The move comes after Chase Nursing Home in Brownhills received a damning report from the Care Quality Commission, which issued formal warnings. Walsall Council is working with the families of the 13 residents it supports to find alternative services, or new homes. But family fears have been raised about the impact the changes will have.
The council's quality assurance team visited the home, which supports people with mental health problems, earlier this year and raised concerns.
Then inspectors from the CQC warned provider, Heritage Healthcare (Midlands) Ltd, that it needed to do more to protect residents' safety and welfare.
They said the Vicarage Road home, which can accommodate up to 22 people, had to make improvements in relation to care and welfare, consent to care and treatment and the management of medicines.
The council said the authority, NHS Walsall, Dudley and Walsall Mental Health Trust and Black Country Partnership NHS Foundation Trust had a duty to ensure the quality of services provided by the home.
Councillor Barbara McCracken, portfolio holder for social care and health, said: "We are focusing on planning the best long-term arrangements for the 13 residents that are funded by the council and the mental health trust, and are talking to them and their families to move forward in their best interests."
Marilyn Stanton, whose 36-year-old son David, is at the home, do not want him to move. The 63 year-old, of High Heath, said: "The staff are pleasant and the place is spotlessly clean. It is going to be a crying shame."
No-one from Chase Nursing Home was available for comment.