Independent Living Due Diligence Checklist

Define the assets, entities and resident promise

List the operator, property owner, manager and entities holding key contracts. Describe the assets, lease rights, balances and obligations in the offer. Review shared staff or services supplied by related companies. A buyer needs to understand what can continue and what must be replaced after the sale.

The housing seller exercise follows a fictional wing that relies on the seller’s retained kitchen, shuttle and hall. An internal cost entry does not establish future access to those services. Use those dependencies to identify required terms or replacement services. The proposed wing still needs a supported plan to operate alone.

Read resident agreements, service schedules and current marketing together. Identify housing-only charges, bundled services and any future-care promises. Use the independent living overview to frame the model. If continuing-care duties apply, add the CCRC diligence guide rather than treating the property as ordinary rentals.

California separates continuing-care authority from the licenses required for each care component. (Source: CDSS applications) This is a state example, not a national rule for all independent living. Ask advisers to review the services, signed agreements and planned deal.

Verify occupied, usable and reserved units

Obtain a dated unit inventory and explain each status. Distinguish occupied apartments, signed future move-ins, reservations, model units and rooms out of service. Compare the list with the rent roll and move-in/departure records. Investigate inconsistencies before using management's occupancy measure in the offer.

Use a consistent denominator and period for occupancy. Check whether planned work adds usable units or brings an existing unit back into service. Counting apartments does not prove that the buyer can offer all of them on day one.

Review changes over time and the evidence behind projected occupancy. A waiting list may not represent current, qualified demand. Separate completed move-ins from forecasts and state the cash needed for repairs, marketing and added service capacity. Do not include future rent as though it were already earned.

Sample agreements through charges and receipts

Trace selected resident agreements to fee schedules, billing, credits, receipts and remaining balances. Use matching dates and include exceptions, not only clean accounts. Explain optional services, concessions and refunds. Expand the sample when errors suggest a wider issue and state the limits of the review.

SBA's buying-business guidance identifies contracts, leases, statements and professional review as part of the investigation. (Source: SBA) Apply that framework to the actual housing and service records. A general checklist cannot prove that a specific balance is collectible.

Recalculate effective rent with a stated scope

Consider a fictional twelve-month housing agreement at $2,800 per month with a single $1,200 concession for the full term. Assume no other pricing adjustments. Optional service charges, deposits, unpaid balances and early termination are outside this example. The measure is average contractual housing charges, not accounting revenue or cash receipts.

The term calculation is 12 × $2,800 = $33,600, then $33,600 − $1,200 = $32,400. The monthly average is $32,400 ÷ 12 = $2,700. These invented amounts are not market prices or proof of collection. Compare the calculation with the agreement's actual terms before using it in a forecast.

The effective rent guide explains why measures with different scopes cannot be compared directly. Ask how management treats other credits, vacancies and optional fees. Preserve the bridge from stated pricing to the selected measure so an adjustment is neither hidden nor counted twice.

A term average does not put every future change into current income. The independent-living date exercise separates concession expiry from a later contract boundary and an unsigned proposal. The evidence differs for each event. Review it before treating higher charges as established income for the business being valued.

Reconcile deposits and closing balances

List security and reservation deposits, advance fees, refunds, receivables and other resident balances. Match each item with its agreement, ledger and bank evidence through authorized review. Determine ownership and restrictions with advisers. The amount in an account does not by itself establish what may fund the transaction.

Specify which party retains each balance or duty and how it is reflected at closing. Address misdirected payments, refunds claimed later and the records needed to answer questions. The buyer needs both a clear settlement and staff able to carry out ongoing duties.

Keep the closing balance calculation separate from operating cash. A negotiated transfer of receivables does not guarantee when they will be paid. Build a dated receipts-and-payments plan for the handoff, using the working-capital guide to distinguish funding needs from reported earnings.

Rebuild the expense base and owner coverage

Compare payroll, schedules, vendor invoices and actual daily tasks. Include management, meals, housekeeping, transport, activities, maintenance and billing where promised. Explain shared services and costs charged by related businesses. The forecast should reflect terms the buyer can obtain for the operation it will run.

