BILL NUMBER: AB 827 CHAPTERED
BILL TEXT
CHAPTER 920
FILED WITH SECRETARY OF STATE OCTOBER 16, 1995
APPROVED BY GOVERNOR OCTOBER 14, 1995
PASSED THE ASSEMBLY SEPTEMBER 5, 1995
PASSED THE SENATE AUGUST 30, 1995
AMENDED IN SENATE AUGUST 21, 1995
AMENDED IN SENATE JULY 19, 1995
AMENDED IN SENATE JULY 5, 1995
AMENDED IN ASSEMBLY APRIL 17, 1995
INTRODUCED BY Assembly Member Speier
FEBRUARY 22, 1995
An act to amend Sections 1770, 1771, 1771.2, 1771.4, 1771.6,
1771.8, 1772, 1773, 1775, 1776.2, 1777, 1777.2, 1777.4, 1778, 1779,
1779.2, 1779.4, 1779.6, 1779.8, 1779.10, 1780, 1780.2, 1780.4, 1781,
1781.2, 1781.4, 1781.8, 1782, 1783, 1783.2, 1784, 1785, 1786, 1786.2,
1787, 1788, 1788.2, 1788.4, 1789, 1789.2, 1789.4, 1789.6, 1789.8,
1790, 1791, 1792, 1792.2, 1793, 1793.5, 1793.6, 1793.7, 1793.9,
1793.11, 1793.13, 1793.15, 1793.17, 1793.19, 1793.21, 1793.23,
1793.25, 1793.27, 1793.29, 1793.31, 1793.50, 1793.52, 1793.54,
1793.56, 1793.58, 1793.60, and 1793.62 of, to add Sections 1771.5 and
1793.8 to, and to repeal Section 1788.3 of, the Health and Safety
Code, relating to continuing care contracts, and making an
appropriation therefor.
LEGISLATIVE COUNSEL'S DIGEST
AB 827, Speier. Continuing care contracts.
Under existing law, the State Department of Social Services is
responsible for regulating activity relating to continuing care
contracts that are defined to include promises to provide care to an
elderly resident for the duration of his or her life or for a period
in excess of 1 year in exchange for certain charges or fees.
Existing law prohibits continuing care providers from entering
continuing care contracts without a current and valid provisional or
final certificate of authority issued by the department and prohibits
these providers from entering into deposit subscription agreements
without a current and valid permit from the state department.
Existing law restricts the information that may be included by
continuing care providers in their advertising or other printed
materials. Existing law requires the inclusion of certain provisions
in all continuing care deposit subscription agreements and
continuing care contracts.
This bill, among other things, would revise the provisions
regarding continuing care contracts, and would require the continuing
care retirement communities to maintain an environment that enhances
residents' independence and self-determination and in that regard
would impose various requirements on the provider. The bill would
revise some of the purposes for which the funds in the continuously
appropriated Continuing Care Provider Fee Fund may be expended and
would increase the amounts deposited into the fund, thereby making an
appropriation. It would revise the requirement for an application
for a permit to sell deposit subscriptions and for a certificate of
authority.
The bill would also authorize the department to charge applicants
a fee if there is any material change in their application for a
permit to sell deposit subscriptions and a certificate of authority.
It would revise the requirements for the monthly progress reports
required to be filed under existing law regarding the escrow accounts
opened for deposit subscriptions. The bill would establish
procedures and requirements for the department to issue a provisional
certificate of authority to a provider. It would require certain
services to be listed in the continuing care contract and to be made
available to the residents, and would list prescribed documents to be
attached to each continuing care contract.
The bill would revise certain requirements regarding annual
reporting by providers of their financial condition, and the
conditions for exemption from that requirement. As to those
providers who offer a refundable contract, it would restrict the type
of investments to be made with the money held in trust for the
contractholders, and set forth procedures for determining the amount
of money to be held in trust for each resident who is a party to a
refundable continuing care contract.
The bill would provide that any entity that abandons the
continuing care retirement community or its obligations under a
continuing care contract is guilty of a misdemeanor, thereby imposing
a state-mandated local program by changing the definition of a
crime.
The bill would also recast the grounds for, and establish grounds
for, suspending, revoking, or conditioning a permit to sell deposit
subscriptions, a provisional certificate of authority, or a
certificate of authority.
The California Constitution requires the state to reimburse local
agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
This bill would provide that no reimbursement is required by this
act for a specified reason.
Appropriation: yes.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 1770 of the Health and Safety Code is amended
to read:
1770. The Legislature finds, declares, and intends all of the
following:
(a) Continuing care retirement communities are an alternative for
the long-term residential, social, and health care needs of
California's elderly residents, seek to provide a continuum of care,
minimize transfer trauma, and allow for provision of services in an
appropriately licensed setting.
(b) Because elderly residents often expend a significant portion
of their savings in order to purchase care in the retirement
community and, thereby, expect to receive care at the retirement
community for the rest of their lives, tragic consequences can result
from a continuing care provider becoming insolvent or unable to
provide responsible care.
(c) There is a need for disclosure concerning the terms of
agreements made between prospective residents and the continuing care
provider, and concerning the operations of the continuing care
retirement community.
(d) Providers of continuing care should obtain a certificate of
authority to enter into continuing care contracts and be monitored
and regulated by the State Department of Social Services.
(e) This chapter applies equally to for-profit and nonprofit
provider entities.
(f) This chapter shall be the minimum requirement to be imposed
upon any entity offering or providing continuing care, as set forth
in this chapter.
(g) Because the authority to enter into continuing care contracts
granted by the State Department of Social Services is neither a
guarantee of performance by the providers nor an endorsement of
contract provisions, prospective residents must carefully consider
the risks, benefits, and costs before signing a continuing care
contract and should be encouraged to seek financial and legal advice
before doing so.
SEC. 2. Section 1771 of the Health and Safety Code is amended to
read:
1771. Unless the context otherwise requires, the definitions in
this section govern the interpretation of this chapter.
(a) (1) "Affinity group" means a grouping of individuals sharing a
common interest, philosophy, or connection (e.g., military officers,
religion, etc.).
(2) "Annual report" means audited financial statements and reserve
calculations (as required by Sections 1792.2 and 1793), with
accompanying certified public accountant's opinions thereon, resident
lists, evidence of fidelity continuing care bond, and certification
that the contract in use for new residents has been approved by the
department, all to be submitted to the department by each provider
annually, as required by Section 1790.
(3) "Applicant" means any entity that submits an application to
the department for a permit to sell deposit subscriptions and
certificate of authority.
(b) (reserved)
(c) (1) "Cancellation" means to destroy the force and effect of an
agreement or continuing care contract, by making or declaring it
void or invalid.
(2) "Cancellation period" means the 90-day period, beginning when
the transferor signs the continuing care contract, during which time
the resident or transferor may rescind the continuing care contract.
(3) "Care" means nursing, medical, or other health related
services, protection or supervision, or assistance with the personal
activities of daily living, or any combination of those services.
(4) "Cash equivalent" means certificates of deposit and United
States treasury securities with a maturity of five years or less.
Possession and control of any of these instruments shall be
transferred to the escrow agent or depository at the time the deposit
is paid.
(5) "Certificate" or "certificate of authority" means the written
authorization from the department for a specified provider to enter
into one or more continuing care contracts at a single specified
continuing care retirement community.
(6) "Condition" means a restriction or required action placed on a
provisional or final certificate of authority by the department. A
condition may limit the circumstances under which the provider may
enter into any new contract, or may be a condition precedent to the
issuance of a final certificate of authority.
(7) "Consideration" means some right, interest, profit, or benefit
accruing to one party, or some forbearance, detriment, loss, or
responsibility, given, suffered, or undertaken by the other.
(8) "Continuing care contract" means a written contract, which
includes a promise, expressed or implied, by a provider to provide
one or more elements of care to an elderly resident for the duration
of his or her life or for a term in excess of one year, in exchange
for the payment of an entrance fee, or payment of periodic charges,
or both types of payments. A continuing care contract may consist of
one or a series of agreements and may have other writings
incorporated by reference. A life care contract, as defined in
paragraph (1) of subdivision (l) is a type of continuing care
contract.
(9) "Continuing care contract committee" means an advisory panel
appointed pursuant to Section 1777.
(10) "Continuing care retirement community" (CCRC) means a
facility where services promised in a continuing care contract are
provided. A distinct phase of development approved by the department
may be considered to be the continuing care retirement community
when a project is being developed in successive multiple phases over
a period of time. When the services are provided in a resident's own
home, the homes into which the provider takes those services
collectively are considered part of the community.
(11) "Control" means the power to direct or cause the direction of
the management and policies of an operator of a continuing care
retirement community, whether through the ownership of voting
securities, by contract or otherwise. A parent or sole corporate
member of a corporation may exhibit control of the operator of the
continuing care retirement community through direct participation in
the initiation or approval of policies directly affecting the
operations, including, but not limited to, approval of budgets or
approval of the continuing care retirement community administrator.
(d) (1) "Department" means the State Department of Social
Services.
(2) "Deposit subscription" means cash or cash equivalent payment
made by a subscriber to an applicant and the escrow agent prior to
the release of escrow during development or construction of a
continuing care retirement community.
(3) "Deposit subscription agreement" means a written contract in
compliance with Section 1780.4 entered into between the transferor
and applicant. This agreement allows an applicant to accept deposit
subscriptions prior to the issuance of a provisional certificate of
authority.
(4) "Depository" means a bank or institution that is a member of
the Federal Deposit Insurance Corporation or a comparable title
insurance program. The department's approval of the depository will
be based, in part, upon its capability to ensure the safety of funds
and properties entrusted to it and capable and willing to perform the
obligations of the depository pursuant to the escrow agreement and
this chapter. The depository may be the same entity as the escrow
agent.
(5) "Director" means the Director of the State Department of
Social Services.
(e) (1) "Elderly" means an individual who is 60 years of age or
older.
(2) "Entity" means an organization or being that possesses
separate existence for tax purposes. Entity includes person, sole
proprietorship, estate, trust, association, joint venture,
partnership, and corporation.
(3) "Entrance fee" means an initial or deferred transfer of
consideration made or promised to be made by a person entering into a
continuing care contract, for the purpose of assuring care or
related services pursuant to that continuing care contract or as full
or partial payment for the promise to provide one or more elements
of care for the term of the continuing care contract. An entrance
fee includes the purchase price of a condominium, cooperative, or
other interest sold in connection with a promise of continuing care.
The entrance fee may include a previously paid deposit subscription,
which is credited to the total entrance fee due at the time the
transferor signs the continuing care contract. An entrance fee that
is greater than 12 times the monthly fee shall be presumed to imply a
promise to provide care for more than one year. The term
"accommodation fee" may be synonymously used to mean an entrance fee.
(4) "Equity" means the residual value of a business or property
beyond any mortgage or deed of trust thereon and liability therein.
(5) "Equity project" means a continuing care development project
wherein the transferors are given an equity interest in the
continuing care retirement community property or in a transferable
membership in a resident's association.
(6) "Escrow agent" means a bank or institution, including, but not
limited to, a title insurance company, approved by the department as
capable of ensuring the safety of the funds and properties entrusted
to it and capable and willing to perform the terms of the escrow
pursuant to the escrow agreement and the provisions of this chapter.
(f) (1) "Facility" means any place or accommodation in which a
provider undertakes to provide a resident with care or related
services, whether or not the place or accommodation is constructed,
owned, leased, rented, or otherwise contracted for by the provider.
(g) (reserved)
(h) (reserved)
(i) "Inactive certificate of authority" means a certificate which
has been declared inactive under Section 1793.8 and renders its
holder no longer authorized to enter into continuing care contracts,
but still contractually obligated to continuing care residents and
statutory compliance requirements.
(j) (reserved)
(k) (reserved)
(l) (1) "Life care contract" means a continuing care contract
which includes a promise, expressed or implied, by a provider to
provide routine services at all levels of care; including acute care
and physicians and surgeons' services, to a resident for the duration
of his or her life. Care shall be provided in a continuing care
retirement community having a comprehensive continuum of care,
including a skilled nursing facility, under the ownership and
supervision of the provider on, or adjacent to, the premises. In a
life care contract, no change is made in the monthly fee based on
level of service. A life care contract shall also include provisions
to subsidize residents who become financially unable to pay their
monthly care fees.
(2) "Life lease" means a landlord-tenant relationship wherein the
tenant obtains only the right to possess a defined living unit for
life. In a life lease there is no obligation, or intent, to provide
care and services to the tenant at any time, present or future.
(m) (1) "Monthly care fee" means the monthly charge to a resident
for accommodations and services rendered, including care, board, or
lodging, and any other periodic charges to the resident, determined
on a monthly or other recurring basis, pursuant to the provisions of
a continuing care contract. Monthly care fees are exclusive of
periodic entrance fee payments or other prepayments.
(2) "Monthly fee contract" means a continuing care contract that
provides by its terms for the monthly payment of a fee for
accommodations and services rendered.
(n) (1) "Nonambulatory person" means a person who is unable to
leave a building unassisted under emergency conditions, as required
by Section 13131.
(o) (reserved)
(p) (1) "Per capita cost" means a continuing care retirement
community's operating expenses, excluding depreciation, divided by
the average number of residents.
(2) "Permit to sell deposit subscriptions" means a written
authorization by the department for an applicant to enter into one or
more deposit subscription agreements at a single specified location.
(3) "Personal care" means assistance with personal activities of
daily living, including dressing, feeding, toileting, bathing,
grooming, mobility, and associated tasks, to help provide for and
maintain physical and psychosocial comfort.
(4) "Personal care unit" means the living unit within a physical
area of a continuing care retirement community specifically designed
to provide ongoing personal care. A personal care unit is synonymous
with an assisted living unit.
(5) "Prepaid contract" means a continuing care contract in which
the monthly care fee, if any, may not be adjusted to cover the actual
cost of care and services.
(6) "Processing fee" means a payment by the transferor to cover
administrative costs of processing the application of a subscriber or
prospective resident.
(7) "Promise to provide care" means any expressed or implied
representation that care will be provided or will be available, such
as by preferred access, whether the representation is part of a
continuing care contract, other agreement, or series of agreements,
or contained in any advertisement, brochure, or other material,
either written or oral.
(8) "Proposes" means a representation that an applicant or
provider plans to make a future promise to provide care, which may be
subject to the happening of certain events, such as continuing care
retirement community construction or obtaining a certificate of
authority.
(9) "Provider" means an entity which provides, promises to
provide, or proposes to promise to provide, care for life or for more
than one year. A provider shall include any entity that controls
the entity that promises care as determined by the department.
Homeowner's associations, cooperatives, or condominium associations
shall not be providers.
(10) "Provisional certificate of authority" means written
authorization by the department that allows the provider to enter
into continuing care contracts. This provisional certificate is
issued after the conditions defined in Section 1786 have been met and
is issued for a term defined under subdivision (b) of Section 1786.
(q) (reserved)
(r) (1) "Refundable reserve" means the amount calculated to ensure
the availability of funds for specified refunds of entrance fees.
(2) "Refundable contract" means a continuing care contract form
that includes promises, expressed or implied, to pay refunds of
entrance fees or to repurchase the transferor's unit, membership,
stock, or other interest in the continuing care retirement community
when the specified refund right is not fully amortized by the end of
the sixth year of residency. A lump sum payment to a resident after
termination of a continuing care contract that is conditioned upon
resale of a unit shall not be considered a refund and shall not be
advertised as a refund.
(3) "Reservation fee" means cash received by an applicant from an
interested individual during a market test feasibility study, which
complies with subdivision (b) of Section 1771.6.
(4) "Resident" means a person who enters into a continuing care
contract with a provider, or who is designated in a continuing care
contract to be a person being provided or to be provided services,
including care, board, or lodging.
(5) "Residential care facility for the elderly" means a housing
arrangement as defined by Section 1569.2.
(6) "Residential living unit" means a living unit in a continuing
care retirement community which is included in the residential care
facility for the elderly license capacity, but not used exclusively
for personal care or nursing services.
(s) "Subscriber" means a person who has applied to be a resident,
in a continuing care retirement community under development or
construction, and who has entered into a deposit subscription
agreement.
(t) (1) "Termination" means the ending of a continuing care
contract as provided for in the terms of the continuing care
contract.
(2) "Transfer" means conveyance of a right, title, or interest.
(3) "Transfer fee" means a levy by the provider against the
proceeds from the sale of a transferor's equity interest.
(4) "Transfer trauma" means death, depression, or regressive
behavior, caused by the abrupt and involuntary transfer of an elderly
resident from one home to another, resulting in a loss of familiar
physical environment, loss of well-known neighbors, attendants,
nurses and medical personnel, the stress of an abrupt break in the
small routines of daily life, and the major loss of visits from
friends and relatives who may be unable to reach the new facility.
(5) "Transferor" means a person who transfers or promises to
transfer a sum of money or property for the purpose of assuring care
or related services pursuant to a continuing care contract, whether
for the benefit of the transferor or another.
SEC. 3. Section 1771.2 of the Health and Safety Code is amended to
read:
1771.2. (a) No entity proposing to promise to provide care shall
enter into a deposit subscription agreement or sell a deposit
subscription unless the entity has applied for and received a current
and valid permit to sell deposit subscriptions.
(b) No continuing care contract shall be executed, unless the
provider has a current and valid provisional or final certificate of
authority.
(c) If a provider subcontracts or assigns to another entity the
responsibility to provide continuing care, that other entity shall
have a current and valid certificate of authority. The provider
holding a certificate of authority may contract for the provision of
a particular aspect of continuing care, such as medical care, with
another entity that does not possess a certificate of authority, if
that other entity is appropriately licensed under laws of this state
to provide that care, and that care is not paid for more than one
year in advance.
