron, lived at Sedgebrook, a retirement community in Lincolnshire, and she says his experience there was lovely with no complaints.

“It was a really good experience,” Horn recalled. “The apartments are beautiful. And it's a very nice place to live. But this is just, it's frustrating. And it's really unacceptable.”

What’s frustrating for Horn is that since her father passed away in April 2021, with his Sedgebrook unit vacated a month later, she says Sedgebrook’s communication has dwindled and their plans for showing the unit to prospective tenants were not initially disclosed.

More than two years later, the delay in fulfilling the contractual refund promise has left the Horn family in a financial hole, owed around $300,000.

“We're totally powerless,” Horn said. “There's no rhyme or reason to how they're showing units. That's very frustrating to us.”

Sedgebrook’s Executive Director, Mark Golliday, confirmed to NBC 5 that it has sold dozens of units since May 2021, 85 units to be exact, just not the unit that belonged to Harold Pastron.

After NBC 5 contacted Sedgebrook about the Horn family's refund, an email sent to the family and shared with NBC 5 stated Sedgebrook was "doubling the sales commission to further motivate our sales counselors to show and sell [the Horn family's unit,]" but there have been no updates since.

Golliday told NBC 5 that Sedgebrook does not keep any records detailing how often specific units are shown to prospective tenants, and these delays are not for a lack of trying, rather it can be traced back to COVID-19.

“The delay in making refunds is a result of a number of factors, many of which are related to the fact that our normal inflow and outflow of residents was dramatically disrupted in 2020 and 2021 as a result of the pandemic,” Golliday told NBC 5 by email. “In short, this has created a backlog of apartments in a market that remains driven by, and reliant on, the individual tastes and preferences of prospective residents.”

Sedgebrook’s answer is similar to what other CCRCs have said when dealing with families frustrated over refund delays. 

A Hyde Park family contacted NBC 5 Responds this past February after waiting nearly four years for a $300,000 refund from their late father’s retirement community that they were rightfully owed. (Watch the full story below.)

A Hyde Park family contacted NBC 5 Responds after waiting nearly four years for a $300,000 refund from their late father’s retirement community that they were rightfully owed. Lisa Parker has the story.

The list of families is growing for House Representative Michelle Mussman as well.

“The status quo is really not working well for many consumers,” Mussman told NBC 5. “They have all of your money and they have no legal obligation to pay you back on any particular timeline.”

This year, Mussman took the first step to change that, introducing House Bill 2494, which was modeled after a law passed in New Jersey in response to entrance fee refund delays by retirement communities.

If passed, the bill would amend the Life Care Facilities Act and create a timeline or system for families seeking their refunds by assigning each beneficiary a sequential number once their loved ones’ unit is vacated.

From there forward, it’s a first in, first out system: When any vacant unit is occupied or sold, the family at the top of the list will receive their refund, and others will automatically move up the list.

If passed, HB 2494 would require all retirement communities to assign beneficiaries of entrance fee refunds a sequential number, so that as units are sold, the person moves up the list towards getting their refund.

While many families applaud this idea, the retirement community industry opposes it.

“We have not come up with another solution yet because this model has worked,” said Angela Schnepf, the President of LeadingAge Illinois, a group that advocates and lobbies on behalf of retirement communities.

While the sequential system may look good on paper, in practice, Schnepf believes it could create more imbalance and uncertainty for these families.

“If you are an individual and you have one unit, similar to a home where your unit goes up for sale, maybe a week after your neighbors’, but yours has lake views, has an extra bedroom, has marble countertops,” Schnepf said. “But your neighbor came up [the list] a week before, they're getting the proceeds from your unit selling and we find that to be an unfair system for that resident.”

Schnepf also raised the point that entrance fees are meant to keep all residents of a CCRC safe and secure, especially in cases where they have exhausted their financial means.

“In exchange for the entrance fee model, you agree to keep someone beyond their means. So once they've spent all their funds, the organization agrees to take the risk,” Schnepf said. "If an organization immediately or within an arbitrary timeline returns a refund, they now no longer have the cash flow to maintain services for everyone else in the community, especially those that are now spent beyond their means.”

After groups like LeadingAge Illinois approached Mussman, she temporarily paused HB 2494 so that more conversations can take place this summer, in hopes of finding a solution that works for all parties.

Mussman said the bill will likely be re-introduced, either in its current form, or an amended version, next January.

In the meantime, Mussman worries for families out there, like Linda Horn, who on top of waiting for these large sums of money, are also seeking closure.

“For these families, remember, they cannot close their loved one’s estate until this is reconciled. And so that is part of the ongoing trauma.”

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