text:
(a) The Legislature finds and declares all of the following:

(1) The residents of continuing care retirement communities have a unique and valuable perspective on the operations of, and services provided in, the community in which they live.

(2) Resident input into decisions made by the provider is an important factor in creating an environment of cooperation, reducing conflict, and ensuring timely response and resolution to issues that may arise.

(3) Continuing care retirement communities are strengthened when residents know that their views are heard and respected.

(b) The Legislature encourages continuing care retirement communities to exceed the minimum resident participation requirements established by this section by, among other things, the following:

(1) Encouraging residents to form a resident association, and assisting the residents, the resident association, and its governing body to keep informed about the operation of the continuing care retirement community.

(2) Encouraging residents of a continuing care retirement community or their elected representatives to select residents to participate as members of the governing body of the provider.

(3) Quickly and fairly resolving any dispute, claim, or grievance arising between a resident and the continuing care retirement community.

(c) The governing body of a provider, or the designated representative of the provider, shall hold, at a minimum, semiannual meetings with the residents of the continuing care retirement community, or the resident association or its governing body, for the purpose of the free discussion of subjects including, but not limited to, income, expenditures, and financial trends and issues as they apply to the continuing care retirement community and proposed changes in policies, programs, and services. This section does not preclude a provider from taking action or making a decision at any time, without regard to the meetings required under this subdivision.

(d) At least 30 days prior to the implementation of an increase in the monthly care fee, the designated representative of the provider shall convene a meeting, to which all residents shall be invited, for the purpose of discussing the reasons for the increase, the basis for determining the amount of the increase, and the data used for calculating the increase. This meeting may coincide with the semiannual meetings required in subdivision (c). At least 14 days prior to the meeting to discuss an increase in the monthly care fee, the provider shall make available to each resident or resident household comparative data showing the budget for the upcoming year, the current year’s budget, and actual and projected expenses for the current year, and a copy shall be posted in a conspicuous location at each facility.

(e) The governing body of a provider or the designated representative of the provider shall provide residents with at least 14 days’ advance notice of each meeting provided for in subdivisions (c) and (d), and shall permit residents attending the meeting to present issues orally and in writing. The governing body of a provider or the designated representative of the provider shall post the notice of, and the agenda for, the meeting in a conspicuous place in the continuing care retirement community at least 14 days prior to the meeting. The governing body of a provider or the designated representative of the provider shall make available to residents of the continuing care retirement community upon request the agenda and accompanying materials at least seven days prior to the meeting.

(f) A provider shall make available to the resident association or its governing body, or if neither exists, to a committee of residents, a financial statement of activities for that facility comparing actual costs to budgeted costs broken down by expense category, not less than quarterly, with a written explanation of all significant budget variances, and shall consult with the resident association or its governing body, or, if neither exists, with a committee of residents, during the annual budget planning process. The effectiveness of consultations during the annual budget planning process shall be evaluated at a minimum every two years by the continuing care retirement community administration. The evaluation, including any policies adopted relating to cooperation with residents, shall be made available to the resident association or its governing body, or, if neither exists, to a committee of residents at least 14 days prior to the next semiannual meeting of residents and the provider’s governing body provided for in subdivision (c), and a copy of the evaluation shall be posted in a conspicuous location at each facility.

(g) A provider shall, within 10 days after the annual report required pursuant to Section 1790 is submitted to the department, provide, at a central and conspicuous location in the community and in a conspicuous location on the provider’s Internet Web site, a copy of the annual report, including the multifacility statement of activities and a copy of the annual audited financial statement, but excluding personal confidential information.

(h) A provider shall maintain, as public information, available upon request to residents, prospective residents, and the public, minutes of the meetings held by the provider’s governing body and shall retain these records for at least three years from the date the records were filed or issued.

(i) Except as provided in subdivision (s), the governing body of a provider that is not part of a multifacility organization with more than one continuing care retirement community in the state shall accept both of the following:

(1) At least one resident of the continuing care retirement community it operates to participate as a nonvoting resident representative to the provider’s governing body.

(2) At least one resident, or two residents for a governing body with 21 or more members, of the continuing care retirement community it operates to participate as a voting member of the provider’s governing body. A provider’s governing body shall not be required to meet the requirements of this paragraph until there is a vacancy on the provider’s governing body or upon the next regularly scheduled selection of the provider’s governing body occurring on or after January 1, 2015. A resident member shall perform his or her duties in a manner that complies with the standards of conduct and fiduciary duties of all other members of the governing board.

(j) Except as provided in subdivision (s), in a multifacility organization having more than one continuing care retirement community in the state, the governing body of the multifacility organization shall do both of the following:

(1) Elect either to have at least one nonvoting resident representative to the provider’s governing body for each California-based continuing care retirement community the provider operates or to have a resident-elected committee composed of representatives of the residents of each California-based continuing care retirement community that the provider operates select or nominate at least one nonvoting resident representative to the provider’s governing body for every three California-based continuing care retirement communities, or fraction thereof, that the provider operates. If a multifacility organization elects to have one representative for every three communities that the provider operates, the provider shall provide to the president of the residents association of each of the communities that do not have a resident representative the same notice of meetings, packets, minutes, and other materials as the resident representative. At the reasonable discretion of the provider, information related to litigation, personnel, competitive advantage, or confidential information that is not appropriate to disclose, may be withheld.

(2) (A) Elect to have at least one resident, or two residents for a governing body with 21 or more members, from any of the continuing care retirement communities it operates to participate as voting members of the provider’s governing body. A provider’s governing body shall not be required to meet the requirements of this subparagraph until there is a vacancy on the provider’s governing body or upon the next regularly scheduled selection of the provider’s governing body occurring on or after January 1, 2015. A resident member shall perform his or her duties in a manner that complies with the standards of conduct and fiduciary duties of all other members of the governing board.

(B) If there are communities that do not have a resident from the community as a voting member of the provider’s governing body, the provider shall provide to the president of the resident association of each of those communities the same notice of meetings, packets, minutes, and other materials as the resident voting members. At the reasonable discretion of the provider, information related to litigation, personnel, competitive advantage, or confidential information that is not appropriate to disclose may be withheld.

(k) In order to encourage innovative and alternative models of resident involvement, residents selected pursuant to paragraph (1) of subdivision (i) or paragraph (1) of subdivision (j) to participate as a resident representative to the provider’s governing body may, at the option of the resident association, be selected in any one of the following ways:

(1) By a majority vote of the resident association of a provider or by a majority vote of a resident-elected committee of residents of a multifacility organization.

(2) If no resident association exists, any resident may organize a meeting of the majority of the residents of the continuing care retirement community to select or nominate residents to represent them on the governing body.

(3) Any other method designated by the resident association.

(l) A resident member of the provider’s governing body selected pursuant to paragraph (2) of subdivision (i) or paragraph (2) of subdivision (j) shall be nominated to participate on the provider’s governing body by the resident association or, if a resident association does not exist, a committee of residents. The resident association or committee of residents may nominate multiple nominees from which the provider’s governing body may approve a resident member. If the governing body disapproves of the resident association’s nominations, the resident association or the committee of residents shall nominate additional resident members for the governing body’s approval or disapproval until the vacancy is filled.

(m) The resident association, organizing resident, or, in the case of a multifacility organization, the resident-elected committee of residents, shall give residents of the continuing care retirement community at least 30 days’ advance notice of the meeting to select a resident representative and resident members of the governing body and shall post the notice in a conspicuous place at the continuing care retirement community.

(n) (1) Except as provided in subdivision (o), resident representatives shall receive the same notice of meetings, packets, minutes, and other materials as members of the provider’s governing body and shall be permitted to attend, speak, and participate in all meetings of the governing body.

