Why Senior Housing Requires a Different Playbook for Acquisitions

Introduction

Senior housing transactions sit at the intersection of real estate, healthcare regulation, and resident care, making them fundamentally different from other commercial real estate transactions. Institutional investors are increasingly investing in this asset class based on changes in demographic demands and limited new supply. The baby boomer generation is the wealthiest generation in history, controlling approximately $85 trillion in US household assets,¹ and they have the financial wherewithal to afford extended stays in senior living facilities. As of January 1, 2026, the first US baby boomers have started to turn 80 years old. The 80-plus population group in the nation is projected to double from 14.7 million in 2025 to 29.4 million in 2045.² This “silver tsunami” has created a demand for senior living facilities, which are generally immune to economic downturns. As one investor quipped to the audience at a recent real estate industry conference, senior housing is the latest “darling of commercial real estate investing.”

However, while attractive returns and economic resiliency may be driving and attracting institutional interest in senior housing, there is also heightened legal and reputational risk that must be mitigated. Operational issues can surface publicly after an acquisition closes in ways that traditional indemnities or carved-out liabilities will not fully address. Senior housing is ultimately an asset class in which pre-closing operational issues can become post-closing headlines.

Surveys, deficiency citations, complaint investigations, and resident safety incidents may become public between the end of the due diligence period and closing. In the context of the proposed acquisition, a sophisticated investor is not only negotiating for price and other standard deal terms but also transparency, cooperation, and communication. The purchase and sale agreement (PSA) must address the reality that reputational harm to a senior housing facility is an ongoing risk, not a static schedule item. This means that a PSA needs to move beyond standard disclosure schedules to ongoing incident reporting, tight post-diligence notification covenants, and objective closing conditions that allow buyers to reprice or walk away from the deal if the disclosure of facts at the later stage of a transaction dramatically changes the underwriting assumptions for the asset.

This article focuses on how investors should structure senior housing PSAs to capture incident-level detail before closing and how to pair that visibility with targeted remedies so that if an investor’s latest acquisition becomes the headline of the week, its PSA gives it options instead of unpleasant surprises.

Senior Housing as a Unique Asset

Senior housing combines real property and a heavily regulated caregiving operation. Investors must underwrite not only rent rolls, labor costs, and capital expenditures but also care quality, clinical risk, staffing protocols, incident reporting, regulator posture, insurance coverage, and media exposure. The key differences between senior living facilities and other residential assets such as multifamily, student housing or build-to-rent include:

• Resident vulnerability and claim severity: Incidents may involve injuries, elopements,³ abuse, or neglect, each with potential mandatory reporting obligations and heightened risk exposure.
• Regulatory visibility: State health departments and other authorities conduct inspections, issue notices of violations and deficiencies, and publish findings.
• Bad publicity: Headlines name the facility itself, not the former owner.

These dynamics require PSAs to front-load operational transparency and preserve late-stage remedies if adverse events surface between the diligence cutoff and closing. Traditional PSA protections (e.g., representations, indemnities, caps, and baskets) remain essential but are not enough on their own to protect senior living facilities against reputational harm.

Litigation and Reputational Risk

In our experience, senior housing residents (and their families) are more likely to escalate grievances (often to counsel) in comparison to residents of other residential assets. Common claim categories include falls and fractures, medication errors, elopements, abuse/neglect, wrongful death, and staffing-related negligence (together, referred to as Senior Housing Claims). Even when defensible, these claims will cause owners to incur discovery costs, file insurance claims, and deal with negative press.

While broad indemnification provisions are not common in most purchase and sale agreements, it is essential to include a robust indemnity for pre-closing Senior Housing Claims in a PSA for a senior housing facility. If a facility has pending Senior Housing Claims, then the buyer needs to be indemnified from such claims, and any recovery must be carved out from minimum and maximum thresholds set forth in the PSA. In addition, key representations and warranties in a PSA, including those addressing licensing issues, facility violations, and threatened and actual litigation, should have extended survival periods to allow for sufficient time to discover breaches of any such representations and warranties. But keep in mind that having the right to seek indemnification from the seller for Senior Housing Claims will not erase any reputational damage that can negatively impact occupancy, staffing, and, ultimately, asset performance.

Traditional PSAs contain schedules listing pending or threatened litigation and governmental proceedings. In senior housing, Senior Housing Claims may never ripen into litigation, or the filing of litigation may lag significantly between the underlying incident and formal filing. For a potential buyer to ensure it has the full picture of a facility’s state, it should require incident-level disclosures upon the signing of the PSA and during the escrow period that capture:

• Reportable events: injuries, elopements, suspected abuse/neglect, and medication errors.
• Internal investigations: root cause analyses, corrective actions, and lessons learned.
• Regulator activity: complaints, deficiency citations, surveys,⁴ investigations, and plans of correction.
• Insurance notifications.
• Employment actions tied to resident care: suspensions, terminations, and disciplinary steps.

Pre-Closing Notification Covenants

Due diligence investigations can provide a snapshot of an active and ongoing business at any given time. Buyers cannot obtain estoppels from facility residents to flush out potential claims, so it is incumbent on them to actively seek out information about the asset. From the end of the due diligence period until closing, the buyer will need fresh information. Here, the electronic health record (EHR) system⁵ is a buyer’s best friend.

Senior housing deals are often under contract for far longer than typical real estate transactions, which is largely due to the timing and complexity of change‑of‑ownership (CHOW) approvals. Regulatory CHOW processes, which may involve state health departments, licensing agencies, and payor programs, can take several months or longer to complete. During that extended interim period, the facility continues to operate; residents continue to receive care; Senior Housing Claims may arise; and government-mandated surveys and enforcement actions can and do occur. The risk profile of a senior housing asset can materially change after diligence ends but before the deal closes.

This elongated contract life cycle is precisely why interim notification and disclosure covenants are critical. Without them, buyers may reach the closing table unaware that a Senior Housing Claim has occurred post‑diligence, a government agency has commenced a complaint investigation or cited new deficiencies, or a plan of correction has been submitted or rejected.

Robust interim covenants mitigate these risks to buyers by ensuring that they receive real-time operational updates during the CHOW period. In senior housing, this period is an active risk window that must be managed contractually. If a buyer links disclosure triggers to the facility’s EHR, then they mitigate the risk of seller subjectivity (i.e., leaving the disclosure of potential Senior Housing Claims to the seller’s discretion). If an event is logged in the EHR under defined incident categories, the seller must promptly notify the buyer and deliver relevant documentation.

Tailored Closing Conditions

A PSA for a senior housing asset must include key closing conditions, including receipt of the CHOW approval and the nonoccurrence of any suspension, restriction, or material limitation on the facility’s license or certification. However, buyers should also consider incorporating the occurrence of certain regulatory threshold triggers as a failed closing condition, such as the issuance of a deficiency notice, the imposition of directed plans of correction, and/or civil monetary penalties exceeding a certain threshold.

To further mitigate risks, a buyer that engages the existing manager to continue operating the facility should consider what rights exist to rebrand post-closing, such as seller cooperation, if needed.

Conclusion

Senior housing remains a compelling, resilient asset class with durable demand drivers. However, it can be a potential pitfall without sufficient contractual safeguards. By expanding disclosures beyond traditional litigation schedules, anchoring notice obligations to the EHR, and crafting targeted closing conditions and remedies, institutional investors can meaningfully reduce downside risk while preserving asset performance.