(d) If an entity enters into an agreement to provide care for life
or for more than one year to a person under 60 years of age in
return for payment of an entrance fee or periodic charges, and the
agreement includes the provision of services to that person after age
60, the entity shall either terminate the continuing care contract
or meet all requirements of this chapter when the first such person
turns 60 years of age.
(e) Homeowner's associations, cooperatives, or condominium
associations shall not be providers.
SEC. 4. Section 1771.4 of the Health and Safety Code is amended to
read:
1771.4. Any entity which promises to provide care for life or for
more than one year in return for payment of an entrance fee or
periodic charges from, or on behalf of, a person 60 years of age or
older shall first obtain written licenses for the entire continuing
care retirement community pursuant to Chapter 3.2 (commencing with
Section 1569), including residential living and personal care units,
and Chapter 2 (commencing with Section 1250) if a skilled nursing
facility is on the premises.
SEC. 5. Section 1771.5 is added to the Health and Safety Code, to
read:
1771.5. (a) A continuing care retirement community shall maintain
an environment that enhances the residents' self-determination and
independence. The provider shall:
(1) Permit the formation of a resident council by interested
residents, provide space and post notices for meetings, and provide
assistance in attending meetings for those residents who request it.
In order to permit a free exchange of ideas, at least part of each
meeting shall be conducted without the presence of any continuing
care retirement community personnel. The council may, among other
things, make recommendations to management regarding resident issues
which impact their quality of life. Proper notice shall be provided
of all council meetings and the meetings shall be open to all
residents to attend as well as present issues when prearranged with
the council president. Executive sessions of the council shall be
for attendance only by council members.
(2) Establish policies and procedures that promote the sharing of
information, dialogue between residents and management and access to
the board of directors or general partners. The policies and
procedures shall be evaluated at a minimum of every two years by the
continuing care retirement community administration to determine
their effectiveness in maintaining meaningful resident/management
relations.
(b) The department may, upon receiving a complaint relative to
this section, request a copy of the policies and procedures along
with documentation on the conduct and findings of any
self-evaluations and consult with the Continuing Care Contract
Committee for determination of compliance.
(c) Failure to comply with this section shall be grounds for
suspension, condition, or revocation of the provisional or final
certificate of authority pursuant to Section 1793.21.
SEC. 6. Section 1771.6 of the Health and Safety Code is amended to
read:
1771.6. (a) This chapter does not apply to any of the following:
(1) Any arrangement for the care of a person by a relative.
(2) Any arrangement for the care of a person or persons from only
one family by a friend.
(b) Any market test feasibility study during which reservation
fees are being collected shall not be considered to be a violation of
this chapter, provided that all of the following have occurred:
(1) An application for a permit to sell deposit subscriptions and
a certificate of authority for the project has been filed with, and
the receipt has been acknowledged in writing by, the department.
(2) The amount of each reservation fee does not exceed 1 percent
of the average entrance fee.
(3) The reservation fee is placed in escrow.
(4) The escrow agreement provides for a refund within 10 calendar
days after the request of a potential resident or within 10 calendar
days after denial of the application for the permit to sell deposit
subscriptions.
(5) The escrow agreement provides for the conversion of the
reservation fee to a deposit subscription when a permit to sell
deposit subscriptions is issued.
SEC. 7. Section 1771.8 of the Health and Safety Code is amended to
read:
1771.8. (a) Any entity which believes its project is not subject
to this chapter or which is contemplating a project which it believes
may not be subject to this chapter, may apply to the department for
a Letter of Non-applicability.
(b) Applications for Letters of Non-applicability shall be made to
the department in writing and include the following:
(1) A nonrefundable one thousand dollar ($1,000) application fee.
(2) A list of the reasons why the existing or proposed project may
be exempt.
(3) A copy of the existing or proposed contract between the entity
and residents.
(4) Copies of all advertising material.
(5) Any other reasonable information requested by the department.
(c) The department shall follow these timelines in reviewing
requests for Letters of Non-applicability:
(1) Within seven calendar days, the department shall acknowledge
receipt of the request.
(2) Within 30 calendar days after all materials are received, the
department shall either issue the Letter of Non-applicability, or
notify the entity of the department's reasons for denial of the
request.
(d) If the department determines that the entity does not qualify
for a Letter of Non-applicability, the entity shall refrain from or
immediately cease entering into continuing care contracts.
(1) If the entity intends to provide continuing care, an
application for a certificate of authority shall be filed with the
department pursuant to this chapter.
(2) If the entity does not intend to provide continuing care, it
shall alter its plan of operation so that the project is not subject
to this chapter and submit a new application and fee for a Letter of
Non-applicability.
SEC. 7.5. Section 1772 of the Health and Safety Code is amended to
read:
1772. (a) Except as otherwise provided in paragraph (5) of
subdivision (a) of Section 1788, no report, circular, public
announcement, certificate, financial statement, or any other printed
matter or advertising material, or oral representation, that states
or implies that any entity sponsors, guarantees, or assures the
performance of any continuing care contract, shall be published or
presented to any prospective resident unless the entity files with
the department a written and legally sufficient document of
acceptance of full financial responsibility for each continuing care
contract. Each entity shall be listed as a provider on the
certificate of authority and shall be cosigner on the continuing care
contracts.
(1) Implied sponsorship includes the use of the name of an entity
for the purpose of implying that the entity's reputation may be
relied upon to determine the likelihood of success of the proposed
continuing care retirement community.
(2) Any implication that the entity may be financially responsible
for these contracts may be rebutted by a conspicuous statement in
each continuing care contract and marketing materials that clearly
inform the transferor that the entity is not financially responsible.
(b) On written appeal to the department, and for good cause shown,
the department may, in its discretion, allow an affinity group
exemption from this section. If an exemption is granted, every
continuing care contract shall include a conspicuous statement which
clearly informs the transferor that such entity is not financially
responsible.
(c) If the name of any entity, including, but not limited to, a
religion, is used in connection with the development, marketing, or
continued operation of a continuing care retirement community, but
that entity does not actually own, control, manage, or otherwise
operate the facility, the providers shall expressly disclose this
lack of affiliation in the continuing care contract.
(d) All printed advertising materials, including brochures,
circulars, public announcements, and similar publications pertaining
to continuing care shall identify the current status of the
continuing care retirement community as follows: (1) If a
certificate of authority has not been issued, then specify whether
the application for continuing care has been filed, permit to sell
deposit subscriptions issued, or provisional certificate of authority
issued.
(2) If a certificate of authority has been issued, specify the
providers' certificate of authority number.
SEC. 8. Section 1773 of the Health and Safety Code is amended to
read:
1773.
No certificate of authority has value for sale or exchange as
property. No provider shall sell or transfer ownership of the
continuing care retirement community or enter into a contract with a
third party entity for management of the continuing care retirement
community without the approval of the department. Violation of this
section is grounds for revocation of the certificate of authority.
SEC. 9. Section 1775 of the Health and Safety Code is amended to
read:
1775. (a) To the extent that this chapter conflicts with the
statutes, regulations, or interpretations enforced by the Department
of Real Estate, this chapter as interpreted by the department shall
have precedence.
(b) Notwithstanding any law or regulation to the contrary, in any
continuing care retirement community the provider may restrict or
abridge the right of any resident, whether or not he owns an equity
interest, to sell, lease, encumber, or otherwise convey any interest
in the resident's unit, and may require that the resident only sell,
lease, or otherwise convey the interest to persons approved by the
provider. Provider approval may be based on factors which include,
but are not limited to, age, health status, insurance risk, financial
status, or burden on the provider's personnel, resources, or
physical facility. Any restrictions on a real property interest
shall be recorded by the provider.
(c) To the extent that this chapter conflicts with Sections 51.2
and 51.3 of the Civil Code, this chapter shall have precedence. A
continuing care provider, at its discretion, may limit entrance based
on age.
(d) This chapter imposes minimum requirements upon any entity
undertaking the responsibility for providing one or more elements of
care to an elderly person for the duration of his or her life or for
a term in excess of one year, in exchange for any prepayment or
transfer of property prior to the services actually being rendered,
whether or not the prepayment or transfer of property is supplemented
with periodic or other payments.
(e) This chapter shall be liberally construed for the protection
of persons attempting to secure their care for the remainder of their
lifetime or for a period in excess of one year.
(f) A resident's entry into a continuing care contract described
in this chapter shall be presumptive evidence of the resident's
intent not to return to his or her prior residence to live for
purposes of qualifying for Medi-Cal coverage under Sections 14000 et
seq. of the Welfare and Institutions Code and Section 50425 of Title
22 of the California Code of Regulations.
SEC. 10. Section 1776.2 of the Health and Safety Code is amended
to read:
1776.2. The department may, by any duly authorized
representative, inspect and examine any continuing care retirement
community, including the books and records thereof, or the
performance of any service required by the continuing care contracts.
SEC. 11. Section 1777 of the Health and Safety Code is amended to
read:
1777. (a) The Continuing Care Contracts Committee of the State
Department of Social Services shall act in an advisory capacity to
the department on matters relating to continuing care contracts.
(b) The members of the committee shall include:
(1) Three representatives of nonprofit continuing care providers
pursuant to this chapter, each of whom shall have offered continuing
care services for at least five years prior to appointment. One
member shall represent a multifacility provider and shall be
appointed by the Governor in even years. One member shall be
appointed by the Senate Committee on Rules and shall be appointed in
odd years. One member shall be appointed by the Speaker of the
Assembly and shall be appointed in odd years.
(2) Three senior citizens who are not eligible for appointment
pursuant to paragraphs (1) and (4) who shall represent consumers of
continuing care services, at least two of whom shall be residents of
continuing care retirement communities but not residents of the same
provider. One member shall be appointed by the Governor and shall be
appointed in even years. One member shall be appointed by the
Senate Committee on Rules and shall be appointed in odd years. One
member shall be appointed by the Speaker of the Assembly and shall be
appointed in odd years.
(3) A certified public accountant with experience in the community
care industry, who is not a provider of continuing care services.
This member shall be appointed by the Governor in even years.
(4) A representative of a for-profit provider of continuing care
contracts pursuant to this chapter. This member shall be appointed
by the Governor in even years.
(5) An actuary. This member shall be appointed by the Governor in
even years.
(c) Commencing January 1, 1997, all members shall serve two-year
terms and be appointed based on their interest and expertise in the
subject area. The Governor shall designate the chairperson for the
committee with the advice and consent of the Senate. A member may be
reappointed at the pleasure of the appointing power. It shall be
the duty of the appointing power to fill all vacancies on the
committee within 60 days. These members shall continue to serve
until their successors are appointed and qualified.
(d) The members of the committee shall serve without compensation,
except that each member shall be paid from the Continuing Care
Contract Provider Fee Fund a per diem of twenty-five dollars ($25)
for each day's attendance at a meeting of the committee not to exceed
six days in any month. The members of the committee shall also
receive their actual and necessary traveling expenses incurred in the
course of their duties.
(e) Prior to commencement of service, each member shall file with
the department a statement of economic interest and a statement of
conflict of interest pursuant to Article 3 (commencing with Section
87300) of the Government Code.
(f) If, during the period of appointment, any member no longer
meets the qualifications of subdivision (b), that member shall submit
his or her resignation to their appointing power and a qualified new
member shall be appointed to fulfill the remainder of the term.
SEC. 12. Section 1777.2 of the Health and Safety Code is amended
to read:
1777.2. (a) The Continuing Care Contracts Committee shall:
(1) Review the financial and managerial condition of each
continuing care retirement community operating under a certificate of
authority.
(2) Review the financial condition of any continuing care
retirement community that the committee determines is indicating
signs of financial difficulty and may be in need of close
supervision.
(3) Monitor the condition of continued care retirement communities
as the department or the chair of the committee may direct.
(4) Make available consumer information on the selection and
necessary contract protections in the purchase of continuing care
contracts.
(5) Review new applications regarding financial, actuarial, and
marketing feasibility as requested by the department.
(6) The Continuing Care Contracts Committee of the department, in
consultation with residents and providers shall, by December 31,
1997, advise the department of its suggestions to protect continuing
care retirement communities and residents from the financial
consequences caused by earthquakes and other natural disasters. This
paragraph shall become inoperative on January 1, 1998.
(b) The committee shall make recommendations to the department
regarding needed changes in its rules and regulations and upon
request provide advice regarding the feasibility of new continuing
care retirement communities and the correction of problems relating
to the management or operation of any continuing care retirement
community. The committee shall also perform any other advisory
functions necessary to improve the management and operation of
continuing care retirement communities.
(c) The committee may report on its recommendations directly to
the director of the department.
(d) The committee may hold meetings, as deemed necessary to the
performance of its duties.
SEC. 13. Section 1777.4 of the Health and Safety Code is amended
to read:
1777.4. Any member of the Continuing Care Contracts Committee is
immune from civil liability based on acts performed in his or her
official capacity. Costs of defending civil actions brought against
a member for acts performed in his or her official capacity shall be
borne by the complainant. However, nothing in this section immunizes
any member for acts or omissions performed with malice or in bad
faith.
SEC. 14. Section 1778 of the Health and Safety Code is amended to
read:
1778. (a) There is hereby created in the State Treasury a fund
which shall be known as the Continuing Care Provider Fee Fund. The
fund shall consist of fees received by the department pursuant to
this chapter. Notwithstanding Section 13340 of the Government Code,
the Continuing Care Provider Fee Fund is hereby continuously
appropriated to the department, without regard to fiscal years.
(b) Use of the funds appropriated pursuant to this section shall
include funding of the following:
(1) Program personnel salary costs, to include but not be limited
to: Continuing Care Contracts Program Manager at a level consistent
with other management classifications that direct a regulatory
program with statewide impact requiring skills and knowledge at the
highest level with responsibility for work of the most critical or
sensitive nature as it relates to the department's mission, including
protecting vulnerable elderly persons, supervising technical staff
with oversight of highly complex operations and responsibility for
policy and program evaluation and recommendations; full-time legal
counsel with a working knowledge of all laws relating to the
regulation of continuing care retirement communities and residential
care facilities for the elderly; financial analyst with working
knowledge of generally accepted accounting principles and auditing
standards; and other appropriate analytical and technical support
positions.
(2) Contracts with technically qualified persons, to include but
not be limited to financial, actuarial, and marketing consultants, as
necessary to provide advice regarding the feasibility or viability
of continuing care retirement communities and providers.
(3) Other program costs or costs directly supporting program
staff.
(4) The department shall use no more than 5 percent of the fees
collected pursuant to this section for overhead costs, including
facilities operation, and indirect department and division costs.
(c) If the balance in the Continuing Care Provider Fee Fund is
projected to exceed five hundred thousand dollars ($500,000) for the
next budget year, the department shall adjust the calculations for
the application fees under Section 1779.2 and annual fees under
Section 1791 to reduce the amounts collected.
(d) The intent of the Legislature is to empower the program
administrator with the ability and authorization to obtain necessary
resources or staffing to carry out the program objectives.
SEC. 15. Section 1779 of the Health and Safety Code is amended to
read:
1779. (a) An application for a permit to sell deposit
subscriptions and certificate of authority shall be filed with the
department, as set forth in this chapter, in any of the following
circumstances:
(1) Prior to entering into any continuing care contracts or any
deposit subscription agreements.
(2) Prior to initiating construction of a prospective continuing
care continuing care retirement community.
(3) Prior to initiating construction on a new phase or expansion
of an existing continuing care retirement community. An expansion
has occurred when there is an increase in Residential Care Facility
for the Elderly license capacity, an increase in the number of units
at the continuing care retirement community, an increase in the
number of skilled nursing beds, or additions to or replacement of
existing continuing care retirement community structures that affects
obligations to current residents. The department has the discretion
to eliminate all or portions of the application contents required
under Section 1779.4 for an expansion of an existing continuing care
retirement community.
(4) Prior to converting an existing structure to a continuing care
retirement community.
(5) Prior to recommencing marketing on a planned facility when the
applicant has previously forfeited a permit to sell deposit
subscriptions pursuant to Section 1793.7.
(6) Prior to executing new continuing care contracts after a
provisional or final certificate of authority has been inactivated,
revoked, surrendered, or forfeited.
(7) Prior to closing the sale or transfer of a continuing care
retirement community.
(b) If the provider undergoes an organizational change, including,
but not limited to, a change in structure, separation, or merger, a
new application shall be required and a new certificate of authority
must be issued by the department before any continuing care contracts
may be executed by the new entity.
(c) A new application is not required for an entity name change,
if there is no change in the entity structure or management. If the
provider undergoes a name change, the provider shall notify the
department of the name change and shall return the previously issued
certificate of authority for reissuance under the new corporate name.
SEC. 16. Section 1779.2 of the Health and Safety Code is amended
to read:
1779.2. (a) A formal application shall be made by a person or
organization to the department for a permit to sell deposit
subscriptions and certificate of authority, as provided in this
chapter.
(b) A separate application shall be required for each proposed
project which includes all planned phases.
(c) The application shall be signed under penalty of perjury by
the applicant. If the applicant is a corporation, the chief
executive officer shall sign the application and certify that to the
best of his or her knowledge and belief, the items are correct. If
the applicant is a partnership, each general partner shall sign the
application and certification. If there are multiple applicants, the
above requirements apply to each.
(d) An application fee shall be required whenever a provider
applies for a permit to sell deposit subscriptions and certificate of
authority.
The application fee shall be calculated and submitted to the
department as follows:
(1) Each application shall be accompanied by payment to the
Continuing Care Provider Fee Fund of 80 percent of the application
fee for all currently planned phases. Processing of the application
shall not begin until this fee is received.
(A) For new continuing care retirement communities or for the sale
or transfer of existing continuing care retirement communities, the
application fee is calculated as one-tenth of 1 percent of the
purchase price of the continuing care retirement community, or the
estimated construction cost, including the purchase price of the land
or the present value of any long-term lease.