(2) Resident representatives may share information from meetings with other residents, unless the information is confidential or doing so would violate fiduciary duties to the provider. A resident representative shall be permitted to attend meetings of the governing body committee or committees that review the annual budget of the facility or facilities and recommend increases in monthly care fees. The resident representative shall receive the same notice of meetings, information, packets, minutes, and other materials as committee members, and shall be permitted to attend, speak, and participate in the committee meetings. Resident representatives shall perform their duties in good faith and with such care, including reasonable inquiry, as an ordinarily prudent person in a like position would use under similar circumstances.

(o) Notwithstanding subdivision (n), the provider’s governing body may exclude resident representatives from its executive sessions and from receiving meeting materials to be discussed during executive session. However, resident representatives shall be included in executive sessions and shall receive all meeting materials to be discussed during executive sessions related to discussions of the annual budgets, increases in monthly care fees, indebtedness, and expansion of new and existing continuing care retirement communities.

(p) The provider shall pay all reasonable travel costs for resident representatives and resident members of the governing body.

(q) The provider shall disclose in writing the extent of resident involvement with the governing body to prospective residents.

(r) A provider is not prohibited from exceeding the minimum resident participation requirements of this section by, for example, having more resident meetings, more resident representatives or resident members of the governing body to the provider’s governing body than required, or by having one or more residents on the provider’s governing body who are selected with the active involvement of residents.

(s) (1) If a provider having at least one continuing care retirement community in the state does not have a governing body within the state, the provider shall, in lieu of appointing a voting member pursuant to subdivision (i) or (j), appoint a select committee of its governing body members to meet pursuant to paragraph (6) of subdivision (a) of Section 307 of the Corporations Code, or in a location that has been designated in the notice of the meeting, with the resident association or a resident-elected committee of residents no less frequently than a reasonable period prior to any regularly scheduled meeting of the governing body at each of its facilities in the state to address concerns of the residents and to ensure that the opinions of the residents are relayed to all governing body members of the provider.

(2) (A) For a provider that is a sole proprietorship, general partnership, limited partnership, limited liability company, or a closely held corporation, the provider may, in lieu of appointing a voting member pursuant to paragraph (2) of subdivision (i) or paragraph (2) of subdivision (j), appoint a select committee of its members to, or, if it is a sole proprietorship, the sole proprietor shall, meet in a location that has been designated in the notice of the meeting with the resident association or a resident-elected committee of residents at each of its facilities semiannually and at least 60 days prior to any financial or administrative changes, including, but not limited to, any proposed increase in monthly fees, indebtedness of the provider, expansion or contraction of the community facility, or other changes that would result in a budget variance, or any policies, programs, or services that would materially change the operation or environment of the community, to address concerns of the residents and to ensure that the opinions of the residents are relayed to all members of the provider.

(B) If any member of a limited liability company is a corporation, a nonvoting resident representative elected pursuant to paragraph (1) of subdivision (i) or paragraph (1) of subdivision (j) shall be invited to the meetings of the governing body of that corporation that address any of the proposed changes specified in subparagraph (A) and shall be permitted to address those proposed changes. The governing body of the corporation shall provide the nonvoting resident representative with at least 30 days’ advance notice of the meeting. If more than one member of the limited liability company is a corporation, only the corporation with the largest interest in the limited liability company shall comply with this subparagraph.

history: (History: Amended by Stats. 2014, Ch. 699, Sec. 1. (AB 1751) Effective January 1, 2015.)

article: 1. General Provisions


kind: section

code: HSC

text: Each provider shall adopt a comprehensive disaster preparedness plan specifying policies for evacuation, relocation, continued services, reconstruction, organizational structure, insurance coverage, resident education, and plant replacement.

history: (History: Added by renumbering Section 1771.11 by Stats. 2000, Ch. 820, Sec. 15. Effective January 1, 2001.)

division: 2. LICENSING PROVISIONS

chapter: 10. Continuing Care Contracts

article: 1. General Provisions

path: 2. LICENSING PROVISIONS > 10. Continuing Care Contracts > 1. General Provisions


citation: HSC § 1772

text:
(a) No report, circular, public announcement, certificate, financial statement, or any other printed matter or advertising material, or oral representation, that states or implies that an entity sponsors, guarantees, or assures the performance of any continuing care contract, shall be published or presented to any prospective resident unless both of the following have been met:

(1) Paragraph (5) of subdivision (a) of Section 1788 applies and the requirements of that paragraph have been satisfied.

(2) The entity files with the department a duly authorized and executed written declaration that it accepts full financial responsibility for each continuing care contract. The filing entity shall be subject to the application requirements set forth in Article 2 (commencing with Section 1779), shall be a coobligor for the subject contracts, and shall be a coprovider on the applicable provisional certificate of authority and certificate of authority.

(b) Implied sponsorship includes the use of the entity’s name for the purpose of implying that the entity’s reputation may be relied upon to ensure the performance of the continuing care contract.

(c) Any implication that the entity may be financially responsible for these contracts may be rebutted by a conspicuous statement, in all continuing care contracts and marketing materials, that clearly discloses to prospective residents and all transferors that the entity is not financially responsible.

(d) 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 discloses to prospective residents and all transferors that the affinity group entity is not financially responsible.

(e) If the name of an 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 continuing care retirement community, the provider shall clearly disclose the absence of that affiliation, involvement, or association with the continuing care retirement community in the continuing care contract.

history: (History: Amended by Stats. 2000, Ch. 820, Sec. 16. Effective January 1, 2001.)

article: 1. General Provisions


text:
(a) All printed advertising materials, including brochures, circulars, public announcements, and similar publications pertaining to continuing care or a continuing care retirement community shall specify the number on the provider’s provisional certificate of authority or certificate of authority.

(b) If the provider has not been issued a certificate of authority, all advertising materials shall specify both of the following:

(1) Whether an application has been filed.

(2) If applicable, that a permit to accept deposits or a provisional certificate of authority has been issued.

history: (History: Added by Stats. 2000, Ch. 820, Sec. 17. Effective January 1, 2001.)

article: 1. General Provisions


citation: HSC § 1773

text:
(a) A provisional certificate of authority or certificate of authority may not be sold, transferred, or exchanged in any manner. A provider may not sell or transfer ownership of the continuing care retirement community without the approval of the department. Any violation of this section shall cause the applicable provisional certificate of authority or certificate of authority to be forfeited by operation of law pursuant to subdivision (c) of Section 1793.7.

(b) A provider may not enter into a contract with a third party for overall management of the continuing care retirement community without the approval of the department. The department shall review the transaction for consistency with this chapter.

(c) Any violation of this section shall be grounds for revocation for the provider’s provisional certificate of authority or certificate of authority under Section 1793.21.

history: (History: Amended by Stats. 2000, Ch. 820, Sec. 18. Effective January 1, 2001.)

article: 1. General Provisions


citation: HSC § 1774

text: No arrangement allowed by a permit to accept deposits, a provisional certificate or authority, or a certificate of authority issued by the department under this chapter may be deemed a security for any purpose.

history: (History: Amended by Stats. 2000, Ch. 820, Sec. 19. Effective January 1, 2001.)

article: 1. General Provisions


citation: HSC § 1775

text:
(a) To the extent that this chapter, as interpreted by the department, conflicts with the statutes, regulations, or interpretations governing the sale or hire of real property, this chapter shall prevail.

(b) Notwithstanding any law or regulation to the contrary, a provider for a continuing care retirement community may restrict or abridge the right of any resident, whether or not the resident 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. The provider shall record any restrictions on a real property interest.

(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 promising to provide, proposing to promise to provide, or providing continuing care.

