BILL ANALYSIS                                                                                                                                                                                                    



                                                                  SB 1329
                                                                  Page  1

          Date of Hearing:  June 22, 2010

                           ASSEMBLY COMMITTEE ON JUDICIARY
                                  Mike Feuer, Chair
                     SB 1329 (Leno) - As Amended:  April 28, 2010

           SENATE VOTE :  30-0

           SUBJECT  :  RESIDENTIAL CARE FACILITIES FOR THE ELDERLY: RCFE  
          RESIDENTS FORECLOSURE PROTECTION ACT OF 2010

           KEY ISSUE :  TO PROTECT VULNERABLE SENIORS IN ASSISTED LIVING,  
          SHOULD LICENSEES OF RESIDENTIAL CARE FACILITIES FOR THE ELDERLY  
          (RCFE) BE REQUIRED TO NOTIFY THE RESIDENTS AND THE DEPARTMENT OF  
          SOCIAL SERVICES WHEN THE PROPERTY IS SUBJECT TO FORECLOSURE OR  
          OTHER EVENT INDICATING FINANCIAL DISTRESS?

           FISCAL EFFECT  :  As currently in print this bill is keyed fiscal.

                                      SYNOPSIS
                                          
          This bill, co-sponsored by California Advocates for Nursing Home  
          Reform (CANHR) and Bet Tzedek Legal Services, would enact the  
          RCFE Residents Foreclosure Protection Act of 2010--legislation  
          intended to protect the interest of vulnerable seniors living in  
          assisted living homes in the event of foreclosure or other  
          financial distress experienced by the licensee operating the  
          facility.  Under this bill, the RCFE licensee would be required  
          to notify the Department of Social Services and the residents of  
          the home upon the occurrence of, or upon obtaining knowledge of,  
          certain triggering events, all of which are meant to indicate  
          that the facility is experiencing financial distress or is  
          subject to foreclosure.  Upon receiving the notification, in  
          most cases DSS would be authorized, but necessarily required, to  
          initiate administrative action.  If, however, foreclosure,  
          eviction, or bankruptcy proceedings have actually begun against  
          the licensee, then this bill appropriately requires  
          administrative action to protect the interests of the residents.  
           The author has expressed intent to make clarifying amendments  
          suggested in Assembly Human Services to address concerns of one  
          association of care providers who have yet to officially oppose  
          the bill.  The bill is supported by a number of organizations  
          that advocate for seniors, including AARP and the Congress of  
          California Seniors, and has no current opposition.  This bill  
          passed out of the Senate by a 30-0 vote.








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           SUMMARY  :  Enacts the RCFE Residents Foreclosure Protection Act  
          of 2010, to require licensees of residential care facilities for  
          the elderly to notify authorities and the residents of the home  
          when the property is subject to foreclosure or certain other  
          events indicating financial distress.  Specifically,  this bill  :   
            

          1)Requires a RCFE licensee to notify the Department of Social  
            Services (DSS) in writing within 2 business days of the  
            occurrence of, or the licensee obtaining knowledge of, any of  
            the following events:

             a)   Failure to make one or more mortgage, lease, or rental  
               payments on the property within 30 days of the due date;

             b)   Failure to make timely payment of any premiums required  
               to maintain mandated insurance policies or bonds in effect,  
               or any tax lien levied by any government agency, unless an  
               insurance premium has not been paid due to the fault of an  
               escrow account servicer;

             c)   A utility company has sent notice of intent to terminate  
               a utility on the property;

             d)   A judgment lien has been levied against the facility or  
               any of the assets of the facility or licensee;

             e)   A financial institution refuses to honor a check or  
               other instrument issued by the licensee to its employees  
               for a regular payroll due to insufficient funds;

             f)   The financial resources of the licensee fall below the  
               amount needed to operate the facility for a period of at  
               least 45 days based on the current occupancy of the  
               facility.

          2)Authorizes, but does not require, DSS to initiate a compliance  
            plan, noncompliance conference or other administrative action  
            upon receipt of notification of any of the factors (a) through  
            (f) above indicating financial distress.

          3)Requires that a RCFE licensee notify DSS, all residents, and,  
            if applicable, their legal representatives, in writing within  
            2 business days, of the occurrence of, or the licensee  








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            obtaining knowledge of, any of the following events:

             a)   A notice of foreclosure is issued on the property;

             b)   An unlawful detainer is initiated against the licensee;

             c)   The licensee files for bankruptcy.

