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Sheltered housing: Are you legally protected?

August 14, 2017

In most sheltered residences, the legal aspects are rather complicated. One does not buy an apartment as such but purchases the right of residency for life, together with a basket of services tailored to the specific needs of the senior resident. These include medical services, nursing care, leisure and cultural services, etc. Such an agreement is a legally binding long-term relationship between the residence and the tenant. The most common means of paying for the right of residency and the basket of services is by making a large cash deposit plus a monthly maintenance fee to cover the running costs. In most cases, the deposit has a depreciation mechanism that varies according to the agreement or according to the size of the deposit. The deposit usually depreciates by 2.5% to 3% annually for the first 10 to 12 years. In some cases, the deposit has a high rate of depreciation until the deposit is depleted. In some rare cases, there is no depreciation at all, and the balance of the deposit is returned to the heirs when the residential unit is vacated. No interest is paid on the deposit, and it is not linked to the cost of living; consequently, when the heirs receive the deposit, its real value is much less.
Besides the financial aspects, the agreement should have an appendix. It should include a list of the medical services and/ or nursing care provided by the residence, such as details about the in-house medical staff, hours of operation, various procedures relating to accommodation of family members and the decision-making mechanism with regard to the medical issues of the client. In addition, as this is a high value real estate transaction, it should be viewed as such. This includes making sure of the property rights and, most importantly, if one can register a cautionary alert at the Land Registry. This will guarantee the residential rights to the property in all possible scenarios, such as the sale of the property of the sheltered housing to another person or company or bankruptcy of the legal owner of the property.
It is also important to remember that the decision to move to sheltered housing is not always based on economic considerations alone. Because of their very personal nature, most of these decisions are emotionally charged and complex, sometimes making it difficult to successfully negotiate a transaction. It is therefore highly advisable to engage an experienced real estate attorney for the entire process.