Rental Deposit Provision of IURLTA Does Not Apply to Continuing Care Retirement Communities

Posted by Thomas Johnson on Tuesday, August 13, 2019

Article written by BrownWinick 2019 Summer Associate, Casey Sievert, and BrownWinick attorney, Thomas Johnson

The Iowa Supreme Court has ruled that the Iowa Uniform Residential Landlord and Tenant Act (IURLTA) does not apply to entrance fees of a continuing care retirement community. The Iowa Supreme Court held that the legislature did not intend for Iowa Code Chapter 523D (which governs continuing care retirement communities) to be subject to the rental deposit provisions of IURLTA.                    

Residents of a continuing care retirement community generally pay an entrance fee (or some other form of enrollment fee) upon being accepted into the community, followed by monthly fees.  This arrangement might resemble other types of residential leases, but the up-front payments at a continuing care retirement community are treated very differently than a typical rental deposit.

In Cheryl Albaugh vs. The Reserve (June 28, 2019), a daughter attempted to have her mother’s entrance fee and supplemental amount, totaling more than $125,000, refunded after her mother stayed only a short time at The Reserve before being diagnosed with dementia. The daughter argued that IURLTA applies to retirement facilities and that denying the return of these funds violated the rental deposit provision of the IURLTA. She argued that if the entrance fees are subject to, and the equivalent of, a rental deposit, the entrance fees could only then cover the costs associated with returning the unit back to its previous condition and remedying any default payments, with the remaining funds then returned to the resident upon leaving the facility.

The Iowa Supreme Court held that continuing care retirement communities licensed pursuant to Iowa Code Chapter 523D are not subject to the rental deposit provision of IURLTA. The court stated: “[T]he legislature did not contemplate the use of an entrance fee as a rental deposit because the statutory definition of entrance fee is neither constrained to two months’ rent nor restricted as a landlord’s remedial function.”  

The court’s ruling is limited to this single provision of the Act.