<PAGE>
 
                                                                    EXHIBIT 10.4
 
                    AMENDMENT NO. 1 TO SUBSIDIARY GUARANTY


     THIS AMENDMENT, dated as of March 27, 1997, by (i) each of the Guarantors
which is a party to the Subsidiary Guaranty referred to below (the "ORIGINAL
GUARANTORS"); (ii) each of the following additional Subsidiaries of the
Borrower: ATRIA COMMUNITIES SOUTHEAST, INC., a Delaware corporation which is the
surviving corporation of a merger with American ElderServe Corporation, a
Georgia corporation, AMERICAN ELDERSERVE MANAGEMENT, INC., a Georgia
corporation, SOUTHERN CARE, INC., a Georgia corporation, AMERICAN ELDERSERVE OF
ALABAMA, INC., a Georgia corporation, AMERICAN ELDERSERVE OF TEXAS, INC., a
Texas corporation, SOUTHEAST ASSISTED LIVING RESIDENCES, INC., a Georgia
corporation, AMERICAN ELDERSERVE OF NORTH CAROLINA, INC., a North Carolina
corporation, AMERICAN ELDERSERVE OF FLORIDA, INC., a Florida corporation,
PLANTATION SOUTH ON CYPRESSWOOD LIMITED PARTNERSHIP, a Texas limited
partnership, and PLANTATION SOUTH AT AUBURN PARTNERSHIP, an Alabama general
partnership (each, together with its successors and assigns,  an "ADDITIONAL
SUBSIDIARY GUARANTOR"); and (iii) PNC BANK, NATIONAL ASSOCIATION, a national
banking association, as Administrative Agent (the "ADMINISTRATIVE AGENT") under
the Credit Agreement referred to in the Subsidiary Guaranty identified below:

     PRELIMINARY STATEMENTS:

     (1)  The Original Guarantors have heretofore entered into the Subsidiary
Guaranty, dated as of August 15, 1996, in favor of the Administrative Agent (the
"SUBSIDIARY GUARANTY"; with the terms defined therein, or the definitions of
which are incorporated therein, being used herein as so defined).

     (2)  The parties hereto desire to amend certain of the terms and provisions
of the Subsidiary Guaranty, all as more fully set forth below.

     NOW, THEREFORE, the parties hereby agree as follows:

     1.   JOINDER OF ADDITIONAL SUPPORTING GUARANTORS.  Effective upon the
execution and delivery of this Amendment, each Additional Subsidiary Guarantor
hereby joins in and becomes a party to the Subsidiary Guaranty, as amended
hereby, as a Guarantor thereunder as fully as if it had been an original
signatory to the Subsidiary Guaranty. All representations, warranties,
covenants, agreements and waivers contained in the Subsidiary Guaranty, as
amended hereby, applicable to Guarantors thereunder shall apply to the
Additional Subsidiary Guarantors from and after the date of execution and
delivery of this Amendment.

     2.   RATIFICATIONS. The terms and provisions set forth in this Amendment
shall modify and supersede all inconsistent terms and provisions set forth in
the Subsidiary Guaranty, and except as expressly modified and superseded by this
Amendment, the terms and provisions of the Subsidiary Guaranty are ratified and
confirmed and shall continue in full force and effect.

     3.   MISCELLANEOUS.  The terms and provisions of sections 13, 14, 15, 16,
20, 23, 25 and 26 of the Subsidiary Guaranty are hereby incorporated into this
Amendment as if set forth in full herein, except that references in such
incorporated terms and provisions to "this Guaranty", "herein", "hereby" and
words of similar import shall be deemed to refer to this Amendment instead of
the Subsidiary Guaranty.



              [The balance of this page is intentionally blank.]
<PAGE>
 
     IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed and delivered by their respective officers thereunto duly authorized as
of the date first above written.


                         LANTANA PARTNERS, LTD.
                              BY: HILLHAVEN PROPERTIES, LTD.,
                                    A GENERAL PARTNER
                         PHILLIPPE ENTERPRISES, INC.
                         HILLHAVEN PROPERTIES, LTD.
                         CASTLE GARDENS RETIREMENT CENTER
                              BY: HILLHAVEN PROPERTIES, LTD.,
                                    A GENERAL PARTNER
                         HILLCREST RETIREMENT CENTER, LTD.
                              BY: FAIRVIEW LIVING CENTERS, INC.,
                                    A GENERAL PARTNER
                         SANDY RETIREMENT CENTER LIMITED PARTNERSHIP
                              BY: HILLHAVEN PROPERTIES, LTD.,
                                    A GENERAL PARTNER
                         TOPEKA RETIREMENT CENTER, LTD.
                              BY: HILLHAVEN PROPERTIES, LTD.,
                                    A GENERAL PARTNER
                         EVERGREEN WOODS, LTD.
                              BY: ATRIA COMMUNITIES, INC.,
                                    A GENERAL PARTNER
                         FAIRVIEW LIVING CENTERS, INC.
                         TWENTY-NINE HUNDRED ASSOCIATES, LTD.
                              BY: TWENTY-NINE HUNDRED CORPORATION,
                                    A GENERAL PARTNER
                         TWENTY-NINE HUNDRED CORPORATION
                         WOODHAVEN PARTNERS, LTD.
                              BY: HILLHAVEN PROPERTIES, LTD.,
                                    A GENERAL PARTNER
                         TUCSON RETIREMENT CENTER LIMITED
                                    PARTNERSHIP
                              BY: HILLHAVEN PROPERTIES, LTD.,
                                    A GENERAL PARTNER


                         BY: _________________________________
                              VICE PRESIDENT


                         ATRIA COMMUNITIES SOUTHEAST, INC.
                         AMERICAN ELDERSERVE MANAGEMENT, INC.
                         SOUTHERN CARE, INC.
                         AMERICAN ELDERSERVE OF ALABAMA, INC.
                         AMERICAN ELDERSERVE OF TEXAS, INC.
                         SOUTHEAST ASSISTED LIVING RESIDENCES, INC.
                         AMERICAN ELDERSERVE OF NORTH CAROLINA, INC.
                         AMERICAN ELDERSERVE OF FLORIDA, INC.
                         PLANTATION SOUTH ON CYPRESSWOOD
                              LIMITED PARTNERSHIP
                              BY: AMERICAN ELDERSERVE OF TEXAS, INC.
                                    ITS GENERAL PARTNER
                         PLANTATION SOUTH AT AUBURN PARTNERSHIP
                              BY: AMERICAN ELDERSERVE OF ALABAMA, INC.
                                    ITS GENERAL PARTNER


                         BY:____________________________________
                              VICE PRESIDENT

                                       2
<PAGE>
 
                         PNC BANK, NATIONAL ASSOCIATION,
                              AS ADMINISTRATIVE AGENT


                         BY: _________________________________
                              VICE PRESIDENT

                                       3