(B) For existing continuing care retirement communities that are
proposing remodeling or an expansion, the application fee is
calculated as one-tenth of 1 percent of the cost of the addition,
annexation, or renovation, including the cost of the land and
improvements.
(C) For existing facilities converting to continuing care
retirement communities, the application fee is calculated as
one-tenth of 1 percent of the current appraised value of the
facility, including land, or present value of any long-term lease.
(2) Payment to the Continuing Care Provider Fee Fund of the
remainder of the application fee shall be made at or before the time
of issuance of the provisional certificate of authority. The
application fee shall be calculated as one-tenth of 1 percent of the
purchase price of the continuing care retirement community, or the
actual construction cost, including the purchase price of the land or
the present value of any long-term lease, less the payment included
with the application. The provisional certificate of authority shall
not be issued until the balance of the fee is paid.
SEC. 17. Section 1779.4 of the Health and Safety Code is amended
to read:
1779.4. An application shall contain all of the following:
(a) The name and business address of the applicant.
(b) An itemization of the total fee calculation, including sources
of figures used, and a check in the amount of 80 percent of the
total application fee.
(c) The name, address, and a description of the real property of
the continuing care retirement community.
(d) The estimated number of continuing care residents of the
continuing care retirement community.
(e) A description of the proposed continuing care retirement
community, including the services and care to be available for
residents or provided to residents, or both.
(f) A statement indicating whether the application is for a
certificate of authority to enter into life care contracts.
(g) Documentation evidencing a preliminary approval for licensure
from the State Department of Social Services, Community Care
Licensing Division, or the Licensing and Certification Division of
the State Department of Health Services, as appropriate.
(h) If the applicant is an individual, a statement disclosing any
revocation or other disciplinary action taken, or in the process of
being taken, against a license, permit, or certificate held or
previously held by the applicant.
(i) A description of any matter in which any principal involved
with the proposed continuing care retirement community has been
convicted of a felony or pleaded nolo contendere to a felony charge,
or been held liable or enjoined in a civil action by final judgment,
if the felony or civil action involved fraud, embezzlement,
fraudulent conversion, or misappropriation of property. For the
purpose of this paragraph, "principal" means any representative of
the developer or applicant including a general partner, chief
executive officer, or chief operating officer who has significant
decisionmaking authority with respect to the proposed continuing care
retirement community.
(j) If the applicant is an entity other than an individual, the
following information also shall be submitted:
(1) A statement naming the type of legal entity and listing the
interest and extent of the interest of each principal in the legal
entity. For the purposes of this paragraph, "principal" means any
person or entity having a 10 percent or more financial interest in
the legal entity. When the application is submitted in the name of a
corporation, the parent, sole corporate shareholder, or sole
corporate member shall be listed as an applicant, when that parent,
sole corporate shareholders, or sole corporate member controls the
operation of the continuing care retirement community. When multiple
corporate applicants exist, they shall be listed jointly by
corporate name on the application, and the certificate of authority
shall be issued in the joint names of the corporations. When the
application is submitted by a partnership, all general partners shall
be listed as applicants and the certificate of authority shall be
issued in the joint names of the general partners.
(2) The names of the members of the board of directors, the
trustees, the general partners, or other responsible officers of the
legal entity.
(3) A statement as to whether the applicant was or is affiliated
with a religious, charitable, nonprofit or for-profit organization,
and the extent of any affiliation. The statement shall also include
the extent, if any, to which the affiliate organization will be
responsible for the financial and contract obligations of the
applicant and shall be signed by a responsible officer of the
affiliate organization.
(4) A statement identifying any parent corporation or other
affiliate corporation, the primary activities and the interest in the
applicant held by each entity.
(5) Copies of all contracts, management agreements or other
documents, setting forth the relationships of the entities.
(6) A statement as to whether the applicant, a principal, a
parent, affiliate, or subsidiary corporation, or any other affiliate
entity, or any responsible employee, manager, board member, or anyone
who otherwise profits from the continuing care retirement community,
has had applied against it, any injunctive or restrictive order of a
court of record, or any suspension or revocation of any state or
federal license, permit, or certificate, arising out of or relating
to business activity of health or nonmedical care, including, but not
limited to, actions affecting a license to operate a health care
institution, a nursing home, an intermediate care facility, a
hospital, or a home health agency, residential care facility for the
elderly, community care facility, or child day care facility.
(k) A description of the business experience of the applicant in
the operation or management of similar facilities.
(l) A copy of any advertising material regarding the proposed
continuing care retirement community prepared for distribution or
publication.
(m) Evidence of the bonds required by Section 1789.8.
(n) Copies of the proposed continuing care contracts to be entered
into with residents of the continuing care retirement community.
(o) A copy of the proposed deposit subscription agreement form.
(p) The name of the proposed escrow agent and depository.
(q) Copies of all escrow agreements.
(r) A statement of any periodic fees to be paid by residents, the
components and services considered in determining such fees, and the
manner by which the provider may adjust these fees in the future. If
the continuing care retirement community is already in operation, or
if the provider operates one or more similar continuing care
retirement communities within this state, the statement shall include
tables showing the frequency and each percentage increase in
periodic rates at each continuing care retirement community for the
previous five years, or such shorter period as each continuing care
retirement community may have been operated by the provider or his or
her predecessor in interest.
(s) A statement of the provisions that have been made, or will be
made, to provide reserve funding or security by the provider to
enable the provider to fully perform his or her obligations pursuant
to continuing care contracts, including, but not limited to, the
establishment of escrow accounts in financial institutions, trusts,
or reserve funds.
(t) A copy of audited financial statements for the three most
recent fiscal years of the applicant or any shorter period of time
the applicant has been in existence, prepared in accordance with
generally accepted accounting principles and accompanied by an
independent auditor's report from a reputable firm of certified
public accountants. The audited financial statements shall be
accompanied by a statement signed and dated by both the chief
financial officer and chief executive officer for the identified
corporation, or by each general partner, that the financial
statements are complete, true, and correct in all material matters to
the best of their knowledge.
(u) Unaudited interim financial statements shall be included if
the applicant's fiscal year ended more than 90 days prior to the date
of filing. The statements shall be either quarterly or monthly,
prepared on the same basis as the annual audited financial statements
or other basis acceptable to the department. The period between the
end of the most recent fiscal year for which audited financial
statements are submitted and a date not more than 90 days prior to
the date the application is filed shall be covered in the unaudited
interim financial statements.
(v) A financial and marketing feasibility study prepared by a firm
acceptable to the department. The study shall include or address,
as appropriate, all of the following items:
(1) A narrative describing the applicant, its prior experience,
qualifications, and management, including a descriptive analysis of
the proposed continuing care retirement community and its service
package, fee structure, and anticipated opening date.
(2) A narrative describing the financing and construction plans
for the proposed continuing care retirement community, including a
statement of the anticipated source and application of the funds to
be used in the purchase, lease, rental, or construction. This
statement shall include, but not be limited to, all of the following:
(A) A description of any mortgage loan or other long-term
financing intended to be used for the financing of the continuing
care retirement community, including the anticipated terms and costs
of the financing. This indebtedness shall not exceed the appraised
value of the continuing care retirement community.
(B) Equity to be contributed by the applicant.
(C) Other sources of funds, including entrance fees, if
applicable.
(D) An estimate of the cost of purchasing, leasing, renting,
designing, or constructing and equipping the continuing care
retirement community, including, but not limited to, such related
costs as financing expense, legal expense, land costs, occupancy
development costs, and all other similar costs which the provider
expects to incur, or become obligated for, prior to the commencement
of operation.
(E) Interest expense, insurance premiums, and property taxes prior
to opening.
(F) An estimate of any proposed continuing care retirement
community reserves required for items such as debt service, insurance
premiums, and operations.
(G) An estimate of any funds which are anticipated to be necessary
to fund startup losses and to assure full performance of the
obligations of the provider pursuant to continuing care contracts,
including, but not limited to, any reserve fund escrow.
(3) An analysis of the potential market, addressing such items as:
(A) Service area, including its demographic, economic, and growth
characteristics.
(B) Forecasts of penetration based on the proposed fee structure.
(C) Existing and planned competition in and about the primary
service area.
(4) A detailed description of the sales and marketing plan,
addressing such items as:
(A) Marketing schedule, anticipated sales, and cancellation rates.
(B) Month-by-month forecast of unit sales through sellout.
(C) A marketing plan describing the methods, staffing, and
advertising media.
(D) An estimate of the total entrance fees to be received from
residents prior to completion of occupancy.
(5) Projections of move-in rates, deposit subscription fee
collections, couple mix by unit type, age distribution, care and
nursing unit utilization, and unit turnover or resale rates.
(6) A description or analysis of development-period costs and
revenues. This item should be provided to the department on a
quarterly basis, throughout the development of the proposed
continuing care retirement community.
(w) Projected annual financial statements for a period commencing
on the first day of the first fiscal year, following the most recent
year for which an audited financial statement has been provided,
through at least the fifth year of operations.
(1) The projected annual financial statements shall be on an
accrual basis using the same accounting principles and procedures as
the audited financial statements furnished pursuant to paragraph (u),
but need not be audited.
(2) Separate projected annual cash-flow statements shall be
provided. The statements shall cover the entire duration of debt,
and be presented on a quarterly basis during the preopening,
construction, and fill-up periods. If the real property is leased,
the cash-flow statement shall project the feasibility of closing the
continuing care retirement community at the end of the lease period.
(A) The projected annual cash-flow statements shall be submitted,
using prevailing rates of interest, with no increase of revenues and
expenses due to inflation, as one set of assumptions.
(B) The projected annual cash-flow statements shall include the
following:
(i) A detailed listing, including a full explanation of all
assumptions used in preparing the projections, plus supporting
supplementary schedules and calculations, all to be consistent with
the financial and marketing feasibility study furnished pursuant to
paragraph (v), as may be required by the department for use in
evaluating the feasibility of the proposed continuing care retirement
community.
(ii) Cash-flows from monthly operations, including, but not
limited to, monthly fees received from continuing care contracts,
medical unit fees if applicable, other periodic fees, and gifts and
bequests used in operations less operating expenses.
(iii) Contractual cash-flows from activities, including, but not
limited to, presales, deposit subscription receipts, and entrance fee
receipts less contract acquisition, marketing, and advertising
expenditures.
(iv) Cash-flows from financing activities, including, but not
limited to, bond or loan proceeds less bond issue or loan costs and
fees, debt service including CAL Mortgage Insurance premiums, trustee
fees, principal and interest payments, leases, contracts, rental
agreements, or other long-term financing.
(v) Cash-flow from investment activities, including, but not
limited to, construction progress payments, architect and
engineering, furnishings, and equipment not included in the
construction contract, project development, inspection and testing,
marketable securities, investment earnings, and interfund transfers.
(vi) Increase or decrease in cash during the projection period.
(vii) The beginning cash balance, which means cash, marketable
securities, reserves, and other funds on hand available and committed
to the proposed continuing care retirement community.
(viii) Cash balance at the end of the period.
(ix) Details of the components of the ending cash balance shall be
provided for each period presented, including, but not limited to,
the ending cash balances for bond reserves, other reserve funds,
deposit subscription funds, and construction funds balance.
(3) If the cash-flow statements required by paragraph (B) indicate
that the provider will have cash balances over and above two months'
projected operating expenses of the continuing care retirement
community, a description of the manner in which the cash balances
will be invested, and the persons who will be making the investment
decisions, shall accompany the application.
(4) The applicant shall furnish further explanatory information,
schedules, and calculations as required by the department on
actuarial data used to project occupancy rate, unit type and couple
mix, sex, age, and turnover, refund, and sales rate subscription
collection rates, a detailed operating budget, and projections of
cash required for major repairs and improvements or on any other
factor considered during the projected periods.
(x) A declaration acknowledging the requirement of executing and
recording a Notice of Statutory Limitation on Transfer (hereinafter
referred to as the notice), relating to continuing care retirement
community property pursuant to this section.
(1) The notice shall be acknowledged so as to entitle it to be
recorded, describe the property, declare the applicant's intention to
use all or part of the described property for the purposes of a
continuing care continuing care retirement community pursuant to this
chapter, and shall be in substantially the following form:
NOTICE OF STATUTORY LIMITATION ON TRANSFER
Notice is hereby given that the property described below is
licensed, or proposed to be licensed, for use as a continuing care
retirement community and accordingly, the use and transfer of the
property is subject to the conditions and limitations as to use and
transfer set forth in Sections 1773 and 1789.4 of the Health and
Safety Code. This notice is recorded pursuant to subdivision (x) of
Section 1779.4 of the Health and Safety Code.
The real property, which is legally owned by (insert the name of
the legal owner) and is the subject of the statutory limitation to
which this notice refers, is more particularly described as follows:
(Insert the legal description and the assessor's parcel number of
the real property to which this notice applies.)
(2) The notice shall remain in effect until notice of release is
given by the State Department of Social Services Continuing Care
Contract Branch. The State Department of Social Services Continuing
Care Contracts Branch shall execute and record a release of the
notice upon proof of complete performance of all obligations to
transferors.
(3) Unless a notice has already been recorded with respect to the
land on which the applicant or provider is operating or intends to
operate a continuing care retirement community, prior to the date of
execution of any trust deed, mortgage, or any other lien or
encumbrance, securing or evidencing the payment of money and
affecting land on which the applicant or provider intends to operate
a continuing care retirement community, the applicant or provider
shall give the department written notice of the proposed encumbrance.
Upon the giving of notice to the department, the applicant or
provider shall execute and record the Notice of Statutory Limitation
on Transfer in the office of the county recorder in each county in
which any portion of the continuing care retirement community is
located.
(4) In the event that the applicant or provider and the owner of
record are not the same entity or individual on the date on which
execution and recordation of the notice is required, the applicant or
provider shall serve a copy of the notice on the owner of record by
certified mail.
(5) The notice shall be indexed by the recorder in the
grantor-grantee index to the name of the owner of record and the name
of the applicant or provider.
(y) A statement that the applicant will keep the department
informed of any material changes to the proposed continuing care
retirement community plan as reflected in the application form and
attachments.
(z) Any other information as may be required by the department for
the proper administration and enforcement of this chapter.
SEC. 18. Section 1779.6 of the Health and Safety Code is amended
to read:
1779.6. (a) Within seven calendar days of receipt of an initial
application for a permit to sell deposit subscriptions and
certificate of authority, the department shall acknowledge receipt of
the application in writing.
(b) Within 30 calendar days of receipt of an application, the
department shall determine if the application is complete. This
review need not include a review of the adequacy of the documentation
submitted. Based on this review, the department shall do one of the
following:
(1) Notify the applicant of additional forms, documents,
information, or materials required to comprise a complete application
and allow the applicant adequate time to submit the requested
information or materials.
(2) Determine that the application is complete as submitted.
(c) Within 120 calendar days after the department determines that
an application is complete, the department shall act to approve the
application or determine the application is inadequate, notify the
applicant of the specific deficiency and code references and give the
applicant an opportunity to respond.
During this period, the department shall do all of the following:
(1) Review the application for adequacy.
(2) Review the application for compliance with this chapter.
(3) Review the financial plan for feasibility.
(4) If necessary, request expert consultants to review portions of
the application and advise the department of their opinions.
(d) Within 30 calendar days after its receipt of any additional
information or clarification required from the applicant, the
department shall respond to the applicant's submission in writing,
including its determination whether each specific deficiency has been
addressed and whether the application is adequate. If the
department determines that the application is adequate and in
compliance with this chapter, the department shall act to issue the
permit to sell deposit subscriptions. If the department determines
that the response is inadequate, it may request additional
information or clarification from the applicant pursuant to
subdivision (c) or deny the application pursuant to Section 1779.10.
SEC. 19. Section 1779.8 of the Health and Safety Code is amended
to read:
1779.8. (a) The applicant shall notify the department of material
changes in the information submitted by the applicant to the
department in the application materials.
(b) No less than 60 calendar days prior to an applicant making any
changes in the applicant's corporate name, structure, organization,
operation, or financing, the applicant shall give written notice of
these proposed changes to the department. This notice requirement
does not apply to mere facility staff changes.
(c) Within 30 calendar days after receiving notice of the proposed
change, the department shall inform the applicant of any additional
or amended information needed to process the pending application, or
whether a new application and application fee must be submitted. The
new application fee shall be twice the actual cost of additional
consultant review time caused by the change. This additional fee is
payable to the department on demand.
(d) Failure to give written notice of changes required by this
section shall result in suspension of the permit to sell deposit
subscriptions, pending the outcome of an investigation by the
department into the effect of the changes on the interests of the
subscribers.
SEC. 20. Section 1779.10 of the Health and Safety Code is amended
to read:
1779.10. (a) The department shall deny an application for a
permit to sell deposit subscriptions and certificate of authority if
any of the following exists:
(1) Failure to pay the application fee as required by Section
1779.2.
(2) Failure to submit all information required by this chapter.
(3) Failure to submit evidence to support a reasonable belief that
any principal of the proposed continuing care retirement community
who has committed any offenses listed in subdivision(i) of Section
1779.4 is of such good character to indicate rehabilitation.
(4) If an action specified in subdivision (h) or (j) of Section
1779.4 has been taken against an applicant and the applicant has
failed to submit evidence to support a reasonable belief that the
applicant is capable of administering the continuing care retirement
community in compliance with applicable laws and regulations.
(5) Failure to demonstrate the feasibility of the proposed
continuing care retirement community plan.
(b) If the application is denied, the previously paid application
fee shall not be refunded.
(c) Immediately upon the denial of an application, the department
shall notify the applicant in writing.
(d) The Notice of Denial from the department shall contain all of
the following:
(1) State that the application is denied.