(e) This chapter shall be liberally construed for the protection of persons attempting to obtain or receiving continuing care.

(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.

history: (History: Amended by Stats. 2000, Ch. 820, Sec. 20. Effective January 1, 2001.)

article: 1. General Provisions


citation: HSC § 1776

text: The department shall adopt, amend, or repeal, in accordance with Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code, reasonable regulations as may be necessary or proper to carry out the purposes and intent of this chapter and to protect the rights of the elderly.

history: (History: Repealed and added by Stats. 1990, Ch. 875, Sec. 2.)

article: 1. General Provisions


text: 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.

history: (History: Amended by Stats. 1995, Ch. 920, Sec. 10. Effective January 1, 1996.)

article: 1. General Provisions


text:
(a) The Continuing Care Contracts Branch of the department shall enter and review each continuing care retirement community in the state at least once every three years to augment the branch’s assessment of the provider’s financial soundness.

(b) During its facility visits, the branch shall consider the condition of the facility, whether the facility is operating in compliance with applicable state law, and whether the provider is performing the services it has specified in its continuing care contracts.

(c) The branch shall issue guidelines that require each provider to adopt a comprehensive disaster preparedness plan, update that plan at least every three years, submit a copy to the department, and make copies available to residents in a prominent location in each continuing care retirement community facility.

(d) (1) The branch shall respond within 15 business days to residents’ rights, service-related, and financially related complaints by residents, and shall furnish to residents upon request and within 15 business days any document or report filed with the department by a continuing care provider, except documents protected by privacy laws.

(2) The provider shall disclose any citation issued by the department pursuant to Section 1793.6 in its disclosure statement to residents as updated annually, and shall post a notice of the citation in a conspicuous location in the facility. The notice shall include a statement indicating that residents may obtain additional information regarding the citation from the provider and the department.

history: (History: Amended by Stats. 2011, Ch. 32, Sec. 7. (AB 106) Effective June 29, 2011. Operative January 1, 2012, by Sec. 73 of Stats. 2011, Ch. 32.)

article: 1. General Provisions


text: The department may contract with any entity to provide consultation services. In providing the services, the entity shall conform to the requirements of this chapter and to the rules, regulations, and standards of the department. The department shall reimburse an entity for services performed pursuant to this section.

history: (History: Added by Stats. 1990, Ch. 875, Sec. 2.)

article: 1. General Provisions


text:
(a) Pursuant to the California Public Records Act (Division 10 (commencing with Section 7920.000) of Title 1 of the Government Code) and the Information Practices Act of 1977 (Chapter 1 (commencing with Section 1798) of Title 1.8 of Part 4 of Division 3 of the Civil Code), the following documents are public information and shall be provided by the department upon request: audited financial statements, annual reports and accompanying documents, compliance or noncompliance with reserve requirements, whether an application for a permit to accept deposits and certificate of authority has been filed, whether a permit or certificate has been granted or denied, and the type of care offered by the provider.

(b) The department shall regard resident data used in the calculation of reserves as confidential.

history: (History: Amended by Stats. 2021, Ch. 615, Sec. 236. (AB 474) Effective January 1, 2022. Operative January 1, 2023, pursuant to Sec. 463 of Stats. 2021, Ch. 615.)

article: 1. General Provisions


citation: HSC § 1778

text:
(a) There is hereby created in the State Treasury a fund that shall be known as the CCRC Oversight Fund. The fund shall consist of fees received by the department pursuant to this chapter. Notwithstanding Section 13340 of the Government Code, the CCRC Oversight 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, including, but not limited to, the following:

(A) A Continuing Care Contracts Program Manager at a level consistent with other management classifications that direct a regulatory program with statewide impact. The position shall require 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.

(B) A 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.

(C) A financial analyst with working knowledge of generally accepted accounting principles and auditing standards.

(D) Other appropriate analytical and technical support positions.

(2) Contracts with technically qualified persons, including, but not 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) As needed, the department shall adjust the calculations for the application fees under Section 1779.2 and annual fees under Section 1791 to ensure that the balance in the CCRC Oversight Fund is adequate to fund the reasonable regulatory costs of the program, as specified in subdivision (b). If the balance in the CCRC Oversight Fund exceeds an amount adequate to fund the reasonable regulatory costs of the program, as specified in subdivision (b), 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. A link to the approved budget for the Continuing Care Contracts Section shall be posted on the department’s internet website.

(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.

history: (History: Amended by Stats. 2022, Ch. 538, Sec. 1. (SB 707) Effective January 1, 2023.)

article: 1. General Provisions


citation: HSC § 1779

text:
(a) An entity shall file an application for a permit to accept deposits and for a certificate of authority with the department, as set forth in this chapter, before doing any of the following:

(1) Accepting any deposit, reservation fee, or any other payment that is related to a promise or proposal to promise to provide continuing care.

(2) Entering into any reservation agreement, deposit agreement, or continuing care contract.

(3) Commencing construction of a prospective continuing care retirement community. If the project is to be constructed in phases, the application shall include all planned phases.

(4) Expanding an existing continuing care retirement community whether by converting existing buildings or by new construction.

(5) Converting an existing structure to a continuing care retirement community.

(6) Recommencing marketing on a planned continuing care retirement community when the applicant has previously forfeited a permit to accept deposits pursuant to Section 1703.7.

(7) Executing new continuing care contracts after a provisional certificate of authority or certificate of authority has been inactivated, revoked, surrendered, or forfeited.

(8) Closing the sale or transfer of a continuing care retirement community or assuming responsibility for continuing care contracts.

(b) For purposes of paragraph (4) of subdivision (a), an expansion of a continuing care retirement community shall be deemed to occur when there is an increase in the capacity stated on the residential care facility for the elderly license issued to the continuing care retirement community, 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 may affect obligations to current residents.

(c) Any provider that alters, or proposes to alter, its organization, including by means of a change in the type of entity it is, separation from another entity, merger, affiliation, spinoff, or sale, shall file a new application and obtain a new certificate of authority before the new entity may enter into any new continuing care contracts.

(d) A new application shall not be 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 in writing of the name change and shall return the previously issued certificate of authority for reissuance under the new name.

(e) Within 10 days of submitting an application for a certificate of authority pursuant to paragraph (3), (4), (7), or (8) of subdivision (a), the provider shall notify residents of the provider’s existing community or communities of its application. The provider shall notify its resident associations of any filing with the department to obtain new financing, additional financing for a continuing care retirement community, the sale or transfer of a continuing care retirement community, any change in structure, and of any applications to the department for any expansion of a continuing care retirement community. A summary of the plans and application shall be posted in a prominent location in the continuing care retirement community so as to be accessible to all residents and the general public, indicating in the summary where the full plans and application may be inspected in the continuing care retirement community.

(f) When the department determines that it has sufficient information on the provider or determines that the provisions do not apply and the protections provided by this article are not compromised, the department may eliminate all or portions of the application contents required under Section 1779.4 for applications filed pursuant to paragraphs (4), (5), (6), (7), and (8) of subdivision (a) or pursuant to subdivision (c).

history: (History: Amended by Stats. 2000, Ch. 820, Sec. 25. Effective January 1, 2001.)

article: 2. Application

path: 2. LICENSING PROVISIONS > 10. Continuing Care Contracts > 2. Application


text:
(a) Any entity filing an application for a permit to accept deposits and a certificate of authority shall pay an application fee.

(b) The applicant shall pay 80 percent of the application fee for all planned phases at the time the applicant submits its application. The 80 percent payment shall be made by check payable to the Continuing Care Provider Fee Fund. The department shall not process the application until it has received this fee.

