Question
From:
(Redacted)
Sent:
Monday, November 02, 2009 8:14 AM
To:
Verne, B. Michael
Subject: AssistedLiving Facilities
Mike,
I have reviewed anumber of informal opinions involving the purchase of assisted living facility assets,and wanted to get your view as to whether I am viewing the exempt andnon-exempt portion of these assets properly.
First, as to theexemption, assisted living facilities, as opposed to nursing homes, are consideredresidential property, and are thus exempt under 802.(d)(ii). Common areas(802.2(d)(2)(iii)) and assets incidental to ownership of such property(802.2(d)(2)(iv)) are also exempt. It follows that services routinely offeredto facility residents would not be considered separate businesses under802.2(d) but would instead be exempt under 802.2 (d)(2)(iv). Thus, assetsrelated to providing the following services would be exempt: meals, cable TV,and housekeeping. See informal opinion 0709019. Common areas such as diningrooms/cafeterias, recreation rooms, lobbies and exercise facilities would alsobe exempt under 802.2(d)(2)(iii). See id. In addition, certain states requirethat a registered nurse be on duty at all times to supervise assistance with dailyliving, the administration of medication, and emergency responses. Suchservices, as opposed to having a skilled nursing facility on site, is alsoexempt. See informal opinion 0006018. Also exempt are assets relating to theprovision of other services such as assistance for bathing and dressing,recreation activities and meal services. See informal opinion 9911007. Finally,services provided for the comfort and safety of patients with Alzheimer'sdisease are exempt. See informal opinion 0409002.
Assetsattributable to on site medical facilities and skilled nursing facilities arenot exempt. See informal opinion 0006018. In addition, certain separatebusinesses are not considered assets incidental to ownership of the residentialproperty under 802.2(d)(2)(iv) and must be valued as non-exempt businessesunder 802.2(d)(3).
These includeon-site barber shops/hairdressers and pharmacies. See informal opinions 0709019and 9911007.
With respect tothese non-exempt assets, they must only be valued if they are controlled by theentities or facilities being acquired. In that case both the business/assetsrelated to providing the services and the square footage of the propertydevoted to providing the services must be valued as non-exempt. However, wherethe services are not controlled by the facilities or entities being acquired,but instead are provided by third parties through a contract and lease of thefacilities space, the assets relating to providing those services need not bevalued. Instead, these activities are exempt under 802.5 as acquisitions ofinvestment rental property, as long as the buyer intends to continue to havethird parties provide these services through a lease of the space. I have notseen this last point in the informal letters, but believe it follows from802.5.