The “Hotel” Method and Rental Value in EHPAD Lease Renewals: A Surprise Setback

Following the shrewd advice of certain “specialists” in furnished rentals, many nursing homes have “service areas” that do not belong to the co-owners of the rooms…

Together, they have invested more than 90% of the price paid to the developer for the premises but, in fact, hold only 60% of the “shares.” The service spaces—representing approximately 40% of the profit-sharing shares—were paid for by their owner (the operator or a company affiliated with the operator) at less than 10% of the price of the premises. When the leases were renewed, the operator’s “trusted advisor” pulled off the following “trick”: they have the “rental value” of the residence determined by a “compliant expert friend” who (improperly) uses the hotel method to determine a so-called overall rental value, which is then apportioned among the co-owners of the building in proportion to their “shares ”!

“A veritable scam on the part of the well-advised operator”

Through this “sleight of hand,” the co-owners of the guest rooms are allocated 60% of the rental value (rather than 90%), while the lucky owners of the service areas are allocated 40% of that value (rather than just 10%). This trap, which goes unnoticed by isolated and uninformed co-owners, is used to justify a demand for a sharp rent reduction that takes the form of a “expert-recommended” adjustment ” and constitutes a veritable “scam” on the part of the “well-advised” property manager

But this “maneuver” will not stand up to an organized defense. It is therefore imperative that co-owners band together, because operators are always stronger when co-owners remain isolated!

Call us to learn how to defend yourselves in a situation where the law protects the stronger party (the property manager) and works against the weaker one (the individual co-owner).