(c) For new continuing care retirement communities or for the sale or transfer of existing continuing care retirement communities, the application fee shall be 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 and all items listed in subparagraph (D) of paragraph (2) of subdivision (y) of Section 1779.4.

(d) For existing continuing care retirement communities that are proposing new phases, remodeling or an expansion, the application fee shall be calculated as one-tenth of 1 percent of the cost of the addition, annexation, or renovation, including the value of the land and improvements and all items listed in subparagraph (D) of paragraph (2) of subdivision (y) of Section 1779.4.

(e) For existing facilities converting to continuing care retirement communities, the application fee shall be calculated as one-tenth of 1 percent of the current appraised value of the facility, including the land, or present value of any long-term lease.

(f) For organizational changes, the application fee shall be determined by the department based on the time and resources it considers reasonably necessary to process the application, including any consultant fees. The minimum application fee for those applications shall be two thousand dollars ($2,000).

(g) The applicant shall pay the remainder of the application fee before the provisional certificate of authority is issued, or in the case of expansions or remodeling, before final approval of the project is granted. The applicant shall make this payment by check payable to the Continuing Care Provider Fee Fund.

history: (History: Amended by Stats. 2000, Ch. 820, Sec. 26. Effective January 1, 2001.)

article: 2. Application


text:
An application shall contain all of the following:

(a) A statement signed by the applicant under penalty of perjury certifying that to the best of the applicant’s knowledge and belief, the items submitted in the application are correct. If the applicant is a corporation, the chief executive officer shall sign the statement. If there are multiple applicants, these requirements shall apply to each applicant.

(b) The name and business address of the applicant.

(c) 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.

(d) The name, address, and a description of the real property of the continuing care retirement community.

(e) An estimate of the number of continuing care residents at the continuing care retirement community.

(f) A description of the proposed continuing care retirement community, including the services and care to be provided to residents or available for residents.

(g) A statement indicating whether the application is for a certificate of authority to enter into continuing care or life care contracts.

(h) A license to operate the proposed continuing care retirement community as a residential care facility for the elderly or documentation establishing that the applicant has received a preliminary approval for licensure from the department’s Community Care Licensing Division.

(i) A license to operate the proposed skilled nursing facility or evidence that an application has been filed with the Licensing and Certification Division of the State Department of Health Services, if applicable.

(j) 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.

(k) A description of any matter in which any interested party 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 the misappropriation of property. For the purpose of this subdivision, “interested party” includes any representative of the developer of the proposed continuing care retirement community or the applicant, including all general partners, executive officers, or chief operating officers and board members of corporations; and managing members and managers of limited liability companies for each entity; who has significant decisionmaking authority with respect to the proposed continuing care retirement community.

(l) If the applicant is an entity other than an individual, the following information shall also be submitted:

(1) A statement identifying 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 financial interest in the legal entity of 10 percent or more. When the application is submitted in the name of a corporation, the parent, sole corporate shareholder, or sole corporate member who controls the operation of the continuing care retirement community shall be listed as an applicant. 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 named as coapplicants and the department shall name them as coproviders on any certificate of authority it issues.

(2) The names of the members of the provider’s governing body.

(3) A statement indicating 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 entity or other affiliate entity, the primary activities of each entity identified, the relationship of each entity to the applicant, and the interest in the applicant held by each entity.

(5) Copies of all contracts, management agreements, or other documents setting forth the relationships with each of the other entities.

(6) A statement indicating whether the applicant, a principal, a parent entity, affiliate entity, subsidiary entity, any responsible employee, manager, or board member, or anyone who 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, nursing home, intermediate care facility, hospital, home health agency, residential care facility for the elderly, community care facility, or child day care facility.

(m) A description of the business experience of the applicants in the operation or management of similar facilities.

(n) A copy of any advertising material regarding the proposed continuing care retirement community prepared for distribution or publication.

(o) Evidence of the bonds required by Section 1789.8.

(p) A copy of any proposed reservation agreement.

(q) A copy of the proposed deposit agreements.

(r) The name of the proposed escrow agent and depository.

(s) Any copies of reservation and deposit escrow account agreements.

(t) A copy of any proposed continuing care contracts.

(u) A statement of any monthly care fees to be paid by residents, the components and services considered in determining the 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 monthly care rates at each continuing care retirement community for the previous five years, or any shorter period for which each continuing care retirement community may have been operated by the provider or his or her predecessor in interest.

(v) A statement of the actions that have been, or will be, taken by the applicant to fund reserves as required by Section 1792 or 1792.6 and to otherwise ensure that the applicant will have adequate finances to fully perform continuing care contract obligations. The statement shall describe actions such as establishing restricted accounts, sinking funds, trust accounts, or additional reserves. If the applicant is purchasing an existing continuing care retirement community from a selling provider, the applicant shall provide an actuarial report to determine the liabilities of existing continuing care contracts and demonstrate the applicant’s ability to fund those obligations.

(w) 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 applicant or, if applicable, by each general partner, or each managing member and manager, stating that the financial statements are complete, true, and correct in all material matters to the best of their knowledge.

(x) 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, and prepared on the same basis as the annual audited financial statements or any other basis acceptable to the department.

(y) A financial study and a marketing study that reasonably project the feasibility of the proposed continuing care retirement community and are prepared by a firm or firms acceptable to the department. These studies shall address and evaluate, at a minimum, all of the following items:

(1) The applicant and its prior experience, qualifications, and management, including a detailed description of the applicant’s proposed continuing care retirement community, its service package, fee structure, and anticipated opening date.

(2) The construction plans, construction financing, and permanent financing for the proposed continuing care retirement community, including a description of the anticipated source, cost, terms, and use of all funds to be used in the land acquisition, construction, and operation of the continuing care retirement community. This proposal shall include, at a minimum, all of the following:

(A) A description of all debt to be incurred by the applicant for the continuing care retirement community, including the anticipated terms and costs of the financing. The applicant’s outstanding indebtedness related to the continuing care retirement community may not, at any time, exceed the appraised value of the continuing care retirement community.

(B) A description of the source and amount of the equity to be contributed by the applicant.

(C) A description of the source and amount of all other funds, including entrance fees, that will be necessary to complete and operate the continuing care retirement community.

(D) A statement itemizing all estimated project costs, including the real property costs and the cost of acquiring or designing and constructing the continuing care retirement community, and all other similar costs that the provider expects to incur prior to the commencement of operation. This itemization shall identify all costs related to the continuing care retirement community or project, including financing expenses, legal expenses, occupancy development costs, marketing costs, and furniture and equipment.

(E) A description of the interest expense, insurance premiums, and property taxes that will be incurred 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 the amount of funds, if any, that will be necessary to fund startup losses, fund statutory and refundable contract reserves, and to otherwise provide additional financial resources in an amount sufficient to ensure full performance by the provider of its continuing care contract obligations.

(3) An analysis of the potential market for the applicant’s continuing care retirement community, addressing such items as:

(A) A description of the service area, including its demographic, economic, and growth characteristics.

(B) A forecast of the market penetration the continuing care retirement community will achieve 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, including all of the following:

(A) Marketing projections, anticipated sales, and cancellation rates.

(B) Month-by-month forecast of unit sales through sellout.

(C) A description of the marketing methods, staffing, and advertising media to be used by the applicant.

(D) An estimate of the total entrance fees to be received from residents prior to opening the continuing care retirement community.

(5) Projected move-in rates, deposit collections, and resident profiles, including 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 throughout the development of the proposed continuing care retirement community.

(z) Projected annual financial statements for the period commencing on the first day of the applicant’s current fiscal year through at least the fifth year of operation.

