Section 1780.4 Of Article 3. Deposit Subscription Period From California Health And Safety Code >> Division 2. >> Chapter 10. >> Article 3.
1780.4
. (a) All deposit agreements between the applicant and the
depositor shall be in writing and shall contain all information
required by this section.
(b) All deposit agreement forms shall be approved by the
department prior to their use.
(c) The requirements of this chapter and Chapter 3.2 (commencing
with Section 1569) shall be the bases for approval of the forms by
the department.
(d) All text in deposit agreement forms shall be printed in at
least 10-point typeface.
(e) The deposit agreement form shall provide all of the following:
(1) An estimated date for commencement of construction of the
proposed continuing care retirement community or, if applicable, each
phase not to exceed 36 months from the date the permit to accept
deposits is issued.
(2) A statement to the effect that the applicant will notify
depositors of any material change in the application.
(3) The identity of the specific unit reserved and the total
deposit for that unit.
(4) Processing fee terms and conditions, including:
(A) The amount.
(B) A statement explaining the applicant's policy regarding refund
or retention of the processing fee in the event of death of the
depositor or voluntary cancellation by the depositor.
(C) Notice that the processing fee shall be refunded within 30
days if the applicant does not accept the depositor for residency, or
the applicant fails to construct the continuing care retirement
community before the estimated date of completion and the department
determines that there is no satisfactory cause for the delay.
(5) Requirements for payment of the deposit by the depositor.
(6) A statement informing the depositor that their deposit
payments will be converted to an entrance fee payment at the time the
continuing care contract is executed.
(7) A statement informing the depositor that deposits shall be
refunded within 30 calendar days of the depositor's nonacceptance for
residency or notice to the applicant of the death of the depositor.
(8) A statement informing the depositor that all deposits shall be
refunded to the depositors if the continuing care retirement
community is not constructed by the estimated date of completion and
the department determines that there is no satisfactory cause for the
delay.
(9) A statement informing the depositor that a refund of the
deposit within 10 calendar days of notice of cancellation by the
depositor. The deposit agreement shall state that depositors who have
deposited more than one thousand dollars ($1,000) or 5 percent of
the entrance fee, whichever is greater, and who have been notified
that construction of the proposed continuing care retirement
community has commenced, will not be entitled to a refund of their
deposit until the provisional certificate of authority is issued or
after one of the following occurs:
(A) Another depositor has reserved the canceling depositor's
specific residential unit and paid the necessary deposit.
(B) The depositor no longer meets financial or health requirements
for admission.
(C) The applicant fails to meet the requirements of Section 1786
or 1786.2.
(10) A statement to depositors that specifies when funds may be
released from escrow to the applicant and explains that thereafter
the depositor's funds will not have escrow protection.
(11) A statement advising the depositor whether interest will be
paid to the depositor on deposits placed in the deposit escrow
account.
(f) If cash equivalents are to be accepted in lieu of cash, all of
the following shall also be included in the deposit agreement:
(1) A statement that cash equivalents that may be accepted as
deposits shall be either certificates of deposit or United States
securities with maturities of five years or less.
(2) A statement that the instruments will be held by the escrow
agent in the form in which they were delivered and assigned by the
depositor until they are replaced by cash or converted to cash.
(3) A statement that the depositor will be required to assign the
instruments to a neutral third-party escrow agent. If the bank or
entity that issued the instruments refuses to allow this assignment,
the escrow agent shall not accept the instruments. These instruments
shall be reassigned to the depositor if the depositor terminates the
deposit agreement before the instruments mature. If the depositor
terminates the deposit agreement after the instruments mature, the
depositor shall receive a cash refund of the portion of the deposit
represented by the matured instruments.
(4) A statement that any amount by which the face value of the
deposited instruments exceeds the required deposit shall be deemed
part of the deposit and shall be applied against the depositor's
obligations under the deposit agreement.
(5) A statement that the instruments shall be converted to, or
replaced with, cash prior to the department's authorization for the
release of deposits to the applicant. The depositor shall be advised
that if the depositor does not substitute cash in the amount equal to
the deposit, the applicant may do either of the following:
(A) Direct the escrow agent to sell, redeem, or otherwise convert
the instruments to cash and to treat the proceeds in the same manner
as it treats cash deposits under the deposit agreement. The costs of
any such sale, redemption, or conversion, including, without
limitation, transaction fees and any early withdrawal penalties, may
be charged to the depositor and paid out of the cash or other
instruments received from the depositor in escrow. If there is a
shortfall, the depositor may be immediately obligated to pay the
shortfall by check jointly payable to the applicant and the escrow
agent.
(B) Terminate the deposit agreement. In this event, the escrow
agent shall reassign the property to the depositor and refund all
cash in escrow within the time periods specified in the deposit
agreement.
(g) A statement that deposits will be invested in instruments
guaranteed by the federal government or an agency of the federal
government, or in investment funds secured by federally guaranteed
instruments.
(h) A statement that no funds deposited in a deposit escrow
account shall be subject to any liens, judgments, garnishments, or
creditor's claims against the applicant, the proposed continuing care
retirement community property, or the continuing care retirement
community. The deposit agreement shall also provide that deposits may
not be subject to any liens or charges by the escrow agent, except
that cash equivalent deposits may be subject to transactions fees,
commissions, prepayment penalties, and other fees incurred in
connection with these deposits.
(i) A schedule of projected monthly care fees estimated to be
charged to residents for each of the first five years of the
continuing care retirement community's existence shall be attached to
each deposit agreement. This schedule shall contain a conspicuous
statement in at least 10-point boldface type that the projected fees
are an estimate only and may be changed without notice.