          4)Requires that a RCFE licensee notify all applicants or  
            potential residents of the facility, and, if applicable, their  
            legal representatives, in writing and prior to admission to  
            the facility, of the occurrence of, or the licensee obtaining  
            knowledge of, any of the following events:

             a)   A notice of foreclosure is issued on the property;

             b)   An unlawful detainer is initiated against the licensee;  
               or,

             c)   The licensee files for bankruptcy.

          5)Requires DSS to initiate a compliance plan, noncompliance  
            conference, or other administrative action upon receipt of  
            notification of any foreclosure, unlawful detainer, or  
            bankruptcy events, as specified above.

          6)Provides for civil penalties of $100 for each day a licensee  
            fails to provide required notification, up to a total civil  
            penalty not more than $2000. 

          7)Authorizes DSS to suspend or revoke the licensee's license, or  
            permanently revoke the licensee's ability to operate or act as  
            an administrator of a facility anywhere in the state, if a  
            resident is relocated without adequate notification, or if the  
            resident's health and safety has been compromised as a result  
            of a relocation that has occurred without the required  
            notification. 

          8)Exempts from these requirements RCFE licensees who have  
            obtained a certificate of authority from DSS permitting the  
            licensee to enter into continuing care contracts at a  
            continuing care retirement community.

           EXISTING LAW  , the California Residential Care Facilities for the  
          Elderly Act (Chapter 3.2 of Division 2 of the Health and Safety  








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          Code), provides for the licensure and regulation of RCFEs by the  
          Department of Social Services, Community Care Licensing Division  
          (CCL), and generally authorizes the Department to take  
          enforcement action, including, but not limited to, actions to  
          suspend, temporarily suspend, or revoke a license, and to impose  
          civil penalties for violations of rules and regulations  
          established under RCFE licensing provisions.

           COMMENTS  :  This bill, co-sponsored by California Advocates for  
          Nursing Home Reform (CANHR) and Bet Tzedek Legal Services, would  
          enact the RCFE Residents Foreclosure Protection Act of  
          2010--legislation intended to protect the interest of vulnerable  
          seniors living in assisted living homes in the event of  
          foreclosure or other financial distress experienced by the  
          licensee operating the facility.  Under this bill, the RCFE  
          licensee would be required to notify DSS and the residents of  
          the home upon the occurrence of, or upon obtaining knowledge of,  
          certain triggering events, all of which are meant to indicate  
          that the facility is experiencing financial distress or could be  
          vulnerable to foreclosure.  Upon receiving the notification, in  
          most cases DSS would be authorized, but necessarily required, to  
          initiate administrative action.  However, if foreclosure,  
          eviction, or bankruptcy proceedings have actually begun against  
          the licensee-a more serious type of event--then this bill  
          appropriately requires DSS to take administrative action to  
          protect the interests of the residents.  Finally, this bill  
          provides up to $2000 in civil penalties for failure to comply  
          with the notification requirements, with the possibility of  
          suspension or revocation of the licensee's license for the more  
          serious offense of relocating a resident without adequate  
          notification.

           Background.   RCFEs are assisted living facilities for seniors  
          where varying levels of care and supervision, protective  
          supervision, or personal care are provided, based upon  
          residents' needs.  (Health and Safety Code Section 1569.2(k).)   
          As of March 2010, there were 7,825 licensed facilities in the  
          state with a total capacity of 170,290 residents.  According to  
          DSS data from 2007, approximately three-quarters of RCFEs are  
          licensed for six or fewer residents; the remaining RCFEs have an  
          average licensed capacity of approximately 60 residents.  As is  
          noted in this bill's legislative findings, the vast majority of  
          RCFEs are located in single-family dwellings, with a mortgage on  
          the property.









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           Stated Need for the Bill  .  According to the sponsor, the housing  
          foreclosure crisis in California increasingly extends to RCFEs.   
          CANHR states that it has experienced a surge of reports about  
          RCFE properties in foreclosure or bankruptcy, and cites figures  
          from the State Long-term Care Ombudsman Program reporting a  
          six-fold increase in the number of RCFEs in financial distress  
          from 2006 to 2008.  This unfortunate trend poses special  
          problems for seniors living in RCFEs because, as CANHR explains:

               The impact of a foreclosure on RCFE residents can be  
               particularly devastating because they often rely on  
               the facility to provide assistance with most of their  
               activities of daily living.  A foreclosure or  
               bankruptcy not only requires they find a new home but  
               also must find new care providers, disrupting the  
               patterns of care to which they had become accustomed.