(1) Projected annual financial statements shall be prepared on an accrual basis using the same accounting principles and procedures as the audited financial statements furnished pursuant to subdivision (x).

(2) Separate projected annual cash-flow statements shall be provided. These statements shall show projected annual cash-flows for the duration of any debt associated with the continuing care retirement community. If the continuing care retirement community property is leased, the cash-flow statement shall demonstrate 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, and assume no increase of revenues and expenses due to inflation.

(B) The projected annual cash-flow statements shall include all of the following:

(i) A detailed description and a full explanation of all assumptions used in preparing the projections, accompanied by supporting supplementary schedules and calculations, all to be consistent with the financial study and marketing study furnished pursuant to subdivision (y). The department may require such other supplementary schedules, calculations, or projections as it determines necessary for an adequate application.

(ii) Cash-flow from monthly operations showing projected revenues for monthly fees received from continuing care contracts, medical unit fees if applicable, other periodic fees, gifts and bequests used in operations, and any other projected source of revenue from operations less operating expenses.

(iii) Contractual cash-flow from activities showing projected revenues from presales, deposit receipts, entrance fees, and all other projected sources of revenue from activities, 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-flows from investment activities, including, but not limited to, construction progress payments, architect and engineering services, furnishings, and equipment not included in the construction contract, project development, inspection and testing, marketable securities, investment earnings, and interfund transfers.

(vi) The 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) The 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 funds, and construction funds balance.

(3) If the cash-flow statements required by paragraph (2) indicate that the provider will have cash balances exceeding 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 department may require the applicant to furnish additional data regarding its operating budgets, projections of cash required for major repairs and improvements, or any other matter related to its projections including additional information, schedules, and calculations regarding occupancy rate projections, unit types, couple mix, sex and age estimates for resident mix, turnover rates, refund obligations, and sales.

(aa) (1) A declaration by the applicant acknowledging that it is required to execute and record a Notice of Statutory Limitation on Transfer relating to continuing care retirement community property.

(2) The notice required in this subdivision shall be acknowledged and suitable for recordation, describe the property, declare the applicant’s intention to use all or part of the described property for the purposes of a 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 (aa) 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.)” (3) The Notice of Statutory Limitation on Transfer shall remain in effect until notice of release is given by the department. The department shall execute and record a release of the notice upon proof of complete performance of all obligations to residents.

(4) Unless a Notice of Statutory Limitation on Transfer has 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 advance 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 prior to encumbering the continuing care retirement community property with the proposed encumbrance.

(5) In the event that the applicant or provider and the owner of record are not the same entity on the date on which execution and recordation of the notice is required, the leasehold or other interest in the continuing care retirement community property held by the applicant or provider shall survive in its entirety and without change, any transfer of the continuing care retirement community property by the owner. In addition, the applicant or provider shall record a memorandum of leasehold or other interest in the continuing care retirement community property that includes a provision stating that its interest in the property survives any transfer of the property by the owner. The applicant or provider shall provide a copy of the notice and the memorandum of interest to the owner of record by certified mail and to the department.

(6) The notice shall, and, if applicable, the memorandum of interest 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.

(ab) A statement that the applicant will keep the department informed of any material changes to the proposed continuing care retirement community or its application.

(ac) Any other information that may be required by the department for the proper administration and enforcement of this chapter.

history: (History: Amended by Stats. 2000, Ch. 820, Sec. 27. Effective January 1, 2001.)

article: 2. Application


text:
(a) Within seven calendar days of receipt of an initial application for a permit to accept deposits and a certificate of authority, the department shall acknowledge receipt of the application in writing.

(b) Within 30 calendar days following its receipt of an application, the department shall determine if the application is complete and inform the applicant of its determination. If the department determines that the application is incomplete, its notice to the applicant shall identify the additional forms, documents, information, and other materials required to complete the application. The department shall allow the applicant adequate time to submit the requested information and materials. This review may not determine the adequacy of the materials included in the application.

(c) Within 120 calendar days after the department determines that an application is complete, the department shall review the application for adequacy. An application shall be adequate if it complies with all the requirements imposed by this chapter, and both the financial study and marketing study reasonably project the feasibility of the proposed continuing care retirement community, as well as demonstrate the financial soundness of the applicant. The department shall either approve the application as adequate under this chapter or notify the applicant that its application is inadequate. If the application is inadequate, the department shall identify the deficiencies in the application, provide the appropriate code references, and give the applicant an opportunity to respond.

(d) Within 60 calendar days after receiving any additional information or clarification required from the applicant, the department shall respond to the applicant’s submission in writing and state whether each specific deficiency has been addressed sufficiently to make the application adequate. If the department determines that the application is adequate and in compliance with this chapter, the department shall issue the permit to accept deposits. 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.

(e) If the applicant does not provide the department with the additional information within 90 days after the department’s notice described in subdivision (c), the application may be denied for being inadequate. Any new application shall require an application fee.

history: (History: Amended by Stats. 2000, Ch. 820, Sec. 28. Effective January 1, 2001.)

article: 2. Application


text:
(a) Where any portion of the consideration transferred to an applicant as a deposit or to a provider as consideration for a continuing care contract is transferred by a person other than the prospective resident or a resident, that third-party transferor shall have the same cancellation or refund rights as the prospective resident or resident for whose benefit this consideration was transferred.

(b) A transferor shall have the same rights to cancel and obtain a refund as the depositor under the deposit agreement or the resident under a continuing care contract.

history: (History: Added by Stats. 2000, Ch. 820, Sec. 28.5. Effective January 1, 2001.)

article: 2. Application


text:
(a) The applicant shall notify the department of material changes in the application information submitted to the department, including the applicant’s financial and marketing projections.

(b) An applicant shall provide to the department at least 60 days’ advance written notice of any proposal to make any changes in the applicant’s corporate name, structure, organization, operation, or financing.

(c) Within 30 calendar days after receiving notice of a change affecting the applicant or the application, the department shall advise the applicant:

(1) Whether additional information is required to process the pending application.

(2) Whether an additional application fee is required.

(3) Whether a new application and application fee must be submitted. The new application fee shall be twice the actual cost of additional review time caused by the change. This additional fee is payable to the department on demand.

(d) The department shall suspend the applicant’s application and, if applicable, its permit to accept deposits if the applicant fails to give written notice of changes required by this section. The suspension shall remain in effect until the department has both assessed the potential impact of the changes on the interests of depositors and taken such action as necessary under this chapter to protect these interests.

history: (History: Amended by Stats. 2000, Ch. 820, Sec. 29. Effective January 1, 2001.)

article: 2. Application


text:
(a) The department shall deny an application for a permit to accept deposits and a certificate of authority if the applicant fails to do any of the following:

(1) Pay the application fee as required by Section 1779.2.

(2) Submit all information required by this chapter.

(3) Submit evidence to support a reasonable belief that any interested party of the proposed continuing care retirement community who has committed any offenses listed in subdivision (k) of Section 1779.4 is of such good character as to indicate rehabilitation.

(4) 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 when an action specified in subdivision (j) or (k) of Section 1779.4 has been taken against the applicant.

(5) Demonstrate the feasibility of the proposed continuing care retirement community.

(6) Comply with residential care facility for the elderly licensing requirements.

(b) If the application is denied, no portion of the paid application fee shall be refundable or 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) A statement that the application is denied.

(2) The grounds for the denial.

(3) A statement informing the applicant that it has the right to appeal.

(4) A statement 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.

history: (History: Amended by Stats. 2000, Ch. 820, Sec. 30. Effective January 1, 2001.)

article: 2. Application


citation: HSC § 1780

text:
The department shall issue a permit to accept deposits when it has done all of the following:

(a) Determined that the application is adequate.