(2) List the reasons for the denial.
(3) Explain the right of appeal.
(4) State that the applicant has 30 calendar days from the date
that the Notice of Denial was mailed to appeal the denial, and where
to send the appeal.
(e) If the applicant appeals the denial, further proceedings shall
be conducted in accordance with Chapter 5 (commencing with Section
11500) of Part 1 of Division 3 of Title 2 of the Government Code.
SEC. 21. Section 1780 of the Health and Safety Code is amended to
read:
1780. The department shall issue a permit to sell deposit
subscriptions when it has:
(a) Determined that the application is complete.
(b) Determined that the proposed continuing care retirement
community marketing and feasibility plans are acceptable.
(c) Reviewed and approved the deposit subscription agreement.
(d) Reviewed and approved the escrow agreement.
SEC. 22. Section 1780.2 of the Health and Safety Code is amended
to read:
1780.2. (a) A deposit subscription may be made in one or several
payments, to begin at the time the parties enter into the deposit
subscription agreement.
A deposit subscription shall be paid by cash or cash equivalent,
jointly payable to the applicant and the escrow agent or depository.
Possession and control of any such instrument must be transferred to
the escrow agent at the time the deposit is paid.
(b) A processing fee may be added to the deposit subscription.
(1) The processing fee shall not exceed one percent of the amount
of the average entrance fee.
(2) A nonrefundable processing fee may be paid directly to the
applicant without being placed in the escrow account.
(c) Payments made to the applicant from a subscriber for upgrades
or modifications to the living unit shall not be placed in escrow
with deposit subscriptions. Written refund policies shall be given
to the subscriber.
SEC. 23. Section 1780.4 of the Health and Safety Code is amended
to read:
1780.4. (a) All deposit subscription agreements entered into
between the applicant and the subscriber shall be in writing and
shall contain all information required by this section.
(b) All deposit subscription agreement forms shall be approved by
the department prior to their use.
(c) The requirements of this chapter and Chapter 3.2 (commencing
with Section 1569) shall be the bases for approval of the forms by
the department.
(d) All text in deposit subscription agreement forms shall be
printed in at least 10-point typeface.
(e) The deposit subscription agreement form shall provide for all
of the following:
(1) An estimated date for commencement of construction of the
proposed continuing care retirement community or each phase, if
applicable, not to exceed 36 months from the date the permit to sell
deposit subscriptions is issued.
(2) Identification of the specific unit subscribed to and the
total deposit subscription for that unit.
(3) Processing fee terms and conditions, including:
(A) The amount.
(B) A statement explaining the applicant's policy regarding refund
or retention of the processing fee in the event of death of the
subscriber or voluntary cancellation by the subscriber.
(C) Notice that the processing fee shall be refunded within 30
days, in the event that the subscriber is not accepted for residency,
or if the continuing care retirement community is not constructed by
the estimated date of completion and the department determines that
there is no satisfactory cause for the delay.
(4) Requirements for payment of the deposit subscription by the
subscriber.
(5) Refund of the deposit subscription within 30 calendar days of
notice of death of the subscriber or his or her nonacceptance for
residency.
(6) Refund of the deposit subscription within 10 calendar days of
notice of voluntary cancellation by the subscriber. A statement that
once construction begins and until the continuing care retirement
community is in operation, refunds shall be made only after another
subscriber has reserved the specific unit and paid the necessary
deposit subscription, or the subscriber no longer meets financial or
health requirements for admission, whichever occurs first.
(7) A statement to subscribers that specifies when funds may be
released from escrow and explains that thereafter subscriber funds
will not have escrow protection.
(8) A statement regarding whether interest will be paid to the
subscriber on deposit subscription funds placed in an escrow account.
(f) A schedule of projected monthly care fees estimated to be
charged to residents for each of the first five years of the facility'
s existence shall be attached to each deposit subscription agreement.
The schedule shall contain a conspicuous statement in at least
10-point boldface type that the projected fees are an estimate only
and may be changed without notice.
SEC. 24. Section 1781 of the Health and Safety Code is amended to
read:
1781. (a) All deposit subscriptions, excluding processing fees,
shall be placed in an escrow account, the terms of which must be
approved in advance by the department.
(b) The escrow account shall be established by an escrow agent and
the deposit subscription deposited in a depository approved by the
department and located in California. The funds deposited therein
shall be kept and maintained in an account separate and apart from
the applicant's business accounts.
(c) The escrow agent may be the same entity as the depository. If
the escrow agent is a title company, it shall meet the following
requirements:
(1) A Standard and Poors rating of "A" or better or a comparable
rating from a comparable rating service.
(2) Licensure in good standing with the Department of Insurance.
(3) Tangible net equity as required by the Department of
Insurance.
(4) Reserves as required by the Department of Insurance.
(d) Funds shall remain in escrow until the department has
authorized their release in accordance with Section 1783.2.
(e) Deposit subscriptions shall be invested in instruments
guaranteed by, or agencies of, the federal government or by
investment funds secured by federally guaranteed instruments.
(f) No funds deposited in an escrow account shall be subject to
any liens, judgments, garnishments, or creditor's claims against the
applicant or continuing care retirement community. Neither shall
these funds be subject to any liens or charges by the escrow agent,
except transaction fees, commissions, prepayment penalties, and other
fees incurred in connection with the payment of cash equivalent
deposit subscriptions.
SEC. 25. Section 1781.2 of the Health and Safety Code is amended
to read:
1781.2. (a) Payments pursuant to deposit subscriptions shall be
deposited with the escrow agent within five business days after their
receipt from subscribers and shall be accounted for in a separate
escrow account.
(b) Deposits shall be accompanied by a copy of the executed
deposit subscription agreement, a copy of the receipt given to the
subscriber, a summary of all deposits made on that date, and any
requirement of the escrow holder.
SEC. 26. Section 1781.4 of the Health and Safety Code is amended
to read:
1781.4. The escrow agreement between the applicant and the escrow
agent shall provide for all of the following:
(a) The amount of the processing fee.
(b) Deposit of funds in the escrow account.
(c) Monthly progress reports, beginning the month after the escrow
account is opened and ending after funds are released from escrow,
to be sent by the escrow agent directly to the department. These
reports shall show each of the following in separate columns:
(1) The name and address of each subscriber or resident.
(2) The designation of the living unit being provided.
(3) Any processing fee which is deposited into escrow.
(4) The total deposit subscription for the unit.
(5) The total entrance fee for the unit.
(6) Twenty percent of the total entrance fee.
(7) Each payment made towards the deposit or refund given.
(8) The unpaid balance of each deposit subscription.
(9) The unpaid balance of each entrance fee.
(10) The current balance in the escrow account.
(11) The dollar amount, type, and maturity date of any cash
equivalent.
(d) Investment of escrow account funds.
(e) Release of escrow account funds as specified in Section
1783.2, including to whom payment of interest earned on such funds
will be made.
(f) The escrow agreement shall state that the escrow agent for the
proposed continuing care retirement community shall neither be a
lender nor have fiduciary responsibilities to lenders or bondholders
for that continuing care retirement community.
SEC. 27. Section 1781.8 of the Health and Safety Code is amended
to read:
1781.8. (a) As instructed by the applicant, funds placed in
escrow accounts may be invested as provided under subdivision (d) of
Section 1781.
(b) Earnings shall not be released except upon approval of the
department.
(c) Approval by the department of the release of earnings from
funds in escrow shall be based upon an assessment that funds
remaining in the escrow account will be sufficient to pay refunds and
interest promised, if any, to all subscribers, and all escrow agent
administrative costs.
(d) Interest shall be distributed in accordance with the terms of
the deposit subscription agreement.
SEC. 28. Section 1782 of the Health and Safety Code is amended to
read:
1782. (a) An applicant shall not begin construction of a
continuing care retirement community without the written
acknowledgment of the department that all of the following
prerequisites have been met:
(1) A completed application has been submitted to the department.
(2) A permit to sell deposit subscriptions has been issued.
(3) At least 20 percent of each applicable entrance fee has been
received for at least 50 percent of the number of residential living
units to be constructed.
(A) Paragraph (3) shall apply to all applications that are
submitted after May 31, 1995.
(B) For applications, and for those phases of the project that
were identified as part of applications, submitted on or before May
31, 1995, at least 20 percent of each applicable entrance fee shall
be received for at least 60 percent of residential units projected to
be occupied six months after the continuing care retirement
community is opened for operation.
(b) Applicants shall notify subscribers in writing of the
commencement of construction.
(c) For purposes of this chapter only, construction shall not
include site preparation or demolition.
SEC. 29. Section 1783 of the Health and Safety Code is amended to
read:
1783. (a) No building, which has been constructed by the
applicant or related parties without prior written approval of the
department for commencement of construction, shall be permitted to be
converted to a continuing care retirement community until five years
have elapsed from the completion of construction. This section
shall not apply to expansions of existing continuing care retirement
communities.
(b) If existing buildings are to be converted to a continuing care
use, the applicant shall comply with all application requirements
necessary to assess the feasibility of the proposed continuing care
retirement community as determined by the department pursuant to
Section 1779.4; provided, however, that the department may waive or
modify the presales requirements of subparagraphs (A) and (B) of
paragraph (1) of subdivision (a) of Section 1783.2 and paragraph (2)
of subdivision (a) of Section 1786 if the facility is already
occupied. This section shall not apply to expansions of existing
continuing care retirement communities.
(c) Any entity applying for conversion to a continuing care
retirement community, unless qualified for a waiver or modification
pursuant to subdivision (b), shall indicate the portion of the
facility to be used for continuing care contracts. The continuing
care allocation shall be used to determine the percentages in meeting
requirements of the deposit subscription period pursuant to
subdivision (b) of Section 1783.2 and Section 1786.
SEC. 30. Section 1783.2 of the Health and Safety Code is amended
to read:
1783.2. (a) Refunds to subscribers shall be disbursed as follows:
(1) Except as provided in paragraph (2), the escrow agent shall
pay refunds to subscribers who cancel a deposit subscription
agreement, upon written notice to the escrow agent from the
applicant, in accordance with the approved deposit subscription
agreement. These refunds shall be paid within 10 days after the
subscriber gives notice to the applicant.
(2) After notice to subscribers of commencement of construction, a
subscriber shall not be entitled to a refund of deposit
subscriptions until the continuing care retirement community is
opened for operation, another subscriber has reserved the specific
residential unit and paid the necessary deposit subscription, or the
subscriber no longer meets financial or health requirements for
admission, whichever occurs first.
(b) Releases to applicants shall be as follows:
(1) The applicant shall petition in writing to the department for
the release of escrow, attesting to all of the following:
(A) The construction of the continuing care retirement community
is at least 50 percent completed.
(B) At least 20 percent of the total of each applicable entrance
fee has been received and placed in escrow for at least 60 percent of
the total number of residential living units. Any units for which a
refund is pending cannot be counted
towards that 60 percent requirement.
(C) All cash equivalent deposit subscriptions have been
liquidated.
(D) The applicant's average performance over any six-month period
substantially equals or exceeds its financial and marketing
projections approved by the department, for that period.
(E) The applicant has received a commitment for any permanent
mortgage loan or other long-term financing.
(2) The department shall instruct the escrow agent to release to
the applicant all deposit subscriptions which have been placed in
escrow pursuant to Section 1781 when all of the following
requirements have been met:
(A) The department has confirmed the information provided by the
applicant pursuant to paragraph (1) of subdivision (b).
(B) The department, in consultation with the Continuing Care
Contracts Committee, has determined that there has been substantial
compliance with projected annual financial statements, which served
as a basis for issuance of the permit to sell deposit subscriptions.
(C) The applicant has complied with all applicable licensing
requirements in a timely manner.
(D) The applicant has obtained a commitment for any permanent
mortgage loan or other long-term financing that is satisfactory to
the department.
(E) The applicant has complied with any additional reasonable
requirements for release of funds placed in escrow accounts,
established by the department pursuant to Section 1785.
SEC. 31. Section 1784 of the Health and Safety Code is amended to
read:
1784. (a) If construction of the proposed continuing care
retirement community, or applicable phase, has not commenced within
36 months from the date the permit to sell deposit subscriptions is
issued, an applicant may request an extension of the permit to sell
deposit subscriptions. The request for extension shall be made to
the department in writing and shall include the reasons why
construction of the proposed continuing care retirement community was
not commenced within the 36-month time period, and the new estimated
date for commencement of construction.
(b) In response to a request for an extension, the department may
do one of the following:
(1) If the department determines there is satisfactory cause for
the delay in commencement of construction of the proposed continuing
care retirement community, the department may extend the permit to
sell deposit subscriptions for a one-year period.
(2) If the department determines that there is no satisfactory
cause for the delay, the department may instruct the escrow agent to
refund to subscribers all deposit subscriptions held in escrow, plus
any interest due under the terms of the deposit subscription
agreements, and require the applicant to file a new application and
application fee.
(c) Within 10 calendar days the applicant shall notify each
subscriber of the department's approval or denial of the extension,
of any expiration of the permit to sell deposit subscriptions, and of
any right to a refund of their deposit subscription.
SEC. 32. Section 1785 of the Health and Safety Code is amended to
read:
1785. (a) If, at any time prior to issuance of a certificate of
authority, the applicant's average performance over any six-month
period does not substantially equal or exceed the applicant's
projections for that period, the department, after consultation and
upon consideration of the recommendations of the Continuing Care
Contracts Committee, may take any of the following actions:
(1) Cancel the permit to sell deposit subscriptions.
(2) Increase the required percentages of construction completed,
units reserved, or entrance fees to be deposited as required under
Sections 1782, 1783.2, 1786, and 1786.2.
(3) Increase the reserve requirements under this chapter.
(b) Prior to taking any actions specified in subdivision (a), the
department shall give the applicant an opportunity to submit a
feasibility study from a consultant in the area of continuing care,
approved by the department, to determine whether in his or her
opinion the proposed continuing care retirement community is still
viable, and if so, to submit a plan of correction. The department,
in consultation with the committee, shall determine if the plan is
acceptable.
(c) In making its determination, the department shall take into
consideration the overall performance of the proposed continuing care
retirement community to date.
(d) If deposit subscriptions have been released from escrow, the
department may further require the applicant to reopen the escrow as
a condition of receiving any further entrance fee payments from
subscribers or residents.
SEC. 33. Section 1786 of the Health and Safety Code is amended to
read:
1786. (a) In order to permit an applicant to become a provider
and enter into continuing care contracts, the department shall issue
a provisional certificate of authority when a provider has done all
of the following:
(1) Complied with the approved marketing plans.
(2) Met and continues to meet the requirements imposed under
subdivision (b) of Section 1783.2. The issuance of the provisional
certificate of authority does not result in the automatic release of
escrowed funds pursuant to Section 1783.2.
(3) Completed construction of the continuing care retirement
community or applicable phase.
(4) Obtained the required licenses.
(5) Paid the remainder of the application fees.
(6) Executed a permanent mortgage loan or other long-term
financing.
(7) Met all applicable provisions of this chapter.
(b) The provisional certificate of authority shall expire 12
months after issuance unless the following occur:
(1) Sixty days prior to the expiration of the provisional
certificate of authority, the provider petitions the department in
writing for an extension of the provisional certificate of authority.
(2) Upon a showing of good cause by the provider, the department
determines that the applicant is capable of meeting the requirements
of Section 1786.2 during the period of extension.
(c) The length of the period of extension shall be determined at
the department's discretion.
(d) After the provisional certificate of authority is issued
providers may continue to take deposits by modifying the deposit
subscription agreement. The new deposit agreement shall clearly
state the rights of the depositor and the provider. These agreements
shall be submitted to the department for review and approval prior
to use.
(e) All holders of a provisional certificate of authority shall
request in writing a final certificate of authority when the
requirements of Section 1786.2 have been met.
SEC. 34. Section 1786.2 of the Health and Safety Code is amended
to read:
1786.2. (a) A certificate of authority shall not be issued to a
provider, unless the department determines that all of the following
have occurred:
(1) A provisional certificate of authority has been issued.
(2) One of the following requirements has been met:
(A) At a minimum, continuing care contracts have been executed for
80 percent of the total residential living units in the continuing
care retirement community, with payment in full of the entrance fee.
(B) At a minimum, continuing care contracts have been executed for
70 percent of the total residential living units in the continuing
care retirement community, with payment in full of the entrance fee,
and the provider has submitted a financial and marketing plan,
satisfactory to the department, demonstrating that the proposed
continuing care retirement community will be financially viable.
(C) At a minimum, continuing care contracts have been executed for
50 percent of the total residential living units in the continuing
care retirement community, with payment in full of the entrance fee,
and the provider furnishes and maintains a letter of credit or other
security, satisfactory to the department, sufficient to bring the
total amount of payments to a level equivalent to 80 percent of the
total entrance fees for the entire continuing care retirement
community.
(3) A minimum five-year financial plan of operation remains
satisfactory to the department.
(4) Adequate reserves exist as required by Sections 1792.2 and
1793. For a new continuing care retirement community without an
operating history, the department may approve calculation of required
reserves on a pro forma basis in conjunction with compliance with
approved marketing plans.
(5) All applicable provisions of this chapter have been met.
(b) When issued, the certificate of authority, whether full or
conditioned, shall remain in full force unless inactivated,
suspended, or revoked by the department pursuant to Section 1793.21.
(c) The certificate of authority shall be displayed in a prominent
place within the continuing care retirement community.
SEC. 35. Section 1787 of the Health and Safety Code is amended to
read:
1787. (a) All continuing care contracts entered into between the
provider and the transferor shall be in writing and shall contain all
information required by Section 1788.
(b) All continuing care contract forms, addenda, exhibits, or any
other related documents, and any revisions thereto, shall be approved
by the department prior to their use.