Map the owner's work, including absences, emergency calls and tasks outside ordinary hours. The owner replacement guide helps cost suitable cover. Reconcile proposed add-backs with replacement costs so necessary work is neither omitted nor deducted twice. A buyer's plan to work onsite still needs a sustainable schedule.

Require an operating basis for proposed cost reductions. Review the resident agreements, duties that apply and effect on service delivery with qualified advisers. A target profit level does not establish which support can be removed. Preserve the cost of adequate relief and supervision where needed.

Check housing policies and actual authority

Collect the policies and lawful verification records supporting an age-qualified housing claim. The federal 55-plus path includes an occupied-unit threshold, demonstrated intent and required verification. (Source: 42 USC 3607(b)) Review the full conditions instead of relying on an age percentage alone.

Use the independent-living permissions guide when proposed services change that operating model. Its example separates housing receipts, conditional assistance revenue and committed administrative cost, without assuming that an outside provider automatically establishes a licensing exemption.

The housing buyer exercise compares two adults sharing an apartment, a reservation and a temporary absence. The fictional entries raise different unit and status questions. Check what each record shows before working out a percentage. These entries supply neither the complete unit count nor a conclusion about the housing exemption.

Keep the familial-status question separate from other housing duties, care licensing and permitted property use. Review complaints, notices and proposed policy changes with counsel. Do not assume that the seller's historical practice proves that the buyer can lawfully continue or expand it.

Read outside-provider and emergency arrangements. Establish who contracts for each service, who has the authority to deliver it and what the housing operator promises. Check consent and termination terms. A referral relationship does not transfer professional credentials or guarantee residents will continue choosing the same provider.

Inspect property, contracts and financing

Have qualified reviewers inspect the property for its planned use. Check its condition, accessibility, safety rules and use limits. Price the work needed and its effect on occupied units and services. An appraisal, a site tour and a license review each answer different questions.

Review lease assignment, renewal and repair duties, or the rights acquired with the property purchase. Identify equipment leases, management agreements, insurance and key vendor terms. Confirm required consents and the cost of replacement arrangements. A signed business agreement does not settle every third-party right.

Ask lenders about the specific property and care model. HUD's healthcare-program overview is not approval for a standalone independent-living asset. (Source: HUD programs) Align financing conditions, capital spending and operating cash with the actual closing path, including the cost of delay.

Protect records and prepare resident communication

Pre-NDA outreach excludes financials and identifying owner, community, exact location, resident, staff, vendor and referral details. Screen buyers and approve their access before detailed business review. Small groups and coded records can still reveal who someone is. Removing names alone does not make the records anonymous. (Source: HHS de-identification)

An NDA does not supply a lawful basis for every sensitive-record disclosure. Determine the duties that apply, permitted access and safeguards with advisers. The records custody guide helps assign storage, retrieval and ongoing requests. Keep necessary care-record review separate from public marketing and broad data-room access.

Plan notices and accurate communication about services, balances and contacts. Respect resident choices and required information rights. Assign who answers questions and handles corrections during the handoff. Confidentiality should not be used to delay a notice that the actual law or agreement requires.

Connect findings to the offer and first week

Record each finding with evidence, open questions, reviewer and next action. Separate ongoing costs, one-time repairs, disputed balances and barriers to operation. Use the letter-of-intent guide to connect key findings with proposed terms. A price adjustment does not create missing authority or perform a required service.

Rehearse billing, payroll, meals, maintenance, deposits and emergency contacts using fictional information. Check permissions, backup and the incoming team's access to needed records. This tests duty gaps without exposing resident information or making clinical judgments. Refresh key schedules and approval status near closing.

Carry agreed duties into the first 90 days plan. The final decision should explain what is supported, what must be resolved and how the buyer will fund daily service. Missing evidence should remain visible until the reviewer in charge has addressed it.

Use the IL payment example to identify who receives each resident payment. Care paid directly to a separate provider should remain a separate record question when reviewing the housing operator's charges.