Over the past few years I have written several posts explaining the different types of residency contracts offered by continuing care retirement communities (CCRCs or “life plan communities”), clarifying the nuances among them and offering tips for comparing the options.
Recently, it was pointed out that much of our content focuses on entry-fee models, even though an estimated 20 percent of the industry operates under rental or equity models, which do not require an entry fee. This estimate is approximate because some CCRCs offer multiple contract types, making it hard to determine an exact share.
If you prefer to avoid an entry-fee model, here is a clear overview of how rental and equity CCRCs work and what to watch for when evaluating them.
>> Related: A Primer on CCRC Residency Contracts
Equity CCRCs
In an equity CCRC, residents own their home or apartment and pay a monthly service or membership fee for services and amenities such as home maintenance, hospitality services, and general operations. Ownership means the property can appreciate or depreciate over time and may pass to the resident’s heirs or estate.
When long-term care becomes necessary, residents in equity CCRCs can often access their home’s equity through an equity line or reverse mortgage if needed. Typically, residents pay the full market cost for long-term care services, although some equity communities may offer these services at a discounted rate.
An important consideration with this model is the responsibility that falls to heirs: after a resident’s death, heirs may be required to continue paying the monthly service fee until the residence is resold to a qualified buyer who meets age, financial, and health criteria.
Equity share
Some equity CCRCs use an equity-share arrangement rather than true ownership. In this model the operator retains ownership and resells the residence when it becomes vacant, but the resident or the resident’s heirs receive a predetermined portion of any price appreciation when the unit is sold.
Cooperatives
Other equity CCRCs operate as cooperatives (co-ops). Instead of buying a specific unit, a resident buys shares in a corporation that owns the property. These shares grant exclusive rights to a unit, and the corporation’s financial benefits accrue to shareholders.
Co-op residents collectively act as their own landlords, with management decisions typically made by a resident committee. This governance model can foster a strong sense of community and shared responsibility but can also lead to disagreements over management choices.
>> Related: Crunch the Numbers: Staying in Your Home vs. Moving to a CCRC
Rental CCRCs
Rental CCRCs do not require an entry fee; at most they may charge a nominal community fee of a few thousand dollars. Contracts are often month-to-month, so residents face no long-term contractual commitment, and the community has no long-term obligation to the resident. Because of that flexibility, monthly service fees in rental CCRCs are generally higher than those in comparable entry-fee communities.
Many rental contracts do not guarantee priority access to nursing or healthcare center spaces, which can be filled by people coming from outside the community. (Some entry-fee communities operate similarly.) Residents in rental CCRCs typically pay full market rates for any long-term care services they require.
Given the usually higher monthly independent-living fee and the full-market cost for long-term care, a resident in a rental CCRC could pay more over their lifetime than they would in an entry-fee community. The total cost depends on how many years the resident lives there and how much care they ultimately need. This difference can be especially significant for couples, since each person would pay market-rate charges for care services.
A personal choice
When considering senior living options, it’s important to review different communities and contract types carefully. No single CCRC or contract type suits everyone. By understanding the distinctions between equity and rental contracts—and how each handles ownership, monthly fees, and access to care—you can make a more informed decision that aligns with your financial situation and personal preferences.