Independent Living Due Diligence Checklist

Establish the acquisition perimeter

Obtain the entity chart, property ownership or lease documents, material agreements and proposed transaction structure. List the included assets, contracts, balances and obligations. Identify exclusions and any resources currently supplied by affiliates.

Compare that list with the resident-facing offering. If a shared kitchen, transport service or management function is essential, establish how the buyer will continue it. SBA's acquisition guidance supports examining contracts, financial statements and operating information with appropriate advisers. It does not supply a substitute for the target's records. (Source: SBA)

Classify agreements and promised services

Request current and historical agreement forms, executed examples, amendments, side letters and fee schedules. Identify included housing, services, deposits, notice provisions and refund responsibilities. Determine whether different resident groups have materially different rights.

Ask counsel whether any arrangement creates continuing-care obligations or involves regulated services. California's application guidance distinguishes continuing-care authority from component licenses and addresses certain organizational changes. Use the CCRC checklist where that additional framework is relevant. (Source: CDSS)

Verify the unit inventory

Reconcile plans, unit numbers, rent-roll status and management's availability schedule. Identify occupied, reserved, vacant, offline and nonrentable space. Review why a unit is unavailable, what must occur before occupancy and whether its carrying costs remain in the financial statements.

Calculate occupancy using a defined period and denominator. Retain both full-inventory and available-unit views when useful rather than silently removing difficult units. Follow the occupancy definition and investigate unexplained changes between monthly reports before relying on a trend.

Sample agreements through billing and collections

Select cases covering different unit types, concessions, move-ins, departures and unpaid balances. Match the executed terms to charges, adjustments and receipts. Review the service period rather than assuming the month of a deposit identifies when revenue was earned.

Document each exception and extend the review if it suggests a systematic problem. A billing error affecting one unit type or agreement version may require a broader reconciliation. Record whether a correction changes historical results, a resident obligation or future billing practices.

Recalculate effective rent

Prepare a schedule of base charges, concessions, agreement lengths and included services. Apply a consistent effective-rent definition. Show the contractual term economics separately from cash timing and expected renewals.

As a fictional check, $2,800 per month for twelve months totals $33,600. A $1,200 concession produces $32,400 over the term, or $2,700 per month before other adjustments. These are invented numbers, not market prices. If management uses a different measure, explain the difference rather than comparing unlike figures.

Reconcile deposits and closing balances

Obtain deposit, advance-payment, refund and receivable schedules. Reconcile the balance movements to accounts and bank activity. Have advisers identify obligations and determine which amounts transfer with the operation.

Review closing prorations alongside the actual service periods and payment timing. If one party receives cash but the other owes the service or refund, document how the agreement resolves it. Do not treat every resident-account balance as a price adjustment in the same direction without understanding the underlying responsibility.

Test the expense base and owner duties

Review payroll, schedules, vendor contracts, food costs, utilities, management expenses and related-party transactions. Compare resources with the promised service package. Explain which costs vary with occupancy and which remain necessary during a vacancy.

List the seller's recurring management and emergency duties, including work supplied by affiliates. The owner-replacement guide helps evaluate a buyer's staffing assumptions. Show supported adjustments separately from hoped-for efficiencies and avoid deducting the same replacement expense twice.

Review housing policies and applicable authority

Collect the policies, records and legal basis used for any age-qualified housing claim. The federal 55-plus pathway combines an age-related occupied-unit threshold, demonstrated intent and occupancy verification; it is not simply a rent-roll percentage. Review the complete requirements with counsel. (Source: 42 USC 3607(b))

Assess other applicable housing, service and care requirements separately. Document the approval or compliance evidence for the actual operation, including third-party providers and mixed-campus arrangements. A business name does not establish an exemption.

Inspect property and capital requirements

Engage suitable property specialists to review condition, major systems, accessibility, life safety, environmental matters and permitted use. Request permits, warranties, inspection findings and outstanding work orders. Connect the findings to unit availability and service delivery.

Build a costed schedule distinguishing urgent work, ordinary turnover and longer-term replacements. Identify funding, responsible parties and downtime. Have management assess practical sequencing so the forecast includes the effect on residents, staff and revenue while work occurs.

Verify contracts, insurance and financing

Review assignment and termination terms for property, management, vendors and service agreements. Confirm the buyer's coverage requirements and supported insurance costs. A new owner should not assume that existing prices, accounts or policies continue without review.

Ask the lender to assess the actual property and use. HUD's healthcare program description does not establish automatic eligibility for independent living. Reconcile purchase price, improvements, fees and working capital to confirmed funding conditions. (Source: HUD)

Examine demand and forecast assumptions

Reconcile inquiries, tours, applications and move-ins using consistent definitions. Review cancellations, concessions, departures and source concentration. Identify unsupported claims of a waiting list or demand that refers to a different unit type or service model.

Keep projected rent growth, renovation premiums and faster absorption separate from historical results. Test a scenario with persistent concessions, slower occupancy and necessary costs continuing. Record how the buyer would fund the difference without relying on unapproved borrowing or resident balances owed elsewhere.

Protect records and plan continuity

Use aggregate information for early review. Establish appropriate authority, purpose and safeguards before detailed resident information is disclosed. HHS de-identification guidance explains why removing names alone may be insufficient within its framework. (Source: HHS)

Assign systems access, rent collection, deposits, staff coverage, vendor payments, work orders, resident communication and urgent response. Walk through a normal day and a service interruption with the incoming team. The plan should identify the evidence supporting readiness, not rely on the departing owner remaining indefinitely available.

Turn findings into a closing decision

For each significant issue, record the source, current conclusion, specialist responsible, financial effect and required action. Distinguish a forecast adjustment from a condition needed to operate or obtain funding. Avoid counting one issue in multiple price adjustments without explanation.

Update material schedules as closing approaches. The independent-living overview provides the broader operating context; the completed diligence record should show which assumptions have evidence and which remain dependencies. The final decision needs to reflect the whole investment and the commitments residents will continue to rely on.