(b) Determined that the proposed continuing care retirement community financial and marketing studies are acceptable.

(c) Reviewed and approved the deposit agreements.

(d) Reviewed and approved the deposit escrow account agreement.

history: (History: Amended by Stats. 2000, Ch. 820, Sec. 31. Effective January 1, 2001.)

article: 3. Deposit Subscription Period

path: 2. LICENSING PROVISIONS > 10. Continuing Care Contracts > 3. Deposit Subscription Period


text:
(a) A deposit may be paid in one or several payments, at or after the time the parties enter into the deposit agreement.

A deposit shall be paid by cash or cash equivalent, jointly payable to the applicant and the escrow agent or depository. Possession and control of any deposit agreement shall be transferred to the escrow agent at the time the deposit is paid.

(b) A processing fee may be added to the deposit.

(1) The processing fee shall not exceed 1 percent of the amount of the average entrance fee or five hundred dollars ($500), whichever is greater.

(2) A nonrefundable processing fee may be paid directly to the applicant without being placed in the deposit escrow account.

(c) Payments made by a depositor for upgrades or modifications to the living unit shall not be placed in escrow with deposits. The applicant shall provide written refund policies to the depositor before accepting any payments for modifications or upgrades.

(d) The applicant shall furnish to the department within the first 10 days of each calendar month a list of all residents who have made payments for modifications or upgrades, the amounts each resident has paid, the date of each payment, and the unit to be modified or upgraded for each resident.

(e) All payments for modifications or upgrades shall be refunded to the depositor with interest if the applicant does not receive a certificate of authority for the proposed continuing care retirement community or expansion.

(f) The department may record a lien against the continuing care retirement community property, or any portion of the continuing care retirement community property, to secure the applicant’s obligations to refund the depositor’s payments made for modifications or upgrades. Any lien created under this section shall be to protect depositors and shall be governed by Section 1793.15.

history: (History: Amended by Stats. 2000, Ch. 820, Sec. 32. Effective January 1, 2001.)

article: 3. Deposit Subscription Period


text:
(a) All deposit agreements between the applicant and the depositor shall be in writing and shall contain all information required by this section.

(b) All deposit 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 agreement forms shall be printed in at least 10-point typeface.

(e) The deposit agreement form shall provide all of the following:

(1) An estimated date for commencement of construction of the proposed continuing care retirement community or, if applicable, each phase not to exceed 36 months from the date the permit to accept deposits is issued.

(2) A statement to the effect that the applicant will notify depositors of any material change in the application.

(3) The identity of the specific unit reserved and the total deposit for that unit.

(4) 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 depositor or voluntary cancellation by the depositor.

(C) Notice that the processing fee shall be refunded within 30 days if the applicant does not accept the depositor for residency, or the applicant fails to construct the continuing care retirement community before the estimated date of completion and the department determines that there is no satisfactory cause for the delay.

(5) Requirements for payment of the deposit by the depositor.

(6) A statement informing the depositor that their deposit payments will be converted to an entrance fee payment at the time the continuing care contract is executed.

(7) A statement informing the depositor that deposits shall be refunded within 30 calendar days of the depositor’s nonacceptance for residency or notice to the applicant of the death of the depositor.

(8) A statement informing the depositor that all deposits shall be refunded to the depositors 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.

(9) A statement informing the depositor that a refund of the deposit within 10 calendar days of notice of cancellation by the depositor. The deposit agreement shall state that depositors who have deposited more than one thousand dollars ($1,000) or 5 percent of the entrance fee, whichever is greater, and who have been notified that construction of the proposed continuing care retirement community has commenced, will not be entitled to a refund of their deposit until the provisional certificate of authority is issued or after one of the following occurs:

(A) Another depositor has reserved the canceling depositor’s specific residential unit and paid the necessary deposit.

(B) The depositor no longer meets financial or health requirements for admission.

(C) The applicant fails to meet the requirements of Section 1786 or 1786.2.

(10) A statement to depositors that specifies when funds may be released from escrow to the applicant and explains that thereafter the depositor’s funds will not have escrow protection.

(11) A statement advising the depositor whether interest will be paid to the depositor on deposits placed in the deposit escrow account.

(f) If cash equivalents are to be accepted in lieu of cash, all of the following shall also be included in the deposit agreement:

(1) A statement that cash equivalents that may be accepted as deposits shall be either certificates of deposit or United States securities with maturities of five years or less.

(2) A statement that the instruments will be held by the escrow agent in the form in which they were delivered and assigned by the depositor until they are replaced by cash or converted to cash.

(3) A statement that the depositor will be required to assign the instruments to a neutral third-party escrow agent. If the bank or entity that issued the instruments refuses to allow this assignment, the escrow agent shall not accept the instruments. These instruments shall be reassigned to the depositor if the depositor terminates the deposit agreement before the instruments mature. If the depositor terminates the deposit agreement after the instruments mature, the depositor shall receive a cash refund of the portion of the deposit represented by the matured instruments.

(4) A statement that any amount by which the face value of the deposited instruments exceeds the required deposit shall be deemed part of the deposit and shall be applied against the depositor’s obligations under the deposit agreement.

(5) A statement that the instruments shall be converted to, or replaced with, cash prior to the department’s authorization for the release of deposits to the applicant. The depositor shall be advised that if the depositor does not substitute cash in the amount equal to the deposit, the applicant may do either of the following:

(A) Direct the escrow agent to sell, redeem, or otherwise convert the instruments to cash and to treat the proceeds in the same manner as it treats cash deposits under the deposit agreement. The costs of any such sale, redemption, or conversion, including, without limitation, transaction fees and any early withdrawal penalties, may be charged to the depositor and paid out of the cash or other instruments received from the depositor in escrow. If there is a shortfall, the depositor may be immediately obligated to pay the shortfall by check jointly payable to the applicant and the escrow agent.

(B) Terminate the deposit agreement. In this event, the escrow agent shall reassign the property to the depositor and refund all cash in escrow within the time periods specified in the deposit agreement.

(g) A statement that deposits will be invested in instruments guaranteed by the federal government or an agency of the federal government, or in investment funds secured by federally guaranteed instruments.

(h) A statement that no funds deposited in a deposit escrow account shall be subject to any liens, judgments, garnishments, or creditor’s claims against the applicant, the proposed continuing care retirement community property, or the continuing care retirement community. The deposit agreement shall also provide that deposits may not be subject to any liens or charges by the escrow agent, except that cash equivalent deposits may be subject to transactions fees, commissions, prepayment penalties, and other fees incurred in connection with these deposits.

(i) A schedule of projected monthly care fees estimated to be charged to residents for each of the first five years of the continuing care retirement community’s existence shall be attached to each deposit agreement. This 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.

history: (History: Amended by Stats. 2000, Ch. 820, Sec. 33. Effective January 1, 2001.)

article: 3. Deposit Subscription Period


citation: HSC § 1781

text:
(a) All deposits, excluding processing fees, shall be placed in an escrow account. All terms governing the deposit escrow account shall be approved in advance by the department.

(b) The deposit escrow account shall be established by an escrow agent and all deposits shall be deposited in a depository located in California and approved by the department. The department’s approval of the depository shall be based, in part, upon its ability to ensure the safety of funds and properties entrusted to it and its qualifications to perform the obligations of the depository pursuant to the deposit escrow account agreement and this chapter. The depository may be the same entity as the escrow agent. All deposits shall be kept and maintained in a segregated account without any commingling with other funds, including any funds or accounts owned by the applicant.

(c) 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) All deposits shall remain in escrow until the department has authorized release of the deposits, as provided in Section 1783.3.

