Assisted Living Contracts: What to Watch For in the Fine Print

You’ve found an assisted living community that feels right, warm staff, clean hallways, a calendar full of activities. Now comes the hard part: the contract. These agreements are dense, legally binding, and packed with clauses that can cost you thousands if you don’t read carefully. Here’s what to watch for, clause by clause.

What fees are listed, and what’s missing?

Most contracts include a base monthly rate covering rent, meals, housekeeping, and some utilities. But the fine print often lists separate charges for care services (medication management, bathing assistance, incontinence care), which may be billed by the task, by the hour, or as a tiered add-on. Look for a “level of care” fee schedule that explains how and when those charges increase. The ElderCare Locator can help you find state-specific consumer protections on fee disclosures.

Entrance fees: are they refundable?

Some communities charge an entrance fee, a lump sum paid upfront, sometimes tens of thousands of dollars. The contract must state clearly: Is any part refundable? Under what conditions? If you move out after six months, do you get your money back? Many facilities use a declining refund schedule (e.g., 100% refund in the first 30 days, then 10% less each month). Others treat the fee as fully non-refundable after move-in. AARP’s assisted living guide explains typical refund structures. If a contract promises a refund only upon “re-renting” the unit, ask how long that typically takes.

How much can the monthly fee increase each year?

Assisted living contracts nearly always include an annual rate escalation clause, often tied to the Consumer Price Index (CPI) or a flat percentage (e.g., 3 to 6%). But some contracts allow increases at any time, for any reason, with short notice. The National Consumer Law Center warns that caps may not apply to add-on care services, meaning your base fee stays stable while your actual bill skyrockets. Ask: “What is the maximum percentage increase in the base rate per year, and is there a separate cap for care-service charges?” Get any verbal promises about limits written into the contract.

What triggers a discharge or transfer?

This is the most overlooked section. The contract should list specific criteria for involuntary discharge, typically failure to pay, dangerous behavior, or a decline in health that the facility cannot safely manage. But the wording matters. Vague phrases like “when the resident’s needs exceed our capability” give the facility broad discretion. Medicare’s Nursing Home Compare site notes that facilities must provide a written explanation and a reasonable timeframe for discharge. State law often requires 30 to 60 days’ notice and a plan for relocation. If the contract says discharge can happen with “10 days’ notice” for any reason, that’s a red flag. For a deeper look at how different care settings handle transitions, see our guide on Home Care vs. Adult Day Programs.

What happens if you run out of money?

Most residents pay privately initially, but many eventually spend down to Medicaid eligibility. Some facilities accept Medicaid; some do not. A contract may require you to move out if you haven’t paid privately for a certain period before applying for Medicaid (e.g., two years). More concerning, some contracts state that a resident must be discharged if they apply for Medicaid, even if the facility participates in the program. Before signing, ask: “Does your facility accept Medicaid? If a resident spends down, do you help with the application? Will they be allowed to stay?” The Medicaid planning article on CaringList explains the timing rules that can affect eligibility. Also read about Private Pay vs. Government Assistance to understand how payment sources interact.

What services are included vs. extra?

Create a checklist of every service the facility offers (transportation, laundry, social activities, escorts to meals, pet care) and mark which are included in the base fee. Then check the contract’s “additional services” schedule for prices. For instance, medication management might be $250/month, but if your parent needs two med passes a day, it could be billed per administration: $8 each, 60 times a month = $480. The Administration for Community Living provides links to state long-term care ombudsman programs that can review contracts for hidden service fees.

The move-out and refund section

What happens if a resident passes away? The contract should specify who can terminate, how much notice is required, and how deposits or unused fees are refunded. Some facilities charge a full month’s rent after the date of death, plus a cleaning/repair fee. Others prorate. Also check what happens to a refundable entrance fee if the resident dies, does it go to the estate or to the facility? The Veterans Benefits for Senior Care guide includes information on veterans’ survivor benefits that can affect estate planning.

What about the resident’s rights?

The contract should incorporate a resident’s rights section, either by reference to state law or in an attached exhibit. This covers dignity, privacy, access to visitors, freedom from restraint, and the right to voice grievances without retaliation. If the contract is silent on these points, be concerned. Federal law requires nursing homes to post residents’ rights, but assisted living is regulated state by state. The National Long-Term Care Ombudsman Resource Center maintains state-by-state comparisons.

Is there an arbitration clause?

Look for a clause labeled “dispute resolution” or “arbitration.” This may require you and your parent to waive the right to sue in court and instead go through binding arbitration. The Centers for Medicare & Medicaid Services (CMS) once prohibited pre-dispute arbitration agreements in nursing homes, but the rule changed in 2019. Some contracts make arbitration mandatory; others give you the right to opt out. If the contract doesn’t mention arbitration, ask whether the facility uses it. If you don’t want to give up your day in court, request removal of the clause or a signed opt-out form before signing.

A one-page contract checklist for tours

Print this list and bring it with you. Check off each item before signing:

• Base monthly fee listed (what’s included?)
• Care-service add-on fee schedule attached
• Entrance fee refund policy in writing
• Annual rate escalation cap stated
• Notice period for fee increases (minimum 30 days)
• Discharge criteria with objective terms
• Discharge notice timeframe (30 days or more)
• Policy when resident spends down to Medicaid
• Services included vs. extra (checklist completed)
• Move-out and death procedure
• Refund terms for deposits/prepaid fees
• Resident rights section present
• Arbitration clause location and opt-out option
• Signature line with date; get a copy of the signed contract

This article provides general information about legal aspects of assisted living contracts and does not constitute legal advice. Laws vary by state. Consult a qualified elder law attorney before signing any contract.