1779. (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).
1779.2. (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.
1779.4. 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.
1779.6. (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.
1779.7. (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.
1779.8. (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.
1779.10. (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.
1779. (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).
1779.2. (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.
1779.4. 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.
1779.6. (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.
1779.7. (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.
1779.8. (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.
1779.10. (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.
1779. (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).
1779.2. (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.
1779.4. 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.
1779.6. (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.
1779.7. (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.
1779.8. (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.
1779.10. (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.
