Should “Automatic” Liens Be Created to Help Protect CCRC Residents’ Financial Interests?

I spend an inordinate amount of time reading and rereading both Contracts and State Laws governing rights and responsibilities in Continuing Care Retirement Communities (CCRCs, including Life Plan Communities). So it is a good thing I find all of this fascinating, although admittedly it doesn’t make me much fun at the average cocktail party. I’m chuckling to myself as I type this on a Friday afternoon.

It turns out that Pennsylvania has a “Lien” law favoring CCRC residents. The lien provision was part of a 1984 comprehensive first oversight statute in the Commonwealth, and was in response to what was then a recent wave of insolvencies across the nation. Or as the legislators observed: “The General Assembly finds and declares that tragic consequences can result to citizens of the Commonwealth when a provider of services under a continuing-care agreement becomes insolvent or unable to provide responsible care.”

Yet, as far as I can tell, there is no evidence that anyone has “used” the law to document residents’ financial interests, even though there have been periodic insolvencies in Pennsylvania. Perhaps the problem is the lien provision is confusing about where to start, and when. What do I mean by that?

Pennsylvania’s CCRC law, at 40 P.S. Section 3211, enacted in provides:

“Prior to the issuance of a certificate of authority under this act or at such other time as the commissioner may determine it in the best interests of residents of a facility, the commissioner may file a lien on the real and personal property of the provider or facility to secure the obligations of the provider pursuant to existing and future contracts for continuing care. A lien filed under this section shall be effective for a period of ten years following such filing and may be extended by the commissioner upon a finding that such extension is advisable for the protection of residents of the facility. The lien may be foreclosed upon the liquidation of the facility or the insolvency or bankruptcy of the provider, and, in such event, the proceeds thereof shall be used in full or partial satisfaction of obligations of the provider pursuant to contracts for continuing care then in effect. The lien provided for in this section shall be subordinate to the lien of any first mortgage on the real property of the facility and may be subordinated with the written consent of the commissioner to the claims of other persons if the commissioner shall determine such subordination to be advisable for the efficient operation of the facility.“

I can find no Pennsylvania law or regulation expressly recognizing the “place” to file such a lien, nor any guidance about when the commissioner of insurance should exercise their authority to file the lien.

It would make sense that the lien should be filed as early as possible, right? In February, 2025, LeadingAge, the trade association for nonprofit CCRCs and other senior living ventures made a public statement citing “automatic liens” in favor of residents’ financial interests as one potentially important safeguard for residents in the event of a CCRC’s insolvency. Pennsylvania law does not appear to be an example of an “automatic” lien. Compare the Pennsylvania statutory language above with that of the Texas law I commented on here.

Perhaps it is time — past time? — for an amendment to Pennsylvania law, reflecting new realities, within and exterior to our state.

When it comes to insolvency, if a lien is “perfected” it would give the holders special collection rights; such liens are created in recognition of a creditor’s unique interests in particular property owned by the debtor.

Such a statute, as part of CCRC statutory law, recognizes that older adults who pay to enter a community, and usually keep paying (monthly fees), are putting their declared assets and income on the line in order to support their campus, right? That seems to be a unique interest.

At a minimum, the collection tool gives residents a “priority” over other unsecured creditors. Any “filing” of liens would serve to put people on notice of the potential priority.

In the context of CCRCs, I would argue that statutory liens favoring residents also serve as both documentation and as public statements reminding us the debtor has a high obligation to residents — perhaps even a fiduciary obligation — to adopt sound financial practices, to stay alert to new risks, and to avoid financial mismanagement (or worse) when operating the CCRC.