(c) The requirements of this chapter and Chapter 3.2 (commencing
with Section 1569) shall be the bases for approval by the department.
(d) The continuing care contract shall constitute the full and
complete agreement between the parties.
(e) More than one continuing care contract form may be used if
multiple program options are available.
(f) All text in continuing care contract forms shall be printed in
at least 10-point typeface.
(g) A clearly legible copy of the continuing care contract,
executed by the provider and a transferor, shall be furnished, with
all required or included attachments to the transferor at the time
the continuing care contract is executed and shall be furnished
within 10 calendar days to the resident if the resident is other than
the transferor.
(h) The provider shall require a written acknowledgment from the
transferor (and the resident, if other than the transferor) that the
executed copy of the continuing care contract and attachments have
been received.
(i) The continuing care contract shall constitute an admissions
agreement for purposes of the residential care facility for the
elderly and long-term health care facility requirements. The
continuing care contract may state the entitlement for skilled
nursing care in accordance with the provisions of law governing
admissions to long-term health care facilities in effect at the time
of admission to the skilled nursing facility. The parties may agree
to the terms of nursing facility admission at the time the continuing
care contract is executed, or the provider may present an exemplar
of the then-current nursing facility admission agreement and require
the resident to execute the form of agreement in effect at the time
of admission to the nursing facility. These terms shall include the
nursing fee, or the method of determining the fee, at the time of the
execution of the continuing care agreement, the services included in
and excluded from the fee, the grounds for transfers and discharges,
and any other terms required to be included under federal law.
(j) Only the skilled nursing admission agreement sections of
continuing care contracts which cover long-term health care facility
services shall be subject to Chapter 3.95 (commencing with Section
1599.60). The provider must submit the proposed skilled nursing
admission agreement to the State Department of Health Services for
its review and to the State Department of Social Services for review
to determine that it is not in violation of the laws relating to
continuing care contracts.
SEC. 36. Section 1788 of the Health and Safety Code is amended to
read:
1788. (a) Any continuing care contract shall contain all of the
following:
(1) The legal name and address of the provider.
(2) The name and address of the continuing care retirement
community.
(3) The resident's name and number of the unit to be occupied.
(4) If the transferor is someone other than the resident, the
transferor's name and address shall be separately designated.
(5) If the provider has used the name of any charitable or
religious or nonprofit organization in its title before January 1,
1979, and continues to use that name, and that organization is not
responsible for the financial and contractual obligations of the
provider, the provider shall include in every continuing care
contract a conspicuous statement which clearly informs the transferor
that the organization is not financially responsible.
(6) The date the continuing care contract is signed by the
transferor.
(7) The duration of the continuing care contract.
(8) A list of the following services that are to be made available
to the resident, which shall include at a minimum, the following
conditions for residential care facility for the elderly licensure:
(A) Regular observation of the resident's health status to ensure
that his or her dietary needs, social needs, and needs for special
services are satisfied.
(B) Safe and healthful living accommodations, including
housekeeping services and utilities.
(C) Maintenance of house rules for the protection of residents.
(D) A planned activities program, which includes social and
recreational activities appropriate to the interests and capabilities
of the resident.
(E) Three balanced, nutritious meals and snacks made available
daily, including special diets prescribed by a physician as a medical
necessity.
(F) Personal care.
(G) Assistance with taking medications.
(H) Central storing and distribution of medications.
(I) Arrangements to meet health needs, including arranging
transportation.
(9) An itemization of the services that are included in the
monthly fee and the services that are available at an extra charge.
The provider shall attach a current fee schedule to the continuing
care contract.
(10) The procedures and conditions under which residents may be
voluntarily or involuntarily transferred from their designated living
units. The transfer procedures, at a minimum, shall provide for all
of the following:
(A) When, in the opinion of the continuing care retirement
community management, a physician and surgeon, appropriate
specialist, or licensing official, any of the following conditions
exists:
(i) The resident is nonambulatory. The definition of
nonambulatory, as defined in Section 13131, shall either be stated in
the continuing care contract or be cited, with a copy of it made
available, as an attachment or by specifying that it will be provided
upon request. If the resident occupies a room that has a fire
clearance for nonambulatory residence, provision for transfer under
the above circumstances is unnecessary.
(ii) Resident develops a physical or mental condition that
endangers the health, safety, or well-being of the resident or
another person, or causes an unreasonable and ongoing disturbance at
the continuing care retirement community.
(iii) Transfer to the continuing care retirement community's
skilled nursing facility or personal care unit is required for more
efficient care and/or to protect the health of other residents, or
because the level of care needed cannot lawfully be provided in the
living unit.
(iv) Transfer to a nursing home or hospital or other facility is
required and the provider has no facilities available for such care.
(B) Provision for transfer of a second resident when a shared
accommodation arrangement is terminated.
(C) When transfer is requested or required, by provider or
resident, for any other reason.
(11) Provisions for any change in the monthly rate and any refund
of entrance fees when a resident transfers from any unit.
(12) Any continuing obligations of the provider in the event a
resident is transferred.
(13) Whether the provider has any responsibility to resume care
after a temporary transfer.
(14) The obligations of the provider for continued services to the
resident while the resident is absent from the continuing care
retirement community.
(15) The conditions under which the resident permanently releases
his or her living unit.
(16) If real or personal properties are transferred in lieu of
cash, a statement as to their value at the time of transfer, and how
the value was ascertained shall be included.
(A) An itemized receipt which includes the information described
above is acceptable, if incorporated as a part of the continuing care
contract.
(B) With respect to the transfer of real property, a statement
that the deed or other instrument of conveyance shall contain a
recital that the transaction is made pursuant to a "continuing care
contract" and may be subject to rescission by the transferor within
90 days from the date of the transfer.
(C) The failure to comply with paragraph (16) shall not affect the
validity of title to real property transferred pursuant to this
chapter.
(17) The amount of the entrance fee.
(18) In the event two parties have jointly paid the entrance fee
or other payment which allows them to occupy the unit, the continuing
care contract shall define the allocation of fees.
(19) The amount of any processing fee.
(20) The amount of any monthly care fee.
(21) For continuing care contracts which require a monthly care
fee or other periodic rate, the continuing care contract shall
provide statements concerning all of the following:
(A) That the occupancy and use of the accommodations by the
resident is contingent upon the regular payment of the fee.
(B) The regular rate of payment agreed upon (per day, week, or
month).
(C) Whether payment will be made in advance or after services have
been provided.
(D) Whether any adjustment in the monthly care fees is to be made
by the provider for the support, maintenance, board, or lodging,
which is supplied to a resident who requires medical attention when
he or she is absent from the continuing care retirement community.
(E) If any credit or allowance is to be given to a resident who is
absent from the continuing care retirement community or from meals,
and if such credit is to be permitted at the discretion or by special
permission of the provider.
(22) All continuing care contracts shall specify one of the
following basic methods for calculating changes in monthly care fees:
(A) For prepaid continuing care contracts, which include monthly
care fees, one of the following methods:
(i) Fees shall not be subject to change during the lifetime of the
agreement.
(ii) Fees shall not be increased by more than a specified number
of dollars in any one year and not more than a specified number of
dollars during the lifetime of the agreement.
(iii) Fees shall not be increased in excess of a specified
percentage over the preceding year and not more than a specified
percentage during the lifetime of the agreement.
(B) For monthly fee continuing care contracts, except prepaid
contracts, changes in monthly fees shall be based on projected costs,
prior year per capita costs, and economic indicators.
(23) The continuing care contract shall provide for notification
of the resident at least 30 days in advance of any change in the
scope or price of any component of care or other services.
(24) The continuing care contract shall include a provision
indicating whether the resident's rights under the continuing care
contract include any proprietary interests in the assets of the
provider or in the continuing care retirement community, or both.
(25) If there is a loan on the property, the continuing care
contract shall advise residents that rights they may have to enforce
continuing care contracts are subordinate to the rights of the
lender. For equity projects, the continuing care contract shall
specify the type and extent of the equity interest and whether any
entity holds a superior security interest.
(26) Notice that the living units are part of a continuing care
retirement community that is licensed as a residential care facility
for the elderly and, as such, any duly authorized agent of the
department may, upon proper identification and upon stating the
purpose of his or her visit, enter and inspect the entire premises at
any time, without advance notice.
(27) A conspicuous statement, in at least 10-point boldface type
in immediate proximity to the space reserved for the signature of the
transferor, that provides as follows: "You, the transferor, may
cancel the transaction without cause at any time within 90 days from
the date of this transaction. See the attached notice of
cancellation form for an explanation of this right."
(28) Notice that during the cancellation period, the continuing
care contract may be canceled by the provider without cause.
(29) The terms and conditions under which the continuing care
contract may be terminated after the cancellation period by either
party, including any health or financial conditions.
(30) A statement that involuntary termination of the continuing
care contract by the provider after the cancellation period shall be
only for good and sufficient cause.
(A) Any continuing care contract containing a clause that provides
for a resident to be evicted, or provides for a continuing care
contract to be canceled for "just cause," "good cause," or other
similar provision, shall also include a provision that none of the
following activities by the resident, or on behalf of the resident,
constitutes "just cause," "good cause," or otherwise activates the
eviction or cancellation provision:
(i) Filing or lodging a formal complaint with the department or
other appropriate authority.
(ii) Participation in an organization or affiliation of residents,
or other similar lawful activity.
(B) No provider shall discriminate or retaliate in any manner
against any resident of a continuing care retirement community for
contacting the department, or any other state, county, or city
agency, or any elected or appointed government official to file a
complaint or for any other reason, or for participation in a
residents' coalition.
(C) Nothing in this provision shall diminish the provider's
ability to terminate the continuing care contract for good and
sufficient cause.
(31) A statement that at least 90 days written notice is required
for an involuntary termination of the continuing care contract.
(32) A statement concerning the length of notice that is required
by a resident for the voluntary termination of the continuing care
contract after the cancellation period.
(33) The policy for refunding any portion of the entrance fee, in
the event of cancellation, termination, or death.
(34) The following notice at the bottom of the signatory page:
"NOTICE" (date)
This is a continuing care contract as defined by Section 1771(j)
or 1771(w) of Chapter 10 of Division 2 of the California Health and
Safety Code. This contract form has been approved by the State
Department of Social Services as required by Section 1787(b) of the
California Health and Safety Code. The basis for this approval was a
determination that (provider name) has complied with specific
requirements of the statutes. Approval by the department is neither
a guaranty of performance nor an endorsement of contract provisions.
Prospective transferors and residents are encouraged to carefully
consider the benefits and risks of this contract before signing. You
should seek financial and legal advice as needed.
(b) A life care contract shall also include all of the following:
(1) Provision to provide all levels of care, including acute care
and physicians and surgeons' services to a resident.
(2) Provision to provide this care for the duration of the
resident's life except for termination of the life care contract by
the provider during the cancellation period or after the cancellation
period for good cause.
(3) Provision to provide a comprehensive continuum of care,
including skilled nursing, under the ownership and supervision of the
provider on, or adjacent to, the continuing care retirement
community premises.
(4) Provision that no change will be made in the monthly care fees
based on the resident's level of care or service.
(5) Provision to subsidize residents who become financially unable
to pay their monthly care fees provided that the resident's
financial need did not arise from the action to divest themselves of
their assets.
(c) The continuing care contract may include, but is not limited
to, and need not include, any of the following items:
(1) Provision for a resident who becomes financially unable to pay
for his or her monthly care fees at some future date to be
subsidized. If provision for subsidizing a resident is included, the
following provisions may be included:
(A) A stipulation that the resident shall apply for any public
assistance or other aid for which eligible and that the provider may
apply on behalf of the resident.
(B) A stipulation that the provider shall be the final and
conclusive determining body of any adjustments to be made or any
action to be taken regarding any charitable consideration to be
extended to any of its residents.
(C) Provision for the payment or entitlement of actual costs of
care from any property acquired by the resident subsequent to the
adjustment, as provided in subparagraph (B), or from any property not
disclosed by the resident at any time.
(D) Provision that the provider may pay the monthly premium of the
resident's health insurance coverage under medicare to ensure that
such payments will be made.
(E) Provision that the provider may receive an assignment from the
resident of the right to apply for and to receive such benefits, for
and on behalf of the resident.
(F) Provision that the provider is not responsible for the costs
of furnishing the resident with any services, supplies, and
medication, when reimbursement is available from any governmental
agency.
(2) Provisions which limit responsibility for costs associated
with the treatment or medication of an ailment or illness existing
prior to the date of admission. In such cases, the medical or
surgical exceptions, as disclosed by the medical entrance
examination, shall be listed in the continuing care contract or in
the medical report, which may
be attached to and made a part of the continuing care contract.
(3) Legal remedies which may be applied in case any material
misrepresentation or omission pertaining to assets or health has been
made by the resident.
(4) A clause which restricts transfer or assignments of the
resident's rights and privileges under a continuing care contract
because of the personal nature of the continuing care contract.
(5) A clause for the protection of the provider in instances where
it may wish to waive any of the terms or provisions of the
continuing care contract in specific instances where the resident has
breached the continuing care contract without relinquishment of its
right to insist upon compliance by the resident with all of the other
terms or provisions.
(6) Provision for the reimbursement of any loss or damage beyond
normal wear and tear suffered by the provider as the result of
carelessness or negligence on the part of the resident.
(7) Provision that the resident agrees to observe off-limit areas
of the continuing care retirement community as designated by the
provider for safety reasons. However, the provider shall not attempt
to absolve itself in the continuing care contract from liability for
its negligence by any statement to that effect.
(8) Provision for the subrogation to the provider of the resident'
s rights in the case of injury to a resident caused by the acts or
omissions of a third party, or for the assignment of the resident's
recovery or benefits in this case to the provider to the extent of
the value of the goods and services furnished by the provider to or
on behalf of the resident.
(9) Provision for a lien on any judgment, settlement, or recovery
for any additional expense incurred by the provider in caring for the
resident as a result of injury.
(10) Provision that requires the cooperation of the resident in
assisting in the diligent prosecution of any claim or action against
any third party.
(11) Provision for the appointment of a conservator or guardian by
a court of competent jurisdiction in the event a resident becomes
unable to handle his or her personal or financial affairs.
(12) Provision that, in the event a provider whose property is
tax-exempt is required to pay property taxes, or in-lieu taxes, the
additional costs will be charged to the resident on a pro rata basis.
(13) Other provisions approved by the department.
(d) A copy of the current audited financial statement of the
provider shall be attached to every continuing care contract. For a
provider whose current audited financial statement does not
accurately reflect the financial ability of the provider to fulfill
the continuing care contract promises, this requirement shall include
supplemental statements or attachments that disclose all of the
following:
(1) That the reserve requirement has not yet been determined or
met, and that entrance fees will not be held in escrow.
(2) That the ability to provide the services promised in the
continuing care contract will depend on successful compliance with
the approved financial plan.
(3) The approved financial plan for meeting the reserve
requirements.
(e) A schedule of the average monthly fees for each type of
residential living unit charged to residents for each of the five
years preceding execution of the continuing care contract shall be
attached to every continuing care contract. This schedule shall be
updated annually at the end of each fiscal year. If the continuing
care retirement community has not been in existence for five years,
the information shall be provided for each of the years the
continuing care retirement community has been in existence.
(f) If any continuing care contract provides for a health
insurance policy for the benefit of the resident, a binder under
Sections 382 and 382.5 of the Insurance Code shall be attached to the
continuing care contract.
(g) A completed form in duplicate, captioned "Notice of
Cancellation" shall be attached to every continuing care contract.
Such notice shall be easily detachable, and shall contain, in at
least 10-point boldface type, the following statement:
"NOTICE OF CANCELLATION" (date)
(Enter date of transaction)
You may cancel this transaction, without any penalty within 90
calendar days from the above date.
If you cancel, any property transferred, any payments made by you
under the contract, and any negotiable instrument executed by you
will be returned within 14 calendar days after making possession of
the living unit available to the provider, and any security interest
arising out of the transaction will be canceled.
If you cancel, you are obligated for a reasonable processing fee
to cover costs and the reasonable value of the services received by
you from the provider up to the date you canceled or made available
to the provider the possession of any living unit delivered to you
under this contract, whichever is later.
If you cancel, you must return possession of any living unit
delivered to you under this contract to the provider in substantially
the same condition as when received.
Possession of the living unit must be made available to the
provider within 20 calendar days of your notice of cancellation. If
you fail to make the possession of any living unit available to the
provider, then you remain liable for performance of all obligations
under the contract.
To cancel this transaction, mail or deliver a signed and dated
copy of this cancellation notice, or any other written notice, or
send a telegram
to _________________________________________________________
(Name of provider)
at _________________________________________________________
(Address of provider's place of business)
not later than midnight of ________________ (date).
I hereby cancel this
transaction ______________________________
(Transferor's signature)
SEC. 37. Section 1788.2 of the Health and Safety Code is amended
to read:
1788.2. (a) The continuing care contract may be canceled without
cause by written notice from either party, within 90 days from the
date of the transaction.
(b) For both equity and nonequity projects, death of the resident
during the cancellation period shall constitute a cancellation of the
continuing care contract under subdivision (a), unless a continuing
care contract includes specific provisions otherwise.
(c) The cancellation period and the refund of obligations
associated therewith shall apply as follows:
(1) To all continuing care contracts executed in conjunction with
nonequity continuing care retirement communities.
(2) To continuing care contracts executed in conjunction with a
purchase of an equity interest from a provider but not to continuing
care contracts executed in conjunction with sales of an equity
interest by one transferor to another.
(d) The following fees may be charged during the 90-day
cancellation period:
(1) If possession of the living unit in a nonequity project is
returned to the provider in substantially the same condition as when
received, the only obligation incurred by the resident shall be a
reasonable fee to cover costs and the reasonable value of services
rendered pursuant to the canceled continuing care contract.
