Senior Home Bankrupt, Stripping Residents of Millions

A Growing Concern: Retirement Communities Facing Financial Crisis

A troubling trend is emerging in the realm of retirement communities, raising alarms about the stability of savings for elderly residents. In a recent case that has drawn significant attention, a continuing-care retirement community on Long Island filed for bankruptcy, resulting in the loss of millions in savings for its elderly residents.

Harborside, located in Port Washington, New York, initiated Chapter 11 bankruptcy proceedings in October of last year. This decision has had far-reaching consequences for its residents, who paid substantial entrance fees ranging from $425,000 to $1.7 million, along with thousands of dollars in monthly fees. These fees were typically refundable to family members upon the resident’s death or if they decided to leave the facility.

However, when a facility like Harborside enters bankruptcy, the process prioritizes secured creditors over residents. This often results in the money intended for families being significantly reduced. Arlene Kohen, an 89-year-old resident at Harborside, paid a standard entrance fee of $945,000 by selling her home in Great Neck for $838,000. Following the bankruptcy, her family now expects to receive less than a third of the $710,000 refund that was promised.

Approximately 187 out of the 210 current and former Harborside residents have accepted the Chapter 11 offer, which returns 32 percent of their entry fees. This situation highlights the financial instability faced by many retirement communities. Harborside had declared bankruptcy twice before its most recent filing. The complex first opened in 2010, shortly after the housing market crash, making it difficult for prospective residents to sell their homes to cover the steep entrance fees.

As a result, Harborside filled less than 60 percent of its 229 independent-living units in two years. The company filed its first bankruptcy in 2014, and the pandemic further disrupted the flow of new move-ins, leading to a second bankruptcy filing in 2021. Residents were not affected during these initial filings because bondholders supported the restructuring efforts.

However, when the company defaulted on its bonds again in 2022, the new owner began scaling back the care offered. This led to many residents needing immediate care or planning to increase their care over time being forced to leave. Among those affected were Bob and Sandy Curtis. The rollback of available care meant Sandy had to be moved to a specialized memory care facility in February, where she passed away at the age of 85 after a fall.

Curtis, 88, remained in Harborside and is hoping to receive a refund of $50,000 from his initial $840,000 entrance fee this fall. The remaining $100,000 could take months to arrive due to the complex financial dealings involved in the bankruptcy.

There are nearly 2,000 senior living facilities across the country, similar to Harborside. According to a Wall Street Journal analysis, at least 16 of these facilities have filed for bankruptcy since the pandemic began in March 2020. These Chapter 11 filings have wiped out $190 million worth of savings from 1,000 families, including 212 from Harborside.

This growing trend underscores the need for greater scrutiny and support for retirement communities to ensure the financial security of their residents. As more facilities face similar challenges, it becomes increasingly important to address the underlying issues that contribute to such financial crises.