               The devastation of a foreclosure is exacerbated by the  
               fact that many residents never receive notice of the  
               imminent loss of their home, leaving them and their  
               family members entirely unprepared for locating a new  
               placement.  A recent foreclosure in Contra Costa  
               County occurred without any notice to the six  
               residents [of the RCFE] or their families.  As the  
               operator of the facility fought the foreclosure in  
               court, she continued to accept new residents who, like  
               the old residents, were stunned to learn their home  
               was lost when word finally leaked out.  In facilities  
               in Alameda and Los Angeles Counties, residents were  
               actually sent to the curb by sheriff's officers while  
               staff from local Adult Protective Services offices  
               sought emergency placements.

          According to Bet Tzedek Legal Services, current law does not  
          adequately protect these vulnerable senior residents of RCFEs,  
          because, as they explain:

               Under current law, RCFE owners are not required to  
               provide notice to residents or the Community Care  
               Licensing Division when they are suffering severe  
               financial distress or their homes are in foreclosure.   
               Increasingly, RCFE owners are losing their homes and  
               residents are being forced to move with little or no  
               notice.  Rather than having months to search for a new  
               care home, residents may have only several hours.  As  








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               a result of this lack of notice, RCFE residents are  
               more vulnerable to emotional and physical trauma, and  
               placement in facilities that cannot meet their care  
               needs.
           
          The author continues to work with residential care providers to  
          address concerns.   Shortly before this bill was heard one week  
          ago by the Assembly Committee on Human Services, the author  
          received a letter from the Community Residential Care  
          Association of California (CRCAC), expressing neither support  
          nor opposition to the bill, but outlining some concerns CRCAC  
          continued to have.  This Committee has received a copy of that  
          letter from CRCAC, as well as written comments from the author  
          that evidences the constructive dialogue that continues to  
          occur.  At the time of this analysis, the author had expressed  
          his commitment to making several clarifying amendments to  
          address ambiguities in the bill that were raised by CRCAC and  
          recommended in the Committee on Human Services analysis.  The  
          author identified to this Committee the specific ambiguities  
          that would be addressed by the impending amendments, but  
          unfortunately the precise language of those amendments was not  
          available in time for this analysis.

          In its letter, CRCAC contends that although this bill requires  
          notice to "all applicants or potential residents" that a  
          foreclosure, eviction, or bankruptcy proceedings has begun (page  
          3, line 28), the bill does not adequately define those terms.   
          Because any eligible senior citizen in California may be  
          conceived of as a "potential resident", the author may wish to  
          require notice only to actual applicants, who are more readily  
          identifiable, by including such notice with the application to  
          any person seeking to apply for residency at the home.

          CRCAC also contends in its letter that the bill language  
          requiring notification of DSS if "the financial resources of the  
          licensee fall below the amount needed to operate the facility  
          for a period of at least 45 days" (page 3, lines 20-22) needs  
          clarification.  According to the author, a 45 day standard  
          currently applies to nursing homes, and this provision is  
          apparently intended to require that the licensee at all times  
          maintain sufficient assets to ensure future operations of the  
          RCFE for at least 45 days.  The author's clarifying amendments  
          are expected to address these concerns. 

           ARGUMENTS IN SUPPORT  :  This bill is supported by a number of  








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          organizations that advocate for seniors, including AARP, the  
          Congress of California Seniors, and the Alzheimer's Association,  
          because they are aware of the potential emotional and physical  
          trauma to fragile seniors associated with moving from one  
          assisted living facility to another.  

          Other supporters include the Consumer Attorneys and the  
          California Retired Teachers Association, the latter writing in  
          support:

               Unfortunately, in these difficult economic times some  
               residential care facilities can face economic troubles  
               leading to bankruptcy and closure.  The clients who  
               are frail and elderly, however, have a much higher  
               risk of service loss and protection if a RCFE should  
               close due to financial troubles or bankruptcy.  SB  
               1329 would create an early warning system to ensure  
               that (certain) obligations occur in a manner that will  
               protect the interests of the elderly clients.

           REGISTERED SUPPORT / OPPOSITION  :

           Support 
           
          California Advocates for Nursing Home Reform (CANHR)  
          (co-sponsor)
          Bet Tzedek Legal Services (co-sponsor)
          Alzheimer's Association
          Consumer Attorneys of California
          American Association of Retired People (AARP)
          California Retired Teachers Association
          Congress of California Seniors
           
            Opposition 
           
          None on file

           Analysis Prepared by  :    Anthony Lew / JUD. / (916) 319-2334