(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
(1) Accepting any deposit, reservation fee, or any other payment
that is related to a promise or proposal to promise to provide
(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
(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
(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
(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
(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).
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
(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
(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
(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
(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
(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
(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
(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
(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
(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
(C) Existing and planned competition in and about the primary
(4) A detailed description of the sales and marketing plan,
including all of the following:
(A) Marketing projections, anticipated sales, and cancellation
(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
(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
(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
(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
(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.)"