(e) Deposits shall be invested in instruments guaranteed by the federal government or an agency of the federal government, or in investment funds secured by federally guaranteed instruments.

(f) No funds deposited in a deposit escrow account shall be subject to any liens, judgments, garnishments, or creditor’s claims against the applicant or the continuing care retirement community. The deposit agreement shall also provide that deposits may not be subject to any liens or charges by the escrow agent except that cash equivalent deposits may be subject to transaction fees, commissions, prepayment penalties, and other fees incurred in connection with those deposits.

history: (History: Amended by Stats. 2000, Ch. 820, Sec. 34. Effective January 1, 2001.)

article: 3. Deposit Subscription Period


text:
(a) All deposits shall be delivered to the escrow agent and deposited into the deposit escrow account within five business days after receipt by the applicant. The deposit escrow account shall be accounted for in a separate escrow account.

(b) The applicant shall provide, with all deposits delivered to the escrow holder, a copy of the executed deposit agreement, a copy of the receipt given to the depositor, a summary of all deposits made on that date, and any other materials required by the escrow holder.

history: (History: Amended by Stats. 2000, Ch. 820, Sec. 35. Effective January 1, 2001.)

article: 3. Deposit Subscription Period


text:
The deposit escrow account agreement between the applicant and the escrow agent shall include all of the following:

(a) The amount of the processing fee.

(b) A provision requiring that all deposits shall be placed into the deposit escrow account upon delivery.

(c) A provision requiring that monthly progress reports be sent by the escrow agent directly to the department, beginning the month after the deposit escrow account is opened and continuing through the month funds are released from escrow. These reports shall be prepared every month that there are any funds in the account and shall show each of the following in separate columns:

(1) The name and address of each depositor or resident.

(2) The designation of the living unit being provided.

(3) Any processing fee which is deposited into escrow.

(4) The total deposit required for the unit.

(5) The total entrance fee for the unit.

(6) Twenty percent of the total entrance fee.

(7) Each deposit payment made by or on behalf of the depositor and any refunds paid to the depositor.

(8) The unpaid balance for each depositor’s deposit.

(9) The unpaid balance for each depositor’s entrance fee.

(10) The current balance in the deposit escrow account for each depositor and the collective balance.

(11) The dollar amount, type, and maturity date of any cash equivalent paid by each depositor.

(d) A provision for investment of escrow account funds in a manner consistent with Section 1781.

(e) A provision for refunds to depositors in the manner specified by Section 1783.2.

(f) A provision regarding the payment of interest earned on the funds held in escrow in the manner specified in the applicant’s deposit agreement.

(g) Release of deposit escrow account funds in the manner specified in Section 1783.3, including to whom payment of interest earned on the funds will be made.

(h) Representations by the escrow agent that it is not, and shall not be during the term of the deposit escrow account, a lender to the applicant or for the proposed continuing care retirement community, or a fiduciary for any lender or bondholder for that continuing care retirement community, unless approved by the department.

(i) If cash equivalents may be accepted as a deposit in lieu of cash, the deposit escrow account agreement shall also include all of the following:

(1) Authorization for the escrow agent to convert instruments to cash when they mature. The escrow agent may notify all financial institutions whose securities are held by the escrow agent that all interest and other payments due upon these instruments shall be paid to the escrow agent. The escrow agent shall collect, hold, invest, and disburse these funds as provided under the escrow agreement.

(2) Authorization for the escrow agent to deliver the instruments in its possession and release funds from escrow according to written directions from the applicant, consistent with the terms provided in the applicant’s deposit escrow account agreement. The escrow agent shall distribute cash and other property to an individual depositor only upon either of the following occurrences:

(A) The depositor’s written request to receive monthly payments of interest accrued on his or her deposits.

(B) Receipt of notice from the applicant to pay a refund to the depositor.

(3) A provision that the escrow agent shall maintain, at all times, adequate records showing the beneficial ownership of the instruments.

(4) A provision that the escrow agent shall have no responsibility or authority to initiate any transfer of the instruments or conduct any other transaction without specific written instructions from the applicant.

(5) A provision authorizing, instructing, and directing the escrow agent to do all of the following:

(A) Redeem and roll over matured investments into money market accounts or other department approved instruments with the escrow agent or an outside financial institution.

(B) Collect and receive interest, principal, and other things of value in connection with the instruments.

(C) Sign for the depositors any declarations, affidavits, certificates, and other documents that may be required to collect or receive payments or distributions with respect to the instruments.

history: (History: Amended by Stats. 2000, Ch. 820, Sec. 36. Effective January 1, 2001.)

article: 3. Deposit Subscription Period


text: All changes to a deposit agreement or deposit escrow account agreement form shall be submitted to, and approved by, the department before use by the applicant.

history: (History: Amended by Stats. 2000, Ch. 820, Sec. 37. Effective January 1, 2001.)

article: 3. Deposit Subscription Period


text:
(a) Deposits held in escrow shall be placed in an interest bearing account or invested as provided under subdivision (e) of Section 1781.

(b) Interest, income, and other gains derived from deposits held in a deposit escrow account may not be released or distributed from the deposit escrow account except upon written approval of the department.

(c) Approval by the department for the release of earnings generated from funds held in escrow shall be based upon an assessment that funds remaining in the deposit escrow account will be sufficient to pay refunds and any interest promised to all depositors, as well as administrative costs owed to the escrow agent.

(d) When released by the department, interest earned by the funds in the deposit escrow account shall be distributed in accordance with the terms of the deposit agreement.

history: (History: Amended by Stats. 2000, Ch. 820, Sec. 38. Effective January 1, 2001.)

article: 3. Deposit Subscription Period


text: No deposit or any other asset held in a deposit escrow account, shall be encumbered or used as collateral for any obligation of the applicant or any other person, unless the applicant obtains prior written approval from the department for the encumbrance or use as collateral. The department shall not approve any encumbrance or use as collateral under this section unless the encumbrance or use as collateral is expressly subordinated to the rights of depositors under this chapter to refunds of their deposits.

history: (History: Amended by Stats. 2000, Ch. 820, Sec. 39. Effective January 1, 2001.)

article: 3. Deposit Subscription Period


citation: HSC § 1782

text:
(a) An applicant shall not begin construction on any phase of a continuing care retirement community without first obtaining a written acknowledgment from 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 accept deposits has been issued to the applicant or, in the case of continuing care retirement community renovation projects, the department has issued a written approval of the applicant’s application.

(3) For new continuing care retirement communities, or construction projects adding new units to an existing continuing care retirement community, deposits equal to at least 10 percent of each depositor’s applicable entrance fee have been placed into escrow for each phase for at least 50 percent of the number of residential living units to be constructed.

(b) Applicants shall notify depositors in writing when construction is commenced.

(c) For purposes of this chapter only, construction shall not include site preparation, demolition, or the construction of model units.

history: (History: Amended by Stats. 2006, Ch. 529, Sec. 2. Effective January 1, 2007.)

article: 3. Deposit Subscription Period


citation: HSC § 1783

text:
(a) (1) An applicant proposing to convert an existing building to continuing care use shall comply with all the application requirements in Section 1779.4 identified by the department as necessary for the department to assess the feasibility of the proposed continuing care retirement community or conversion.

(2) If the proposed continuing care retirement community is already occupied and only a portion of the existing residential units will be converted into continuing care units, the department may modify the presale requirements of paragraph (3) of subdivision (a) of Section 1782 and paragraph (2) of subdivision (a) of Section 1783.3.