(2) Equity project providers may impose a transfer fee on sellers.
For contracts entered into after January 1, 1996, those transfer
fees are subject to the following limitations:
(A) Upon the cancellation of a continuing care contract executed
in conjunction with the purchase of an equity interest from the
provider, the provider may charge a transfer fee not to exceed the
excess of the gross resale price of the equity interest over the
purchase price paid by the transferor for the interest.
(B) Upon the cancellation of a continuing care contract that is
not executed in conjunction with the purchase of an equity interest
from the provider, the transfer fee shall be no greater than the sum
of 10 percent of either the original or resale price of the equity
interest and 100 percent of the excess, if any, of the gross resale
price of the equity interest over the purchase price paid by the
transfer for the interest.
(e) Upon the termination of a continuing care contract that occurs
more than 90 days after the purchase of the equity interest from the
provider, the transfer fee shall be no greater than the sum of 10
percent of either the original or resale price of the equity interest
and 100 percent of the excess if any, of the gross resale price of
the equity interest over the purchase price paid by the transferor
for the interest.
(f) For purposes of this section, "gross resale price" means the
resale price before any deductions for transfer fees, transfer taxes,
real estate commissions, periodic fees, late charges, interest,
escrow fees, or any other fees incidental to the sale of real
property.
(g) This section shall not be construed to limit the provider's
ability to withhold delinquent periodic fees, late charges, accrued
interest, or assessments from the sale proceeds, as provided by the
continuing care contract or the real estate documents governing the
equity facility.
SEC. 38. Section 1788.3 of the Health and Safety Code is repealed.
SEC. 39. Section 1788.4 of the Health and Safety Code is amended
to read:
1788.4. (a) Except during the cancellation period any refunds due
pursuant to the continuing care contract shall be paid within 14
calendar days after a resident makes possession of the living unit
available to the provider, or within 90 calendar days after
cancellation, death, or receipt of notice of termination, whichever
is later.
(b) In nonequity projects, if the provider terminates the
continuing care contract, the transferor shall be refunded the
difference between the total amount of entrance, monthly, and
optional fees paid and the amount used for care of the resident.
(c) When additional fees have been paid for unit upgrades, these
charges shall amortize at the same rate as the entrance fee. The
transferor shall be refunded the unamortized balance.
SEC. 40. Section 1789 of the Health and Safety Code is amended to
read:
1789. (a) Proposed changes of entity name, structure,
organization, operation, overall management of the continuing care
retirement community, or financing shall be submitted to the
department for review and approval.
(b) The provider shall give written notice of proposed changes to
the department no less than 60 calendar days prior to making changes.
(c) This notice requirement does not apply to routine facility
staff changes.
SEC. 40.5. Section 1789.2 of the Health and Safety Code is amended
to read:
1789.2. (a) Any provider contemplating capital financing that
would entail a mortgage or deed of trust for any property on which a
resident resides pursuant to a continuing care contract shall provide
the department with written notification at least 90 calendar days
prior to the execution of the proposed transaction which includes all
of the following:
(1) A description of the terms and amount of the proposed
transaction.
(2) An analysis of the sources of funds for repayment of principal
and interest.
(3) An analysis of the impact of the proposed transaction on
monthly care fees.
(4) An analysis of the impact that the contemplated encumbrance of
real property would have on assets available for statutory reserves
required by Section 1792.2, and refund reserves required by Section
1793.
(b) No provider shall execute proposed capital financial
transactions without the department's written authorization or until
the 90 calendar day period for departmental review has expired.
(c) If the department determines that the proposed capital
financial transaction will materially increase monthly fees or impair
the provider's ability to maintain required reserves, the department
may refuse to approve the transaction, may record a notice of lien
on the provider's property pursuant to Section 1793.15, after
notifying the provider and giving the provider an opportunity to
withdraw the planned transaction, or take any other action that it
determines to be in the best interest of the residents.
SEC. 41. Section 1789.4 of the Health and Safety Code is amended
to read:
1789.4. (a) Any provider who proposes to sell or transfer
ownership of a continuing care retirement community to another party
shall obtain approval from the department before consummating the
sale or transfer.
(b) The provider shall submit written notification to the
department at least 90 calendar days prior to execution of the
proposed transaction. The notification shall include all of the
following:
(1) Identification of the proposed purchaser.
(2) A description of the terms and amount of the proposed
transaction.
(3) A plan detailing how fulfillment of existing contract
obligations will be ensured.
(c) The provider shall give written notice to all continuing care
contract residents and subscribers 60 calendar days prior to the sale
or transfer. The notice shall include all of the following:
(1) A description of the parties.
(2) A description of the proposed sale or transfer.
(3) A description of the arrangements for fulfilling continuing
care contract obligations.
(4) A description of options available to any subscriber or
resident who does not wish to have his or her contract assumed by a
new provider.
(5) An acknowledgment of receipt of the notice to be signed by the
resident.
(d) In the absence of the substitution of a new legal obligor for
the provider, the provider shall set up a trust fund or secure a
performance bond to ensure the fulfillment of continuing care
contract obligations.
(e) The new owner shall make applications for, and obtain a
certificate of authority and appropriate licenses, before executing
any continuing care contracts, or providing care or supervision, or
both, to any residents.
SEC. 42. Section 1789.6 of the Health and Safety Code is amended
to read:
1789.6. All providers shall record and maintain a "Notice of
Statutory Limitation on Transfer" as required by paragraph (24) of
subdivision (a) of Section 1779.4.
SEC. 43. Section 1789.8 of the Health and Safety Code is amended
to read:
1789.8. Each provider shall obtain and maintain in effect
insurance or a fidelity bond for any agent or employee, who, in the
course of his or her agency or employment, has access to any
substantial amount of funds. This requirement is separate from the
bonding requirements of Residential Care Facility for the Elderly
regulations.
SEC. 44. Section 1790 of the Health and Safety Code is amended to
read:
1790. (a) Each provider, that has obtained a provisional or final
certificate of authority, and each provider that possesses an
inactive certificate of authority, shall submit an annual report of
its financial condition. The report shall consist of audited
financial statements and required reserve calculations, with
accompanying certified public accountants' opinions thereon,
Continuing Care Provider Fee and Calculation Sheet, resident
listings, evidence of fidelity bond as required by Section 1789.8,
and certification that the continuing care contract in use for new
residents has been approved by the department, all in a format
provided by the department, and shall include all of the following
information:
(1) A certification, if applicable, that the entity is maintaining
reserves for prepaid continuing care contracts, statutory reserves,
and refund reserves.
(2) Full details on the status of reserves and on per capita costs
of operation for each continuing care retirement community operated.
(3) Full details on any increase in monthly care fees, the basis
for determining the increase, and the data used to calculate the
increase.
(4) The required reserve calculation schedules shall be
accompanied by the auditor's opinion as to compliance with applicable
statutes.
(5) Any other information as the department may require.
(b) Each provider shall file the annual report with the department
within four months after the provider's fiscal year end. If the
complete annual report is not received by the due date, a one
thousand dollar ($1,000) late fee shall accompany submission of the
reports. If the reports are more than 30 days past due, an additional
fee of thirty-three dollars ($33) for each day over the first 30
days shall accompany submission of the report. The department may,
at its discretion, waive the late fee for good cause.
(c) The annual report and any amendments thereto shall be signed
and certified by the chief executive officer of the provider, stating
that, to the best of his or her knowledge and belief, the items are
correct.
(d) A copy of the most recent annual audited financial statement
shall be transmitted by the provider to each transferor requesting
the statement.
(e) A provider shall amend its annual report on file with the
department at any time, without the payment of any additional fee, if
an amendment is necessary to prevent the report from containing a
material misstatement of fact or omitting a material fact.
(f) If a provider is no longer entering into continuing care
contracts, and currently is caring for 10 or fewer continuing care
residents, the provider may request permission from the department,
in lieu of filing the annual report, to establish a trust fund or to
secure a performance bond to ensure fulfillment of continuing care
contract obligations. The request shall be made each year within 30
days after the provider's fiscal year end. The request shall include
the amount of the trust fund or performance bond determined by
calculating the projected life costs, less the projected life
revenue, for the remaining continuing care residents in the year the
provider requests the waiver. If the department approves the
request, the following shall be submitted to the department annually:
(1) Evidence of trust fund or performance bond and its amount.
(2) A list of continuing care contract residents. If the number
of continuing care residents exceeds 10 at any time, the provider
shall comply with the requirements of this section.
(3) A provider fee as required by subdivision (c) of Section 1791.
(g) If the department determines a provider's annual audited
report needs further analysis and investigation, as a result of
incomplete and inaccurate financial statements, significant financial
deficiencies, development of work out plans to stabilize financial
solvency, or for any other reason, the provider shall reimburse the
department for reasonable actual costs incurred by the department or
its representative. The reimbursed funds shall be deposited in the
Continuing Care Contract Provider Fee Fund.
SEC. 45. Section 1791 of the Health and Safety Code is amended to
read:
1791. (a) An annual fee shall be required of each provider which
has obtained a provisional or final certificate of authority.
(b) Each annual report submitted pursuant to Section 1790 shall be
accompanied by a payment to the Continuing Care Provider Fee Fund in
the amount of one-tenth of 1 percent of the portion of total
operating expenses, excluding debt service and depreciation from
audited financial statements, which has been allocated to continuing
care contract residents. The allocation shall be based on the ratio
of the mean number of total residents.
(c) If a provider is granted an exemption from filing annual
reports to the department pursuant to subdivision (f) of Section
1790, the minimum annual provider fee shall be two hundred fifty
dollars ($250). This fee shall be submitted after the end of the
provider's fiscal year with proof of trust fund or performance bond
as required by subdivision (f) of Section 1790.
SEC. 46. Section 1792 of the Health and Safety Code is amended to
read:
1792. (a) Any provider furnishing care pursuant to a prepaid
continuing care contract executed after January 1, 1979, shall
establish a reserve fund escrow account with an escrow agent, in an
amount which equals the aggregate principal and interest, rental, or
lease payments due during the next 12 months on account of any first
mortgage or other long-term financing of the continuing care
retirement community or any leases or other rental agreement for a
continuing care retirement community.
(b) The principal of the escrow account may be invested, as
provided in subparagraphs (A) through (E), inclusive, of paragraph
(3) of subdivision (e) of Section 1792.2 concerning investment of
reserve funds, with the earnings thereon payable to the provider.
(c) Amounts not to exceed in the aggregate one-sixth of the total
principal may be released to the provider upon notice to the
department.
(d) Submit a copy of the executed escrow agreement that provides
all of the following:
(1) That upon withdrawal of any amount by the provider, the escrow
agent shall provide immediate written notice of the withdrawal to
the department.
(2) That any amount released to the provider shall be repaid to
the escrow account within two years of the release of the amount.
(3) That if the provider does not repay the escrow account within
the two-year period, the escrow agent shall provide immediate written
notice to the department.
(e) In the event of a change of escrow agent, the new escrow
agreement shall be submitted to the department.
SEC. 47. Section 1792.2 of the Health and Safety Code is amended
to read:
1792.2. (a) Any entity that has executed or assumed continuing
care contracts shall maintain reserves covering obligations
thereunder.
(b) The following assumptions shall be used when calculating the
reserves:
(1) The following life expectancy table shall be used in
connection with all continuing care contracts:
Age Females Males Age Females Males
55 26.323 23.635 83 7.952 6.269
56 25.526 22.863 84 7.438 5.854
57 24.740 22.101 85 6.956 5.475
58 23.964 21.350 86 6.494 5.124
59 23.199 20.609 87 6.054 4.806
60 22.446 19.880 88 5.613 4.513
61 21.703 19.163 89 5.200 4.236
62 20.972 18.457 90 4.838 3.957
63 20.253 17.764 91 4.501 3.670
64 19.545 17.083 92 4.175 3.388
65 18.849 16.414 93 3.862 3.129
66 18.165 15.759 94 3.579 2.903
67 17.493 15.116 95 3.329 2.705
68 16.832 14.486 96 3.109 2.533
69 16.182 13.869 97 2.914 2.384
70 15.553 13.268 98 2.741 2.254
71 14.965 12.676 99 2.584 2.137
72 14.367 12.073 100 2.433 2.026
73 13.761 11.445 101 2.289 1.919
74 13.189 10.830 102 2.152 1.818
75 12.607 10.243 103 2.022 1.723
76 12.011 9.673 104 1.899 1.637
77 11.394 9.139 105 1.784 1.563
78 10.779 8.641 106 1.679 1.510
79 10.184 8.159 107 1.588 1.500
80 9.620 7.672 108 1.522 1.500
81 9.060 7.188 109 1.500 1.500
82 8.501 6.719 110 1.500 1.500
The life expectancy table set forth in this paragraph shall be
used until this section is amended.
(2) For residents over 110 years of age use 1.500 for computing
the statutory reserve requirements.
(3) If a continuing care retirement community has contracted with
a resident under 55 years of age, provide the department with the
methodology used to determine that resident's life expectancy.
(4) A zero interest assumption shall be used to adjust resident
life expectancies in conjunction with the computation of the
statutory reserve requirement.
(c) The reserves shall be calculated by progressing through each
of the following steps:
(1) Compute net cash per capita costs:
(A) Cash operating expenses: Deduct: depreciation and other
noncash expenses; processing fees; community services; expenses that
will not be incurred in future years; reimbursements for services to
nonresidents; donated services, if included as an operating expense
on the income statement; investment income; contributions received;
and other items that the continuing care retirement community
reasonably believes should be deducted with accompanying explanation.
For a continuing care retirement community in its first year of
operation or following a major addition to an existing continuing
care retirement community, cash operating expenses for calculating
reserve requirements may be classified as fixed or variable and
totaled separately.
(B) Mean number of residents by level of care: List the number of
residents for each level of care separately at the beginning of the
fiscal year. Add the number of residents for each level of care
separately at the end of the fiscal year. Divide the total for each
level of care by two.
(C) Total mean number of residents: Add the total number of
residents at the beginning of the fiscal year to the total number of
residents at the end of the fiscal year and divide by two. For
continuing care retirement communities wherein resident population
fluctuates significantly from month to month and for continuing care
retirement communities in their first year of operation, the mean
number of residents by level of care or the total mean number may be
computed by adding the number of residents at the end of each month
in the fiscal year and dividing by the total number of months
included. The daily attendance for the fiscal year may also be used
to determine the mean number of residents.
(D) Net
cash per capita cost: Cash operating expenses divided by the mean
number of residents. It is acceptable, but not required, to compute
net cash per capita for various levels of care, based on allocated
expenses and contributions from consolidated financial statements.
Allocation methods shall be subject to the approval of the
department, and schedules shall be prepared for all levels of care,
including any levels not covered by continuing care contracts. For a
continuing care retirement community in its first year of operation
or following a major addition to an existing continuing care
retirement community, net cash per capita cost for calculating
reserve requirements may be the sum of the figures determined by
dividing fixed cash operating expenses by the number of residents at
the end of the fiscal year, and dividing variable cash operating
expenses by the mean number of residents.
(2) Compute projected life cost:
(A) Compute aggregate life expectancies: For each resident,
compare age against the life expectancy table and total all life
expectancies.
(B) Multiply net cash per capita costs by aggregate life
expectancies.
(3) Compute five-year plan residents: Determine the maximum
annual total of SSI/SSP payments for the year of entry for each
resident. If that amount is greater than the amount of the entrance
fee paid by a resident, the resident is designated a "Five-year Plan
Resident" and the entrance fee is amortized over five years. No
reserves are required for these residents after the fifth year.
(4) Compute projected life revenue:
(A) Annual fee: Multiply by 12 each monthly fee paid by
residents, including payments to be made by third-party payers on
behalf of the resident, including SSI/SSP and Medi-Cal, and
contributions, donations, or endowments, that the provider actually
used for operating expenditures for continuing care contracts during
the fiscal year.
(B) Continuing care residents requiring full reserves: Enter the
number of continuing care residents for each annual fee, excluding
five-year plan residents.
(C) Aggregate life expectancies: For each resident, compare age
against the life expectancy table and total all life expectancies for
each annual fee.
(D) Total projected life revenue: Multiply each annual fee by
aggregate life expectancies. Total the products obtained.
(5) Compute statutory reserve:
(A) Reserves not including five-year plan residents: Deduct the
projected life revenue from the projected life cost. If the
remainder is less than zero, use zero.
(B) Total statutory reserves: Add the total unamortized balance
for five-year plan residents to the remainder in paragraph (A) above.
(6) Compute liquid asset portion of statutory reserve: For
providers that have executed monthly fee contracts with at least
one-half of the residents, compute 5 percent of the total statutory
reserves. For providers that have executed prepaid contracts with at
least one-half of the residents, compute 25 percent of the total
statutory reserves.
(d) At least 25 percent of the statutory reserve shall consist of
liquid assets, as defined in paragraph (8) of subdivision (e), except
that a 5 percent requirement shall apply to the continuing care
retirement communities that have executed monthly fee contracts with
at least 50 percent of the residents.
(e) The assets available for reserves shall consist of the
following:
(1) Deposits in commercial and savings accounts with California
banks that are members of the Federal Deposit Insurance Corporation.
(2) Notes receivable by the continuing care retirement community,
that are secured by first deeds of trust and first mortgages on
property not owned by the provider or its affiliates.
(3) Stocks, bonds, and securities, at current market value unless
otherwise specified, shall meet the following criteria to be approved
as assets available for statutory reserves:
(A) Highly liquid money securities, including, but not limited to,
United States Treasury Bills, prime banker's acceptances, negotiable
time certificates of deposit, and short-term tax-exempt notes.
