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Ryan v. Mary Ann Morse Healthcare Corp.

Supreme Judicial Court of Massachusetts, Middlesex

December 5, 2019

James M. RYAN, Executor,[1], [2]

         Argued September 9, 2019.

Page 613

         [135 N.E.3d 712] Assisted Living Residence . Landlord and Tenant, Security deposit. Consumer Protection Act, Availability of remedy, Landlord and tenant. Statute, Construction.

          CIVIL ACTION commenced in the Superior Court Department on August 24, 2016. A motion to dismiss was heard by Christopher K. Barry-Smith, J.

         The Supreme Judicial Court on its own initiative transferred the case from the Appeals Court.

         Joshua N. Garick, Woburn, (Matthew T. LaMothe, Salem, also present) for the plaintiff.

         AiVi Nguyen, Worcester, for the defendant.

          The following submitted briefs for amici curiae:

         Joseph M. Desmond & Justin L. Amos, Boston, for Massachusetts Assisted Living Association.

          Lillian Glickman, pro se.

         Elizabeth A. Aniskevich & Susan A. Silverstein, of the District of Columbia, Richard M.W. Bauer, Liane Zeitz, & Rebecca J. Benson, Boston, for AARP & others.

         Present: Gants, C.J., Lenk, Gaziano, Lowy, Budd, Cypher, & Kafker, JJ.


         KAFKER, J.

         [135 N.E.3d 713] At issue in this case is the extent to which Massachusetts assisted living residences (ALRs) are subject to the strictures of the security deposit statute, G. L. c. 186, § 15B. The defendant operates an A.L.R. in Framingham that charges new residents an upfront "community fee," in addition to the first month’s rent and the last month’s rent permitted by G. L. c. 186, § 15B. The community fee was intended to cover upfront administrative costs, an initial service coordination plan, move-in assistance, and a replacement reserve for building improvements. The plaintiff alleges that the community fee violates G. L. c. 186, § 15B, as it exceeded the upfront costs allowed by the security deposit statute. The defendant moved to dismiss the suit, arguing that A.L.R.s are not subject to G. L. c. 186, § 15B. The motion to dismiss was granted, and the plaintiff appealed.

         We conclude that G. L. c. 19D, the A.L.R. statute, incorporates applicable consumer protection laws, including G. L. c. 186, § 15B, but allows for additional upfront charges for the distinctive services assisted living facilities provide that are not applicable to traditional landlord-tenant relationships. Indeed, the A.L.R. statute and corresponding regulations expressly provide for the payment of particular fees related to initial assessments of residents to determine their suitability for placement in an assisted living facility. Such services and fees have no applicability to the traditional landlord-tenant relationship, and are thus not subject to the security deposit law. Accordingly, A.L.R.s may institute upfront charges beyond those permitted by G. L. c. 186, § 15B (1) (b), to the extent that such charges correspond to the distinct services enumerated in G. L. c. 19D, § 13, or to other services designed specifically for assisted living residences. If, however, an A.L.R. charges upfront fees that are not used to fund such distinct assisted living services, it does so in violation of § 15B.

         In the instant case, further factual development is required to determine whether the fee at issue was permissibly charged and used for services distinct to A.L.R.s, and thus the motion to dismiss was not properly allowed. One or more components of the defendant’s community fee appear to have been charged for initial assessments mandated by the A.L.R. statute. Such a service and fee would be specific to assisted living facilities and not governed by the security deposit statute. However, further clarification and factual development as to the purpose and use of other components of the community fee is required, particularly for the replacement reserve fee for building improvements. We cannot discern

Page 614

on this record whether each component of the community fee was imposed and used for services distinct to assisted living facilities but inapplicable to the traditional landlord-tenant relationship. We therefore reverse the decision [135 N.E.3d 714] allowing the motion to dismiss and remand the case to the Superior Court for further proceedings consistent with our decision.[4]

         1. Background .

         a. Facts .

         We review the allowance of a motion to dismiss de novo, accepting as true all well-pleaded facts alleged in the complaint. See Calixto v. Coughlin, 481 Mass. 157, 158, 113 N.E.3d 329 (2018). We summarize the factual allegations as set forth in the complaint and the residency agreement referenced by both parties.[5] See Marram v. Kobrick Offshore Fund, Ltd., 442 Mass. 43, 45 & n.4, 809 N.E.2d 1017 (2004).

          In 2013, Julia Ryan entered into an agreement with Mary Ann Morse Healthcare Corp., doing business as Heritage at Framingham (Heritage), to lease an apartment in the defendant’s A.L.R. in Framingham. The agreement, titled "Residency Agreement," provided that Heritage "hereby leases to the Resident" an apartment at the Framingham facility.

         Ryan’s rent was $4,000 per month. Prior to the commencement of Ryan’s residency, Heritage required her to pay the first and last month’s rent. In addition to the first and last month’s rent, Heritage also charged Ryan a nonrefundable, one-time "community fee" of $2,800. According to the residency agreement, the community fee was "intended to cover upfront staff administrative costs, the Resident’s initial service coordination

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plan and move-in assistance, and establish a replacement reserve for building improvements." The agreement also provided that "the Community is required to pay interest to the Resident annually in keeping with the Landlord/Tenant Law Chapter 186, Section 151B(2)(a)."[6]

         In 2016, James Ryan, the executor of Julia Ryan’s estate, commenced this putative class action, alleging that Heritage violated G. L. c. 186, § 15B, and G. L. c. 93A by charging new residents the community fee. Heritage moved to dismiss the plaintiff’s complaint, claiming that, as an A.L.R., it was not subject to the security deposit statute. On March 5, 2018, a judge in the Superior Court granted the motion, concluding that the Legislature did not intend for A.L.R.s to be subject to the security deposit statute. The plaintiff appealed.

         In May 2017, while the motion to dismiss was still pending, a different judge in the Superior Court concluded that the security deposit statute did apply to A.L.R.s. [135 N.E.3d 715] See Gowen vs. Benchmark Senior Living LLC, Mass. Super. Ct., No. 1684CV03972-BLS2, 2017 WL 3251585 (Suffolk County May 9, 2017). The Gowen decision recognized, however, a possible exception to the fee restrictions imposed by G. L. c. 186, § 15B, in the context of A.L.R.s, stating:

"The statutory limitation on fees imposed by residential landlords only governs fees charged for a ‘tenancy.’ To the extent that [the defendant] or another assisted living facility operator provides its residents with services that are beyond the scope of a typical residential tenancy, it is entitled to charge for those services and may do so without running afoul of § 15B." (Citation omitted.)

Id. at 3-4. The judge went on to conclude, however, that the plaintiff had plausibly alleged facts suggesting that the community fee "was assessed at least in part as a charge for her residential tenancy, and not for separate activities or services." Id. at 4. That judge reached a similar conclusion again in another case in August 2018. See Hennessy v. Brookdale Senior Living Communities, Inc., Mass. Super. Ct., No. 1784CV04215-BLS2, 2018 WL 4427020 (Suffolk County Aug. 1, ...

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