(b) Any applicant proposing to convert an existing building into continuing care units shall indicate the portion of the facility to be used for continuing care contract services. The continuing care allocation specified by the applicant shall be reflected in all financial and marketing studies and shall be used to determine the applicant’s compliance with the percentage requirements stated in paragraph (3) of subdivision (a) of Section 1782 and paragraph (2) of subdivision (a) of Section 1783.3.

history: (History: Amended by Stats. 2000, Ch. 820, Sec. 41. Effective January 1, 2001.)

article: 3. Deposit Subscription Period


text:
(a) An escrow agent shall refund to the depositor all amounts required by the depositor’s deposit agreement upon receiving written notice from the applicant that a depositor has canceled the deposit agreement. Refunds required by this subdivision shall be paid to the depositor within 10 days after the depositor gives notice of cancellation to the applicant.

(b) Depositors who have deposited more than one thousand dollars ($1,000) or 5 percent of the entrance fee, whichever is greater, and who have been notified that construction of the proposed continuing care retirement community has commenced, shall not be entitled to a refund of their deposit until any of the following occurs:

(1) The continuing care retirement community is opened for operation.

(2) Another depositor has reserved the canceling depositor’s specific residential unit and paid the necessary deposit.

(3) The depositor no longer meets financial or health requirements for admission.

history: (History: Amended by Stats. 2000, Ch. 820, Sec. 42. Effective January 1, 2001.)

article: 3. Deposit Subscription Period


text:
(a) In order to seek a release of escrowed funds, the applicant shall petition in writing to the department and certify to each of the following:

(1) The construction of the proposed continuing care retirement community or phase is at least 50 percent completed.

(2) At least 10 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 unit for which a refund is pending may not be counted toward that 60-percent requirement.

(3) Deposits made with cash equivalents have been either converted into, or substituted with, cash or held for transfer to the provider. A cash equivalent deposit may be held for transfer to the provider, if all of the following conditions exist:

(A) Conversion of the cash equivalent instrument would result in a penalty or other substantial detriment to the depositor.

(B) The provider and the depositor have a written agreement stating that the cash equivalent will be transferred to the provider, without conversion into cash, when the deposit escrow is released to the provider under this section.

(C) The depositor is credited the amount equal to the value of the cash equivalent.

(4) 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.

(5) The applicant has received a commitment for any permanent mortgage loan or other long-term financing.

(b) The department shall instruct the escrow agent to release to the applicant all deposits in the deposit escrow account when all of the following requirements have been met:

(1) The department has confirmed the information provided by the applicant pursuant to subdivision (a).

(2) The department has determined that there has been substantial compliance with projected annual financial statements that served as a basis for issuance of the permit to accept deposits.

(3) The applicant has complied with all applicable licensing requirements in a timely manner.

(4) The applicant has obtained a commitment for any permanent mortgage loan or other long-term financing that is satisfactory to the department.

(5) The applicant has complied with any additional reasonable requirements for release of funds placed in the deposit escrow accounts, established by the department under Section 1785.

(c) The escrow agent shall release the funds held in escrow to the applicant only when the department has instructed it to do so in writing.

(d) When an application describes different phases of construction that will be completed and commence operating at different times, the department may apply the 50-percent construction completion requirement to any one or group of phases requested by the applicant, provided the phase or group of phases is shown in the applicant’s projections to be economically viable.

history: (History: Amended by Stats. 2011, Ch. 32, Sec. 11. (AB 106) Effective June 29, 2011. Operative January 1, 2012, by Sec. 73 of Stats. 2011, Ch. 32.)

article: 3. Deposit Subscription Period


citation: HSC § 1784

text:
(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 accept deposits is issued, an applicant may request an extension of the permit to accept deposits. 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 required 36-month period. The request for extension shall also state 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 or applicable phase, the department may extend the permit to accept deposits for up to one year.

(2) If the department determines that there is no satisfactory cause for the delay, the department may instruct the escrow agent to refund to depositors all deposits 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. The applicant shall also refund all processing fees paid by the depositors.

(c) Within 10 calendar days the applicant shall notify each depositor of the department’s approval or denial of the extension, of any expiration of the permit to accept deposits and of any right to a refund of their deposits.

history: (History: Amended by Stats. 2000, Ch. 820, Sec. 44. Effective January 1, 2001.)

article: 3. Deposit Subscription Period


citation: HSC § 1785

text:
(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 may take any of the following actions:

(1) Cancel the permit to accept deposits and require that all funds in escrow be returned to depositors immediately.

(2) Increase the required percentages of construction completed, units reserved, or entrance fees to be deposited as required under Sections 1782, 1783.3, 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 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 deposits 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 depositors or residents.

(e) The department may require the applicant to notify all depositors and, if applicable, all residents, of any actions required by the department under this section.

history: (History: Amended by Stats. 2011, Ch. 32, Sec. 12. (AB 106) Effective June 29, 2011. Operative January 1, 2012, by Sec. 73 of Stats. 2011, Ch. 32.)

article: 3. Deposit Subscription Period


citation: HSC § 1786

text:
(a) The department shall issue a provisional certificate of authority when an applicant has done all of the following:

(1) Complied with the approved marketing plans.

(2) Met and continues to meet the requirements imposed under subdivision (a) of Section 1783.3. The issuance of the provisional certificate of authority shall not require, and shall not be dependent upon the release of escrowed funds. Release of escrowed funds shall be governed by Section 1783.3.

(3) Completed construction of the continuing care retirement community or applicable phase.

(4) Obtained the required licenses.

(5) Paid the remainder of the application fee.

(6) Executed a permanent mortgage loan or other long-term financing.

(7) Provided the department with a recorded copy of the Notice of Statutory Limitation on Transfer required by subdivision (aa) of Section 1779.4.

(8) Met all applicable provisions of this chapter.

(b) The provisional certificate of authority shall expire 12 months after issuance unless both of the following occur:

(1) No later than 60 days prior to the expiration of the provisional certificate of authority, the provider petitions the department and demonstrates good cause in writing for an extension of the provisional certificate of authority.

(2) The department determines that the provider is capable of meeting the requirements of Section 1786.2 during the extension period.

(c) The department shall exercise its discretion to determine the length of the extension period.

(d) After the provisional certificate of authority is issued providers may continue to take deposits by modifying the deposit agreement as appropriate. The new deposit agreement shall clearly state the rights of the depositor and the provider. The applicant shall submit the agreements to the department for review and approval prior to use. A provider that holds a provisional certificate of authority or certificate of authority may accept fees paid by potential residents to be placed on a waiting list without using a deposit agreement. These waiting list fees may not exceed five hundred dollars ($500), and shall be refunded to the potential resident upon written request.

(e) All holders of a provisional certificate of authority shall request in writing a certificate of authority when the requirements of Section 1786.2 have been met.

history: (History: Amended by Stats. 2000, Ch. 820, Sec. 46. Effective January 1, 2001.)

article: 4. Certificate of Authority

path: 2. LICENSING PROVISIONS > 10. Continuing Care Contracts > 4. Certificate of Authority


text:
(a) The department shall not issue a certificate of authority to an applicant or a provider, until the department determines that each of the following has occurred:

(1) A provisional certificate of authority has been issued or all of the requirements for a provisional certificate of authority have been satisfied. In the case of an application for a new certificate of authority due to an organizational change, if the continuing care retirement community is financially sound and operating in compliance with this chapter, it shall be sufficient for the purposes of this paragraph that the department has approved the application in writing.

(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 an updated 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 and 1792.6. 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 forfeited by operation of law under Section 1793.7, inactivated under Section 1793.8, or suspended or revoked by the department pursuant to Section 1793.21.

(c) The provider shall display the certificate of authority in a prominent place within the continuing care retirement community.

history: (History: Amended by Stats. 2000, Ch. 820, Sec. 47. Effective January 1, 2001.)

article: 4. Certificate of Authority