(B) Common stocks rated "above average" or higher by any national
rating agency. For example, a rating of A+, A, or A- by Standard and
Poor's Corporation is required for common stock.
(C) Bonds issued by the United States government or federal
agencies.
(D) Nonfederal bonds that have a current rating of at least "A" by
Moody's Investors Service, Standard and Poor's Corporation, or Fitch
Investors Service, and are listed on a national securities exchange.
(E) Bonds that are not listed on a national securities exchange,
but are traded over-the-counter and have a current rating of at least
"Aa" by Moody's Investors Service or at least "AA" by Standard and
Poor's Corporation or Fitch's Investors Service.
(F) The security interest in the cash surrender value of life
insurance policies assigned by residents to the continuing care
retirement community.
(4) Stocks, bonds, and securities that do not meet the approval
criteria may be retained as part of the reserves with the specific
approval of the department. If necessary to meet reserve
requirements, stocks, bonds, and securities that are not approved by
the department may be disposed of in a gradual manner, to avoid loss
to certificate holders.
(5) Real estate used to provide care and housing for holders of
continuing care contracts, or real estate, or equities therein, owned
by the entity as an investment, the rents from which are used to
discharge obligations to holders of continuing care contracts or to
reinvest as a part of the reserves. These investments may be located
outside the State of California.
(A) The value of this real estate shall be based on 70 percent of
the net equity thereof, which shall be the book value, assessed
value, or current appraised value within 12 months prior to the end
of the fiscal year, less all encumbrances, depreciation, and the
amount required for reserves for refundable contracts under Section
1793, all according to audited financial statements acceptable to the
department.
(B) All appraisals shall be prepared by either a member of the
American Institute of Appraisers or a member of the Society of Real
Estate Appraisers, or the county assessor. The department may
require technical reports to be verified or certified, or both. The
expense of any technical reports or any verifications thereof shall
be borne by the provider.
(6) Seventy percent of the net equity in furniture and equipment
situated on property used to provide care and housing for holders of
continuing care contracts.
(7) Investment certificates or shares in open end investment
trusts, that meet all of the following requirements:
(A) The trust management shall have experience either managing
another mutual fund registered under the Investment Company Act of
1940 (15 U.S.C. Sec. 80a-1 et seq.), or have been registered as an
investment adviser under the Investment Advisors Act of 1940 (15
U.S.C. Sec. 80b-1 et seq.), and in either case shall currently have
at least one hundred million dollars ($100,000,000) under its
supervision.
(B) Qualified for sale in California.
(C) Has at least 40 percent of its directors or trustees not
affiliated with the fund's management company or principal
underwriter or any of their affiliates.
(D) Is registered under the Investment Company Act of 1940.
(E) Is a fund listed as qualifying under rules maintained by the
Commissioner of Corporations in cooperation with the Department of
Insurance.
(8) Liquid assets, if any, shall consist of the following:
(A) Listed bonds, stocks, and commercial and savings accounts.
(B) A sinking fund comprised of liquid assets, if it is a
replacement fund subject to disbursement for items, including, but
not limited to, payment of principal and interest on the mortgage or
for operations during the succeeding year. Replacement funds, that
may only be used for capital improvements or repairs, shall not be
included in liquid reserves.
(9) Deposits made prior to signing a continuing care contract
represent liabilities and shall be offset against liquid assets, if
any, otherwise against any other assets.
(10) Deposits that represent funds turned over to the continuing
care retirement community by residents for safekeeping without
relinquishing control thereof shall be offset against liquid assets,
if any, otherwise against other assets.
SEC. 48. Section 1793 of the Health and Safety Code is amended to
read:
1793. (a) Any provider offering a refundable contract, or other
entity assuming responsibility for refundable contracts, shall
maintain a refund reserve fund in trust for the residents. This
trust fund shall remain intact to accumulate interest earnings
resulting from investments of liquid reserves in accordance with
paragraph (1) of subdivision (e) and subparagraphs (A) through (E),
inclusive, of paragraph (3) of subdivision (e) of Section 1792.2.
The amount of the refund reserve shall be revised annually by the
provider and submitted to the department in conjunction with the
annual report required by Section 1790.
(b) Any providers or other entity assuming responsibility for
refundable contracts, which has not executed refundable contracts in
a continuing care retirement community prior to January 1, 1996, and
proposes to execute these contracts in that continuing care
retirement community after that date, shall maintain a refund reserve
fund in trust for the residents holding such contracts.
(1) Except as noted in paragraph (2), this trust fund shall remain
intact as specified in subdivision (a).
(2) To the extent approved by the department, the trust account
may invest up to 70 percent of the refund reserves in real estate
that is used to provide care and housing for the holders of the
refundable continuing care contracts and is located on the same
campus where these continuing care contract holders reside.
These investments in real estate shall be limited to 50 percent of
the providers' net equity in the real estate. The net equity shall
be the book value, assessed value, or current appraised value within
12 months prior to the end of the fiscal year, less any depreciation,
encumbrances, and the amount required for statutory reserves under
Section 1792.2, all according to audited financial statements
acceptable to the department. This paragraph shall apply to
applications, and for those phases of the project that were
identified as part of applications, submitted after May 31, 1995.
(3) Any provider who submitted an application on or before May 31,
1995, may provide for the refund obligation of this section with a
trust account that invests up to 85 percent of the refund reserves in
the continuing care retirement community's real estate and the
remaining 15 percent in the form of either cash or an unconditional,
irrevocable letter of credit to be phased in over a two-year period
beginning with initial occupancy in the facility.
(4) Each refund reserve trust fund shall be established at an
institution qualified to be an escrow agent pursuant to an agreement
between the provider and the institution based on this section and
approved in advance by the department.
(5) The amount to be held in the reserve fund shall be the total
of the amounts calculated with respect to each individual resident as
follows:
(A) Determine the age in years and the portion of the entry fee
for the resident refundable for the seventh year of residency and
thereafter.
(B) Determine life expectancy of that individual from the life
expectancy table in paragraph (1) of subdivision (b) of Section
1792.2. If there is a couple, use the life expectancy for the
individual with the longer life expectancy.
(C) For that resident, use an interest rate of 6 percent or lower
to determine from compound interest tables the factor which
represents the amount required today to grow at compound interest to
one dollar ($1) at the end of the period of the life expectancy of
the resident.
(D) Multiply the refundable portion of the resident's entry fee
amount by the factor obtained in subparagraph (C) to determine the
amount of reserve required to be maintained.
(E) The sum of these amounts with respect to each resident shall
constitute the reserve for refundable contracts.
(F) The reserve for refundable contracts will be revised annually
as provided for in subdivision (a), using the interest rate, refund
obligation amount, and individual life expectancies current at that
time.
(6) Withdrawals may be made from the trust fund to pay refunds
when due under the terms of the refundable entry fee contracts and
when the balance in the trust fund exceeds the required refund
reserve amount determined in accordance with paragraph (5) of
subdivision (b).
(7) Deposits shall be made to the trust fund with respect to new
residents when the entry fee is received and in the amount determined
with respect to that resident in accordance with paragraph (5) of
subdivision (b).
(8) Additional deposits shall be made to the trust fund within 30
days of any annual reporting date on which the trust fund balance
falls below the required reserve in accordance with paragraph (5) of
subdivision (b) and such deposits shall be in an amount sufficient to
bring the trust fund balance into compliance with this section.
(c) Any provider which has executed refundable contracts in a
continuing care retirement community prior to January 1, 1996, and
which has not executed refundable contracts in a continuing care
retirement community prior to January 1, 1991, shall submit, for the
department's approval, a method of determining a refund reserve to be
held in trust for the residents. Approved methods include any of
the following:
(1) The establishment, at the time continuing care contracts are
signed, of a reserve fund in trust for the full amount of the refunds
promised.
(2) The purchase from an insurance company, authorized to do
business in the State of California, of fully paid life insurance
policies for the full amount of the refunds promised.
(3) A method approved by the American Academy of Actuaries in
their Actuarial Standards of Practice Relating to Continuing Care
Retirement Communities, which method provides for fully funding the
refund obligations in a separate trust fund as provided in
subdivision (b).
(d) Any provider offering a refundable contract, or other entity
assuming responsibility for refundable contracts prior to January 1,
1991, shall maintain a refund reserve bank account in trust for the
residents as described in subdivision (b) except that the amount of
refund reserves shall be calculated based on the following
assumptions and methods of calculation:
(1) The continuing care retirement community will no longer
receive entry fee income after a period of 40 years following the
commencement of operation.
(2) Approved long-term investments, such as treasury notes, will
earn 3 percent more than the rate of inflation.
(3) Entrance fees will increase at the rate of inflation.
(4) Land values will increase at the rate of inflation.
(5) Investments in the refund reserve trust will increase at the
rate for approved long-term investments.
(6) Calculate the number of units to be resold each year at the
approved rate of turnover.
(7) Determine the mean entrance fee, as of the current date.
(8) Determine the factor for inflating the mean entrance fee at
the rate of 3 percent below the interest rate on new 30-year treasury
bonds, for each year from the current date to the 40th year of
operation, or until all units have been turned over.
(9) Calculate the inflated mean entrance fees for the 40th year
and for each preceding year, until all units have been turned over.
(10) Multiply the inflated mean entrance fee for the 40th year,
and each preceding year, as specified in paragraph (9), by the annual
turnover, as specified in paragraph (6), until the total of the
annual turnovers used in the calculations equals the total number of
units in the continuing care retirement community.
(11) The projected refund liability shall be the sum of the
products obtained pursuant to paragraph (10), multiplied by the rate
of refund for the seventh year of residency, specified by current
continuing care contracts, multiplied by the percentage of current
continuing care contracts which specify this rate of refund. The
projected refund liability amount shall be calculated for each rate,
if existing continuing care contracts specify several rates.
(12) The projected refund liability, or the aggregate of these
liabilities, if several rates are obtained pursuant to paragraph
(11), may be reduced by the value of the land used for the continuing
care retirement community, inflated to the 40th year of operation,
as determined pursuant to paragraph (4), if the provider agrees to a
lien pursuant to Section 1793.15 to secure this commitment.
(13) Calculate the present value of the projected refund liability
at the current rate of interest for new 30-year treasury bonds. The
result is the required refund reserve.
(e) Any entity which holds a certificate of authority, provisional
certificate of authority, or permit to sell deposit subscriptions on
or before September 23, 1986, shall be exempted from the refund
reserve requirement established by this section, if the entity has an
equity balance of five times the amount of the refund reserves
calculated pursuant to subdivision (c).
(1) The equity balance shall be verified by one or more of the
following means:
(A) The "stockholders' equity," or equivalent amount, as reflected
on the most recent Form 10K (which may be on a consolidated basis or
on a consolidated and combined basis) filed with the Securities and
Exchange Commission.
(B) The "total fund balance of net worth," or equivalent amount,
as reflected on Form 990 or Form 990-PF filed with the Internal
Revenue Service.
(C) The "total net worth," or equivalent amount, as reflected on
the most recent Form 109 filed with the Franchise Tax Board.
(2) The amount of the requirement for the equity balance shall be
revised annually pursuant to this section.
(3) Compliance shall be based on review, by the department, of
financial statements prepared in accordance with generally accepted
accounting principles, accompanied by an unqualified opinion by a
certified public accountant.
(4) If the equity balance is determined by the department to be
less than the required amount, the provider or other entity assuming
responsibility shall deposit, in a form satisfactory to the
department, an amount equal to the refund reserve required within 60
days.
(f) All continuing care retirement communities offering refundable
entrance fees that are not secured by cash reserves, except those
facilities that were issued a certificate of authority prior to May
31, 1995, shall clearly disclose this fact in all marketing materials
and continuing care contracts.
SEC. 49. Section 1793.5 of the Health and Safety Code is amended
to read:
1793.5. (a) Any entity that sells deposit subscriptions proposing
to promise to provide care without having a current and valid permit
to sell deposit subscriptions is guilty of a misdemeanor.
(b) Any entity which sells deposit subscriptions and fails to
place any consideration received into an escrow account pursuant to
this chapter is guilty of a misdemeanor.
(c) Any entity which executes a continuing care contract without
holding a current and valid provisional or final certificate of
authority is guilty of a misdemeanor.
(d) Any entity that abandons the continuing care retirement
community or the entity's obligations under a continuing care
contract, pursuant to subdivision (f), is guilty of a misdemeanor.
Any entity in violation of this section shall be liable to the
injured resident for treble the amount of damages assessed in any
civil action brought by or on behalf of the resident in any court
having proper jurisdiction. The court may, in its discretion, award
all costs and attorney fees to the injured resident, if that resident
prevails in the action.
(e) Each violation of subdivision (a), (b), (c), or (d) is subject
to a fine not to exceed ten thousand dollars ($10,000), or by
imprisonment in the county jail for a period not to exceed one year,
or by both the fine and imprisonment.
(f) Any entity that issues, delivers, or publishes, or as manager
or officer or in any other administrative capacity, assists in the
issuance, delivery, or publication of any printed matter, oral
representation, or advertising material which does not conform to the
requirements of this section is guilty of a misdemeanor.
(g) Any violation of subdivision (f) shall constitute cause for
the suspension of all and any licenses, permits, provisional
certificates of authority, and certificates of authority issued to
such entity by any agency of the state.
(h) Any violation under this section shall be an act of unfair
competition as defined in Section 17200 of the Business and
Professions Code.
SEC. 50. Section 1793.6 of the Health and Safety Code is amended
to read:
1793.6. (a) The department may issue citations pursuant to this
section containing orders of abatement and assessing civil penalties
against any entity who violates Section 1771.2 or 1793.5.
(b) If upon inspection or investigation, the department has
probable cause to believe that an entity is violating Section 1771.2
or 1793.5, the department may issue a citation to that entity. Each
citation shall be in writing and shall describe with particularity
the basis of the citation. Each citation shall contain an order of
abatement. In addition to the administrative fines pursuant to
Section 1793.27, a provider in violation of the abatement order shall
be liable for an assessment of a civil penalty in the amount of two
hundred dollars ($200) per day for violation of the abatement order.
(c) The civil penalty authorized in subdivision (b) shall be
imposed if an uncertified facility is operated and the operator
refuses to seek a certificate of authority or the operator seeks a
certificate of authority and the application is denied and the
operator continues to operate the uncertificated facility, unless
other remedies available to the department, including prosecution,
are deemed more effective by the department.
(d) Service of a citation issued under this section may be made by
certified mail at the last known business address or residence
address of the entity cited.
(e) Any entity served with a citation under this section may
appeal to the department in writing within 15 working days after
service of the citation with respect to violations alleged, scope of
the order of abatement, or amount of civil penalty assessed.
(f) If the entity cited fails without good cause to appeal to the
department in writing within 15 business days after service of the
citation, the citation shall become a final order of the department.
The department may extend the 15-day period for good cause, to a
maximum of 15 additional days.
(g) If the entity cited under this section makes a timely appeal
of the citation, the department shall provide an opportunity for a
hearing. The department shall thereafter issue a decision, based on
findings of fact, affirming, modifying, or vacating the citation or
directing other appropriate relief. The proceedings under this
section shall be conducted in accordance with the provisions of
Chapter 5 (commencing with Section 11500) of Part 1 of Division 3 of
Title 2 of the Government Code, and the department shall have all the
powers granted therein.
(h) After exhaustion of the review procedures specified in this
section, the department may apply to the appropriate superior court
for a judgment in the amount of the civil penalty and an order
compelling the cited entity to comply with the order of abatement.
The application, which shall include a certified copy of the final
order of the department shall be served upon the cited entity who
shall have five business days within which to file that entity's
response in writing in the superior court, this period may be
extended for good cause. Failure on the part of the cited entity to
so respond shall constitute grounds for entry of a default judgment
against that entity. In the event a response is timely filed in
superior court, the action shall have priority for trial over all
other civil matters.
(i) Notwithstanding any other provision of law, the department may
waive part or all of the civil penalty if the entity against whom
the civil penalty is assessed satisfactorily completes all the
requirements for, and is issued, a certificate of authority.
(j) Civil penalties recovered pursuant to this section shall be
deposited into the Continuing Care Provider Fee Fund.
SEC. 51. Section 1793.7 of the Health and Safety Code is amended
to read:
1793.7. A permit to sell deposit subscriptions, a provisional
certificate of authority, or a certificate of authority shall be
forfeited by operation of law when any one of the following occurs:
(a) The applicant has notified the department that marketing of
the proposed continuing care retirement community has been
terminated.
(b) The applicant or provider surrenders the permit to sell
deposit subscriptions, provisional certificate of authority, or
certificate of authority to the department.
(c) The applicant or provider sells or otherwise transfers all or
part of the continuing care retirement community.
(d) The applicant or provider transfers stock where the transfer
results in a majority change in ownership of the continuing care
retirement community or the certificate of authority holder.
(e) The applicant or provider moves the continuing care retirement
community from one location to another without the department's
prior approval.
(f) The applicant or provider abandons the continuing care
retirement community or its obligations under the continuing care
contracts.
(g) The applicant or provider is evicted from the continuing care
retirement community premises.
SEC. 52. Section 1793.8 is added to the Health and Safety Code, to
read:
1793.8. A Certificate of Authority shall be automatically
inactivated when a provider voluntarily ceases to enter into
continuing care contracts with new residents. The provider shall
continue to comply with all provisions of this chapter until all
continuing care contractual
obligations have been fulfilled.
SEC. 53. Section 1793.9 of the Health and Safety Code is amended
to read:
1793.9. (a) Obligations pursuant to continuing care contracts
executed by a provider shall be deemed a preferred claim against all
assets owned by the provider in the event of liquidation. However,
this preferred claim shall be subject to any perfected claims secured
by mortgage, deed of trust, pledge, deposit as security, escrow, or
otherwise secured.
