All I want for Christmas is an RAL home.
If you have heard me speak before, you may have heard me mention that there are many residential assisted living homes changing hands over the last few years. In fact, it seems that the end of the year and holiday season does not especially slow things down.
Firstly, if you are new to buying and owning businesses, and even if you are not, you should know that you cannot buy or sell an RAL without approval and acceptance from a state regulator. You can add this to the other legal, financial, and operational considerations of the transaction – and the real estate transaction – which is a separate matter. Understanding the necessary steps ensures regulatory compliance and smooth transitions. Below is an outline based on a simplified Change of Ownership (CHOW) checklist to guide you through this process. Each state may have variations, but these regulatory requirements are fairly common.
1. Legal Identity and Representation
When applying for regulatory approval, it is important to clearly define the facility’s legal identity and representation to ensure transparency and compliance with state regulations. Providing the official name under which the facility will operate allows regulators to confirm the entity’s legitimacy and accurately document its operations. This name must match all official materials, such as billing statements and exterior signage, to avoid confusion and ensure accountability.
If the facility will use a trade name, or “Doing Business As” (DBA), regulators need this information to verify that the DBA is properly registered and meets state regulatory requirements.
2. Contact Information
It is essential to provide detailed and accurate contact information to ensure effective communication with regulatory agencies. This includes the facility’s complete mailing address, telephone and fax numbers, email addresses, and website information. Keeping this information up to date is critical, as it allows regulators to contact the facility promptly when needed, streamlining the approval process and ensuring compliance with any ongoing requirements.
3. Ownership and Controlling Interest
It is often required to provide a detailed list of all individuals or entities holding a 5% or greater interest in the company. This transparency in ownership is essential for regulatory agencies to understand who has a controlling interest and the ability to influence the operational direction or management of the facility. Certainly, 5% is not a controlling interest, but it is fairly typical to see an ALR regulator include 5% ownership in the category of “controlling interest.”
Nonetheless, clearly defining the roles and relationships within the organization helps regulators assess the governance structure, ensuring accountability and compliance with applicable laws and regulations.
4. Insurance Requirements
Providing proof of professional liability insurance meets regulatory requirements and ensures resident protection. This documentation shows the facility’s readiness to handle claims, ensuring financial responsibility and protection. Designating the regulatory department as a certificate holder allows verification of the policy’s validity and compliance, demonstrating the facility’s adherence to legal and ethical standards.
5. Corporate Documentation
Prepare and submit:
Corporate Documents: Submitting corporate organizational documents, such as articles of incorporation or operating agreements, is essential to demonstrate the facility’s legal structure and governance framework. Additionally, providing copies of management agreements outlining operational responsibilities ensures clarity regarding who is accountable for the day-to-day operations of the facility. These documents enable regulators to assess the organization’s compliance with legal and operational requirements while ensuring accountability and transparency in its management.
6. Facility Information
Regulators often want to know and will require you to submit:
The exact address of the facility and any off-site records storage locations;
A detailed map of each floor, highlighting room layouts for compliance inspections;
Lease Agreements;
Management Agreements, if any;
7. Legal and Compliance Statements
Regulators will also typically insist that owners and operators, and corporate officers have clean hands.
This will usually involve evidence that the owners do not have a record of adverse legal actions on the Adult Protective Services registry, and a sworn statement that may include the following:
There have been no legal actions taken against me, (Your Name Here), in the last 10 years taken in any of the following areas:
- There have been no convictions of a felony or misdemeanor involving moral turpitude under the laws of any state or of the United States against me.
- There have been no guilty verdicts, pleas of guilty or nolo contendere considered by an court that could be considered a conviction against me.
- There have been no civil judgments or a criminal convictions in a case brought by the federal, state, or local authorities that resulted from the operation, management, or ownership of a facility or agency or other entity related to substandard care or health care fraud against me.
- There have been no limitations, denials, revocations, or suspensions of a state license or federal certification by another jurisdiction against me.
I, (Your Name Here), hereby attest, under penalty of perjury, that all the information provided in this letter is true and accurate to the best of my knowledge.
Key Considerations
Regulatory Compliance: Each state may have specific CHOW requirements. Familiarize yourself with local statutes and administrative codes.
Timelines: Plan well in advance to accommodate processing times for licenses and approvals.
Transparency: Proactively addressing potential issues, such as adverse legal actions or changes in management, builds trust with stakeholders.
Transitioning ownership is a pivotal moment for any assisted living facility. By following a structured checklist, you can ensure that all regulatory, operational, and legal obligations are met. This approach not only protects the interests of new owners but also safeguards the well-being of residents and staff.
The information discussed herein is intended to be educational and an introduction to the subject matter presented. Despite any statutory or regulatory references cited, it is NOT specific legal advice to be relied upon for specific individual circumstances. Contact your own legal professional or reach out to our firm if you would like specific advice on this topic.
We welcome topic suggestions! Write to [email protected] if you are curious to learn more about a certain topic impacting assisted living or other group housing concerns.
