Memory Care Contract: What to Look For Before You Sign

Why the Contract Matters as Much as the Tour

The facility tour shows you the building. The residency agreement shows you the business relationship. These are not the same thing, and families who sign the contract based on the warmth of the tour discover this when the first billing dispute, care-level change, or involuntary discharge notice arrives.

Memory care and assisted living residency agreements are 15- to 40-page contracts drafted by the facility's attorneys to protect the facility. They're not inherently predatory, but they contain clauses that can cost you tens of thousands of dollars if you don't catch them before signing.

The Five Clauses That Matter Most

1. Pre-Dispute Arbitration

Many residency agreements include a clause requiring that any dispute — including allegations of neglect, abuse, or wrongful death — be resolved through private, binding arbitration rather than in court. This means you waive your right (and your parent's right) to a jury trial before any harm has occurred.

Arbitration isn't automatically bad, but it changes the power dynamic. Arbitrators are often selected from pools familiar to the facility's industry. Discovery rules are limited compared to court proceedings. There's typically no right of appeal. And the clause is signed during a high-pressure admission process when families are focused on getting their parent settled, not on reading legal fine print.

Some states restrict these clauses. Minnesota, for example, limits contract terms that strip residents of civil action rights. Other states allow them without restriction. Check your state's consumer protection laws, and if the clause is present, ask the facility whether admission is contingent on accepting it. Whether a facility can condition admission on arbitration depends on state law.

2. Third-Party Guarantor Provisions

This is the clause that turns the adult child signing the paperwork into the person financially responsible for the bills.

Here's how it works: the facility's contract asks you, as the responsible party, to "guarantee" payment of the resident's monthly fees. If your parent's savings run out, or if there's a gap between private-pay exhaustion and Medicaid approval, the facility looks to you personally for the unpaid balance. Monthly fees of $6,000 to $10,000 accumulate fast.

Federal nursing home regulations prohibit facilities from requiring third-party guarantees as a condition of admission. But many assisted living and memory care facilities are regulated at the state level, not under federal CMS rules, and state enforcement varies widely. Strike or modify any clause that makes you personally liable for fees beyond your capacity as your parent's power of attorney to manage their assets.

3. Rate Increase and Tiered Billing Language

Memory care contracts typically allow the facility to increase monthly rates with 30 to 60 days' notice. The question is whether the contract specifies the basis for increases — annual CPI adjustments, care-level reassessments, or "at the facility's discretion."

Tiered billing (also called "care point" billing) is common. The facility assesses the resident's care needs using a point system — points for assistance with bathing, medication management, behavioral interventions — and bills a corresponding tier. As dementia progresses and care needs increase, the tier goes up, and so does the bill.

What to watch for:

• Who performs the care-level reassessment, and how often?
• Can the family request an independent assessment if they disagree with the facility's scoring?
• Is there a cap on annual rate increases, or can the facility adjust at will?
• Are there additional "à la carte" charges for services the family might assume are included (incontinence supplies, laundry, transportation to medical appointments)?

4. Involuntary Discharge and Transfer Terms

The contract spells out the circumstances under which the facility can require your parent to leave — and the process they must follow to do it. This section matters more than most families realize, because "soft evictions" are common in memory care. A facility that can't manage a resident's behavioral symptoms may pressure the family to move the person rather than formally discharging them, which lets the facility avoid the notice requirements and appeal processes that formal discharge triggers.

Look for:

• Required notice period: Notice periods vary by state; 30 days is common, and some states require a pre-termination meeting 7+ days before the notice is even issued.
• Permitted reasons for discharge: These should be specific (nonpayment, the resident's needs exceed the facility's license, the resident poses a danger to others) rather than vague ("the facility determines that the resident's needs can no longer be met").
• Appeal rights: Does the contract reference your right to contact the state Long-Term Care Ombudsman? Does it explain the process for challenging a discharge?
• Emergency discharge provisions: What happens if the resident is hospitalized? Is their bed held, and for how long?

5. Bed-Hold During Hospitalization

When a memory care resident is hospitalized — for a UTI, a fall, pneumonia — the facility may give away their room within days. Getting back into a quality memory care unit can mean weeks on a waitlist, during which the hospital may be pressuring you to discharge your parent to any available facility.

The contract should specify:

• How many days the facility holds the bed during a hospital stay
• Whether you continue paying the full monthly rate during the hold period (most charge a reduced "bed-hold" rate)
• What happens if the hospitalization exceeds the hold period — does your parent go to the top of the waitlist, or to the back?

Some states mandate minimum bed-hold periods; others leave it entirely to the contract. If the contract is silent on bed-holds, add the provision before signing.

Who Should Review the Contract

An elder-law attorney is worth the $500 to $2,500 fee for a contract review. They'll catch the third-party guarantor traps, identify arbitration clauses that can be removed, and ensure the discharge provisions comply with your state's regulations. If you're signing as your parent's power of attorney, the attorney can also verify that you're signing correctly — in your parent's name, by you as agent — rather than inadvertently creating personal liability.

Our Memory Care vs Assisted Living guide includes a contract review checklist that walks you through each section of a typical residency agreement, with the specific questions to ask and the red-flag language to look for — so you arrive at the attorney's office with a marked-up draft instead of paying for them to read 30 pages cold.