(b) In the event of liquidation by the provider, residents who
have executed a refundable continuing care contract shall be deemed
to have a preferred claim to liquid assets held in the refund reserve
fund pursuant to Section 1793. This preferred claim shall be
superior to all other claims from residents without refundable
contracts, or any other creditor. If this fund and any other
available assets are not sufficient to fulfill the refund
obligations, the refund reserve funds shall be distributed to each
resident in a proportionate amount, determined by dividing the amount
of each resident's refund due by the total refunds due and
multiplying that percentage by the total funds available.
(c) For purposes of computing the reserve required pursuant to
Sections 1792.2 and 1793, the liens required under Section 1793.15
shall not be deducted from the value of real or personal property.
SEC. 54. Section 1793.11 of the Health and Safety Code is amended
to read:
1793.11. (a) Any transfer of money or property, pursuant to a
continuing care contract found by the department to be executed in
violation of this chapter, is voidable at the option of the
transferor for a period of 90 days from the execution of the
transfer.
(b) No action may be brought for the reasonable value of any
services rendered between the date of transfer and the date the
transferor disaffirms the continuing care contract.
(c) With respect to real property, the right of disaffirmance or
rescission is conclusively presumed to have terminated if a notice of
intent to rescind is not recorded with the county recorder of the
county in which the real property is located within 90 days from the
date of execution of the conveyance by the transferor.
(d) Any deed or other instrument of conveyance shall contain a
recital that the transaction is made pursuant to rescission by the
transferor within 90 days from the date of the transfer.
(e) Any transfer of a sum of money or property, real or personal,
to anyone pursuant to a continuing care contract that was not
approved by the department is voidable at the option of the
department or transferor or his or her assigns or agents.
(f) Any transaction determined by the department to be in
violation of this chapter is voidable at the option of the transferor
or his or her assigns or agents.
SEC. 55. Section 1793.13 of the Health and Safety Code is amended
to read:
1793.13. (a) In either of the following situations the department
may require the provider to submit within 60 days a financial plan
detailing the method by which the provider proposes to overcome the
deficiencies noted by the department.
(1) If a provider fails to file an annual report as required by
Section 1790.
(2) At any other time when the department has reason to believe
that the provider is insolvent, is in imminent danger of becoming
insolvent, is in a financially unsound or unsafe condition, or that
its condition is such that it may otherwise be unable to fully
perform its obligations pursuant to continuing care contracts.
(b) The department shall approve or disapprove the plan within 30
days of its receipt.
(c) If the plan is approved, the provider shall immediately
implement the plan.
(d) If the plan is disapproved, or if it is determined that the
plan is not being fully implemented, the department may, after
consultation with and upon consideration of the recommendations of
the Continuing Care Contracts Committee, require the provider to
obtain new or additional management capability to solve its
difficulties. A reasonable period, as determined by the department,
shall be allowed to the reorganized management to develop a plan
which, subject to the approval of the department and after review by
the committee, will reasonably assure that the provider will meet its
responsibilities under the law.
SEC. 56. Section 1793.15 of the Health and Safety Code is amended
to read:
1793.15. (a) When necessary to secure the performance of all
obligations of the applicant or provider to transferors, the
department may record a notice or notices of lien on behalf of the
transferors. From the date of recording, the lien shall attach to
all real property owned or acquired by the provider during the
pendency of the lien, provided such property is not exempt from the
execution of a lien and is located within the county in which the
lien is recorded. The lien shall have the force, effect, and
priority of a judgment lien.
(b) The department shall file a release of the lien if the
department deems the lien no longer necessary to secure the
performance of all obligations of the applicant or provider to the
transferors.
(c) The applicant or provider may appeal to the department from a
refusal of a request for a release of the lien.
(d) The decision shall be subject to court review pursuant to
Section 1094.5 of the Code of Civil Procedure, upon petition of the
applicant or provider filed within 30 days of service of the
decision.
SEC. 57. Section 1793.17 of the Health and Safety Code is amended
to read:
1793.17. (a) When necessary to secure the interests of
transferors, the department may require that the applicant or
provider reestablish an escrow account, return previously released
moneys to escrow, and escrow all future entrance fee payments.
(b) The department may release funds from escrow when it deems the
escrow is no longer necessary to secure the performance of all
obligations of the applicant or provider to the transferors.
SEC. 58. Section 1793.19 of the Health and Safety Code is amended
to read:
1793.19. The civil, criminal, and administrative remedies
available to the department pursuant to this article are not
exclusive and may be sought and employed in any combination deemed
advisable by the department to enforce this chapter.
SEC. 59. Section 1793.21 of the Health and Safety Code is amended
to read:
1793.21. The department, in its discretion, may condition,
suspend, or revoke any permit to sell deposit subscriptions,
provisional certificate of authority, or certificate of authority
issued under this chapter if it finds any one or more of the
following:
(a) Violation by the provider of this chapter or the rules and
regulations adopted under this chapter.
(b) Aiding, abetting, or permitting the violation of this chapter
or the rules and regulations adopted under this chapter.
(c) Suspension or revocation of the license of the provider
pursuant to the licensing provisions of Chapter 2 (commencing with
Section 1250) or Chapter 3.2 (commencing with Section 1569).
(d) Material misstatement, misrepresentation, or fraud in
obtaining the permit to sell deposit subscriptions, provisional
certificate of authority, or certificate of authority.
(e) Demonstrated lack of fitness or trustworthiness.
(f) Fraudulent or dishonest practices of management in the conduct
of business.
(g) Misappropriation, conversion, or withholding of moneys.
(h) Refusal by the provider to be examined or to produce its
accounts, records, and files for examination, or refusal by any of
its officers to give information with respect to its affairs or to
perform any other legal obligations as to such examination, when
required by the department.
(i) The provider's unsound financial condition or use of such
methods and practices in the conduct of business as to render further
transactions by the provider hazardous or injurious to the public.
(j) Failure to maintain at all times at least the minimum
statutory reserves required by Section 1792.2.
(k) Failure to maintain the reserve fund escrow account for
prepaid continuing care contracts required by Section 1792.
(l) Failure to comply with the refund reserve requirements of
Section 1793.
(m) Failure by the provider to maintain escrow accounts for funds
as required by this chapter.
(n) Failure to file an annual report as required by Section 1790.
(o) Violation of a condition on a certificate.
(p) Failure to comply with its approved financial and marketing
plan, or secure approval of a modified plan.
(q) A material change or deviation from the approved plan of
operation without the prior consent of the department.
(r) Failure by the provider to fulfill its obligations under
continuing care contracts.
(s) Material misrepresentations to prospective residents, or
residents of, a continuing care retirement community.
(t) Failure by the provider to submit proposed changes to
continuing care contracts prior to use, or execution of a continuing
care contract that has not been previously approved by the
department.
(u) Failure by the provider to diligently submit materials
required by the statute.
SEC. 60. Section 1793.23 of the Health and Safety Code is amended
to read:
1793.23. (a) The department shall consult with and consider the
recommendations of the Continuing Care Contracts Committee prior to
conditioning, suspending, or revoking any permit to sell deposit
subscriptions, provisional certificate of authority, or certificate
of authority.
(b) The provider shall have a right of appeal to the department.
The proceedings shall be conducted in accordance with Chapter 5
(commencing with Section 11500) of Part 1 of Division 3 of Title 2 of
the Government Code, and the department shall have all of the powers
granted therein. A suspension, condition, or revocation shall
remain in effect until completion of the proceedings in favor of the
provider. In all proceedings conducted in accordance with this
section, the standard of proof to be applied shall be by a
preponderance of the evidence.
(c) The department may, upon finding of changed circumstances,
remove a suspension or condition.
SEC. 61. Section 1793.25 of the Health and Safety Code is amended
to read:
1793.25. (a) During the period that the revocation or suspension
action is pending against the permit to sell deposit subscriptions,
provisional certificate of authority, or certificate of authority,
the provider shall not enter into any new continuing care contracts
or deposit subscription agreements.
(b) The suspension or revocation by the department, or voluntary
return of the provisional certificate of authority or certificate of
authority by the provider, shall not release the provider from
obligations assumed at the time the continuing care contracts were
executed.
SEC. 62. Section 1793.27 of the Health and Safety Code is amended
to read:
1793.27. (a) If the department finds that one or more grounds
exist for the discretionary condition, revocation, or suspension of a
permit to sell deposit subscriptions, provisional certificate of
authority, or a certificate of authority issued under this chapter,
the department, in lieu of the condition, revocation, or suspension,
may impose a administrative fine upon the provider in an amount not
to exceed one thousand dollars ($1,000) per violation.
(b) The administrative fine shall be deposited in the Continuing
Care Provider Fee Fund and shall be disbursed for the specific
purposes of offsetting the costs of investigation and litigation and
to compensate court-appointed administrators when continuing care
retirement community assets are insufficient.
SEC. 63. Section 1793.29 of the Health and Safety Code is amended
to read:
1793.29. In the case of any violation or threatened violation of
this chapter, the department may institute a proceeding or may
request the Attorney General to institute a proceeding to obtain
injunctive or other equitable relief in the superior court in and for
the county in which the violation occurs, or in which the principal
place of business of the provider is located. The proceeding under
this section shall conform with the requirements of Chapter 3
(commencing with Section 525) of Title 7 of Part 2 of the Code of
Civil Procedure, except that no undertaking shall be required of the
department in any action commenced under this section, nor shall the
department be required to allege facts necessary to show lack of
adequate remedy at law, or to show irreparable loss or damage.
SEC. 64. Section 1793.31 of the Health and Safety Code is amended
to read:
1793.31. (a) The district attorney of every county may, upon
application by the department or its authorized representative,
institute and conduct the prosecution of any action for violation of
this chapter within his or her county.
(b) This chapter shall not limit or qualify the powers of the
district attorney to institute and conduct the prosecution of any
action brought for the violation within his or her county of this
chapter or any other provision of law, including, but not limited to,
actions for fraud or misrepresentation.
(c) The department shall provide access to any records in its
control on request of a district attorney and shall cooperate in any
investigation by a district attorney.
SEC. 65. Section 1793.50 of the Health and Safety Code is amended
to read:
1793.50. (a) The department, after consultation with the
Continuing Care Contracts Committee, may petition the superior court
for an order appointing a qualified administrator to operate a
continuing care retirement community, and thereby mitigate crisis
situations wherein elderly residents are left without means for their
support or moved without proper preparation, in any of the following
circumstances:
(1) The provider is insolvent or in imminent danger of becoming
insolvent.
(2) The provider is in a financially unsound or unsafe condition.
(3) The provider has failed to establish or has substantially
depleted the reserves required by this chapter.
(4) A plan, as specified in Section 1793.13, has not been approved
by the department or the provider has failed to implement the plan
approved by the department.
(5) The provider is unable to fully perform its obligations
pursuant to continuing care contracts.
(6) The residents are otherwise placed in serious jeopardy.
(b) The administrator may only assume the operation of the
continuing care retirement community in order to either rehabilitate
the provider to enable it fully to perform its continuing care
contract obligations, implement a plan of reorganization acceptable
to the department, facilitate the transition if another provider
assumes continuing care contract obligations, or facilitate an
orderly liquidation of the provider.
(c) With each petition, the department shall include a request for
a temporary restraining order to prevent the provider from disposing
of or transferring assets pending the hearing on the petition.
(d) The provider shall be served with a copy of the petition,
together with an order to appear and show cause why management and
possession of the provider's continuing care retirement community or
assets should not be vested in an administrator.
(e) The order to show cause shall specify a hearing date, which
shall be not less than five nor more than 10 days following service
of the petition and order to show cause on the provider.
(f) Petitions to appoint an administrator shall have precedence
over all matters, except criminal matters, in the court.
(g) At the time of the hearing, the department shall advise the
provider and the court of the name of the proposed administrator.
(h) If, at the conclusion of the hearing, including such oral
evidence as the court shall consider, the court finds that any of the
circumstances specified in subdivision (a) exist, the court shall
issue an order appointing an administrator to take possession of the
property of the provider and to conduct the business thereof,
enjoining the provider from interfering with the administrator in the
conduct of the rehabilitation, and directing the administrator to
take steps toward removal of the causes and conditions which have
made rehabilitation necessary, as the court may direct.
(i) The order shall include a provision directing the issuance of
a notice of the rehabilitation proceedings to the residents at the
continuing care retirement community and to other interested persons
as the court shall direct.
(j) The court may permit the provider to participate in the
continued operation of the continuing care retirement community
during the pendency of any appointments ordered pursuant to this
section and shall specify in the order the nature and scope of the
participation.
(k) The court shall retain jurisdiction throughout the
rehabilitation proceeding and may issue further orders as it deems
necessary to accomplish the rehabilitation or orderly liquidation of
the continuing care retirement community in order to protect the
residents of the continuing care retirement community.
SEC. 66. Section 1793.52 of the Health and Safety Code is amended
to read:
1793.52. The court-appointed administrator shall immediately
notify the residents of that appointment and of the status of the
continuing care retirement community management.
SEC. 67. Section 1793.54 of the Health and Safety Code is amended
to read:
1793.54. If an administrator is appointed to rehabilitate a
provider, the administrator may do any of the following:
(a) Take possession of and preserve, protect and recover any
assets, books, records, or property of the provider, including, but
not limited to, claims or causes of action belonging to, or which may
be asserted by, the provider.
(b) Deal with the property in the administrator's name in the
capacity as administrator, and purchase at any sale any real estate
or other asset upon which the provider may hold any lien or
encumbrance or in which the provider may have an interest.
(c) File, prosecute, and defend or compromise any suit or suits
which have been filed, or which may thereafter be filed, by or
against the provider as necessary to protect the provider or the
residents or any property affected thereby.
(d) Deposit and invest any of the provider's available funds.
(e) Pay all expenses of the rehabilitation.
(f) Perform all duties of the provider in the provision of care
and services to residents in the continuing care retirement community
at the time the administrator takes possession.
(g) Facilitate the orderly transfer of residents should the
provider ultimately fail.
(h) Exercise any other powers and duties as may be authorized by
law or provided by order of the court.
SEC. 68. Section 1793.56 of the Health and Safety Code is amended
to read:
1793.56. (a) Reasonable compensation shall be paid to the
administrator appointed.
(b) Costs for the compensation shall be levied against the assets
of the provider. When facility assets are insufficient, the
department, in its discretion, may compensate the administrator from
funds available from the Continuing Care Provider Fee Fund.
(c) Any individual appointed administrator, pursuant to Section
1793.50, shall be held harmless for any negligence in the performance
of his or her duties and shall be indemnified by the provider for
costs of defending actions brought against him or her in his or her
capacity as administrator.
SEC. 69. Section 1793.58 of the Health and Safety Code is amended
to read:
1793.58. (a) The department, administrator, or any interested
person, upon due notice to the administrator, at any time, may apply
to the court for an order terminating the rehabilitation proceedings
and permitting the provider to resume possession of the provider's
property and the conduct of the provider's business.
(b) No order shall be granted pursuant to subdivision (a) except
when, after a full hearing, the court has determined that the
purposes of the proceeding have been fully and successfully
accomplished and that the continuing care retirement community can be
returned to the provider's management without further jeopardy to
the residents of the continuing care retirement community, creditors,
owners of the continuing care retirement community, and to the
public.
(c) An order terminating the rehabilitation proceeding shall be
based upon a full report and accounting by the administrator of the
conduct of the provider's officers, employees, and business during
the rehabilitation and of the provider's current financial condition.
(d) Upon issuance of an order terminating the rehabilitation, the
department shall reinstate the provisional or final certificate of
authority and may condition, suspend, or revoke the reinstated
certificate only upon a change in the conditions at the time of the
order or a determination of facts which, if such facts had been known
at the time of the order, the court would not have entered the order
as determined by the department.
SEC. 70. Section 1793.60 of the Health and Safety Code is amended
to read:
1793.60. (a) If at any time the department determines that
further efforts to rehabilitate the provider would not be in the best
interest of the residents or prospective residents, or would not be
economically feasible, the director may, with the approval of the
Continuing Care Contracts Committee, apply to the court for an order
of liquidation and dissolution or may apply for other appropriate
relief for dissolving the property and bringing to conclusion its
business affairs.
(b) Upon issuance of an order directing the liquidation or
dissolution of the provider, the department shall revoke the provider'
s provisional or final certificate of authority.
SEC. 71. Section 1793.62 of the Health and Safety Code is amended
to read:
1793.62. (a) The department, administrator, or any interested
person, upon due notice to the parties, may petition the court for an
order terminating the rehabilitation proceedings when the
rehabilitation efforts have not been successful, the continuing care
retirement community has been sold at foreclosure sale, the provider
has been declared bankrupt, or the provider has otherwise been shown
to be unable to perform its obligations under the continuing care
contracts.
(b) No order shall be granted unless all of the following have
occurred:
(1) There has been a full hearing and the court has determined
that the provider is unable to perform its contractual obligations.
(2) The administrator has given the court a full and complete
report and financial accounting signed by the administrator as being
a full and complete report and accounting.
(3) The court has determined that the residents of the continuing
care retirement community have been protected to the extent possible
and has made such orders in this regard as the court deems proper.
SEC. 72. No reimbursement is required by this act pursuant to
Section 6 of Article XIIIB of the California Constitution because the
only costs that may be incurred by a local agency or school district
will be incurred because this act creates a new crime or infraction,
eliminates a crime or infraction, or changes the penalty for a crime
or infraction, within the meaning of Section 17556 of the Government
Code, or changes the definition of a crime within the meaning of
Section 6 of Article XIIIB of the California Constitution.
Notwithstanding Section 17580 of the Government Code, unless
otherwise specified, the provisions of this act shall become
operative on the same date that the act takes effect pursuant to the
California Constitution.