Sheltered Housing – Are You Also Legally Sheltered?

In Israel there are many frameworks that provide housing solutions tailored to the population of senior citizens. Purchase of a unit in one such housing facility, usually called "retirement homes" or "sheltered housing" is not an ordinary commercial transaction. It includes a unique purchase of right of residency together with a 'basket of services' tailored to the specific needs of elderly tenants (such as, medical services, nursing care, leisure and cultural services, etc.). A sheltered housing agreement is also characterized by long-term relationship between the facility and the tenants and their families, based on continuity, trust and the dependence of the tenant in the facility. As such, before undertaking a transaction of sheltered housing it is desirable to pay attention to many legal issues, some of such are presented here.
There are several common methods of payment for sheltered housing which usually consist of a combination of one or more mechanisms of decreasing deposit, partial decreasing deposit, rent (which usually includes full payment of housing expenses such as electricity, water and supplied services) and fixed single up-front payment referred to as an "entrance fee" or "purchase fee". Each of such mechanism of payment has its advantages and disadvantages and should be adapted to the needs of the tenant in accordance with the actual circumstances and after comparative market research. For example, under the decreasing deposit method, the tenant makes a deposit (that may reach hundreds of thousands of dollars) which will decrease by sometimes up to 3% percent per annum and upon the departure of the tenant, for whatever reason, the tenant or tenant's heirs will receive a refund for the balance of the deposit. In case of partial deposit, the actual deposit will be considerably lower but will be decreased by up to 25% per annum and may ultimately be reduced to zero. The monthly rent payments will be adjusted pursuant to the agreed original deposit. The method of payment is an important issue that should be considered carefully before signing the agreement to ensure that the agreed provisions are properly drafted in the agreement and that the wording, if applicable, an option to change payment route in the middle. It is also advisable to also include in the agreement some flexibility in case of early departure during the year, whether due to adjustment issues or lack of contentment of the tenant or even the tenant’s unfortunate premature demise.
One should ensure that the obligations of the facility will be described in broad language in the agreement to include possible future circumstances. It is advisable to specifically consider relating to circumstances if tenants become increasingly dependent on nursing services, whether a personal nurse (note that if such person is required to live in the apartment certain infrastructural changes will be involved), can be employed; whether there may be additional expenses in the future in respect of: price increase, laundry services, medicines, maintenance services, etc.; and what are the policies for a hospitalized tenant in case a tenant is hospitalized for an extended period but still wishes to keep the right to the unit and whether a discount might be granted for such period. The agreement should include an appendix containing the medical services and / or nursing care provided by the facility including details of the medical staff, hours of operation, various procedures relating to accommodation of family members or to decision-making regarding medical issues of the tenant and additional costs, if any, together with all the various undertakings of the facility. All these considerations will serve well to avoid future unpleasantness for the tenant and his or hers family in the future.
In addition, as the transaction is of significant value one should not forego the usual reviews required as in other real-estate transactions. This includes the need for proper caution and review with the relevant authorities, such as checking the land registry to confirm that the property rights are properly registered and that one can register a cautionary note at the land registry in favor of the tenant. Furthermore, one should ensure receipt of appropriate guarantees for securing the repayment of the deposit. It is recommended to set a time frame in the agreement for return of the deposit and proper monetary sanctions in case of delays. It is also important to remember that the decision to move to a sheltered housing is not always based on economic considerations alone and due to their personal nature, most of these decisions are emotionally charged and complex sometimes making it difficult to successfully negotiate the transaction. It is highly advisable to engage a commercial attorney who will accompany the whole process and advise the decision makers of crucial eventualities that they would otherwise not have considered.