Article 7. Offenses And Penalties of California Health And Safety Code >> Division 2. >> Chapter 10. >> Article 7.
(a) An entity that accepts deposits and proposes to promise
to provide care without having a current and valid permit to accept
deposits is guilty of a misdemeanor.
(b) An entity that accepts deposits and fails to place any deposit
received into an escrow account as required by this chapter is
guilty of a misdemeanor.
(c) An entity that executes a continuing care contract without
holding a current and valid provisional certificate of authority or
certificate of authority is guilty of a misdemeanor.
(d) An entity that abandons a continuing care retirement community
or its obligations under a continuing care contract is guilty of a
misdemeanor. An entity that violates this section shall be liable to
the injured resident for treble the amount of damages assessed in any
civil action brought by or on behalf of the resident in any court
having proper jurisdiction. The court may, in its discretion, award
all costs and attorney fees to the injured resident, if that resident
prevails in the action.
(e) Each violation of subdivision (a), (b), (c), or (d) is subject
to a fine not to exceed ten thousand dollars ($10,000), or by
imprisonment in the county jail for a period not to exceed one year,
or by both.
(f) An entity that issues, delivers, or publishes, or as manager
or officer or in any other administrative capacity, assists in the
issuance, delivery, or publication of any printed matter, oral
representation, or advertising material which does not comply with
the requirements of this chapter is guilty of a misdemeanor.
(g) A violation of subdivision (f) by an entity will constitute
cause for the suspension of all and any licenses, permits,
provisional certificates of authority, and certificates of authority
issued to that entity by any agency of the state.
(h) A violation under this section is an act of unfair competition
as defined in Section 17200 of the Business and Professions Code.
(a) The department may issue citations pursuant to this
section containing orders of abatement and assessing civil penalties
against any entity that violates Section 1771.2 or 1793.5.
(b) If upon inspection or investigation, the department has
probable cause to believe that an entity is violating Section 1771.2
or 1793.5, the department may issue a citation to that entity. Each
citation shall be in writing and shall describe with particularity
the basis of the citation. Each citation shall contain an order of
abatement. In addition to the administrative fines imposed pursuant
to Section 1793.27, an entity that violates the abatement order shall
be liable for a civil penalty in the amount of two hundred dollars
($200) per day for violation of the abatement order.
(c) The civil penalty authorized in subdivision (b) shall be
imposed if a continuing care retirement community is operated without
a provisional certificate of authority or certificate of authority
and the operator refuses to seek a certificate of authority or the
operator seeks a certificate of authority and the application is
denied and the operator continues to operate the continuing care
retirement community without a provisional certificate of authority
or certificate of authority, unless other remedies available to the
department, including prosecution, are deemed more appropriate by the
(d) Service of a citation issued under this section may be made by
certified mail at the last known business address or residence
address of the entity cited.
(e) Within 15 days after service of a citation under this section,
an entity may appeal in writing to the department with respect to
the violations alleged, the scope of the order of abatement, or the
amount of civil penalty assessed.
(f) If the entity cited fails without good cause to appeal in
writing to the department within 15 business days after service of
the citation, the citation shall become a final order of the
department. The department may extend the 15-day period for good
cause, to a maximum of 15 additional days.
(g) If the entity cited under this section makes a timely appeal
of the citation, the department shall provide an opportunity for a
hearing. The department shall thereafter issue a decision, based on
findings of fact, affirming, modifying, or vacating the citation or
directing other appropriate relief. The proceedings under this
section shall be conducted in accordance with the provisions of
Chapter 5 (commencing with Section 11500) of Part 1 of Division 3 of
Title 2 of the Government Code, and the department shall have all the
powers granted therein.
(h) After exhaustion of the review procedures specified in this
section, the department may apply to the appropriate superior court
for a judgment in the amount of the civil penalty and an order
compelling the cited entity to comply with the order of abatement.
The application, which shall include a certified copy of the final
order of the department shall be served upon the cited entity who
shall have five business days to file that entity's response in
writing in the superior court. This period may be extended for good
cause. Failure on the part of the cited entity to respond shall
constitute grounds for entry of a default judgment against that
entity. In the event a response is timely filed in superior court,
the action shall have priority for trial over all other civil
(i) Notwithstanding any other provision of law, the department may
waive part or all of the civil penalty if the entity against whom
the civil penalty is assessed satisfactorily completes all the
requirements for, and is issued, a provisional certificate of
authority or certificate of authority.
(j) Civil penalties recovered pursuant to this section shall be
deposited into the Continuing Care Provider Fee Fund.
A permit to accept deposits, a provisional certificate of
authority, or a certificate of authority shall be forfeited by
operation of law when any one of the following occurs:
(a) The applicant terminates marketing for the proposed continuing
care retirement community.
(b) The applicant or provider surrenders to the department its
residential care facility for the elderly license, the permit to
accept deposits, provisional certificate of authority, or certificate
of authority for a continuing care retirement community.
(c) The applicant or provider sells or otherwise transfers all or
part of the continuing care retirement community.
(d) A change occurs in the majority ownership of the continuing
care retirement community or the certificate of authority holder.
(e) The applicant or provider merges with another entity.
(f) The applicant or entity makes a material change in a pending
application which requires a new application pursuant to subdivision
(c) of Section 1779.8.
(g) The applicant or provider moves the continuing care retirement
community from one location to another without the department's
(h) The applicant or provider abandons the continuing care
retirement community or its obligations under the continuing care
(i) The applicant or provider is evicted from the continuing care
retirement community premises.
A Certificate of Authority shall be automatically
inactivated when a provider voluntarily ceases to enter into
continuing care contracts with new residents. The provider shall
notify the department of its intention to cease entering into
continuing care contracts and shall continue to comply with all
provisions of this chapter until all continuing care contract
obligations have been fulfilled.
(a) In the event of receivership or liquidation, all claims
made against a provider based on the provider's continuing care
contracts shall be preferred claims against all assets owned by the
provider. However, these preferred claims shall be subject to any
perfected claims secured by the provider's assets.
(b) If the provider is liquidated, residents who have executed a
refundable continuing care contract shall have a preferred claim to
liquid assets held in the refund reserve pursuant to Section 1792.6.
This preferred claim shall be superior to all other claims from
residents without refundable contracts or other creditors. If this
fund and any other available assets are not sufficient to fulfill the
refund obligations, each resident shall be distributed a
proportionate amount of the refund reserve funds determined by
dividing the amount of each resident's refund due by the total
refunds due and multiplying that percentage by the total funds
(c) For purposes of computing the reserve required pursuant to
Sections 1792.2 and 1793, the liens required under Section 1793.15
are not required to be deducted from the value of real or personal
(a) Any transfer of money or property, pursuant to a
continuing care contract found by the department to be executed in
violation of this chapter, is voidable at the option of the resident
or transferor for a period of 90 days from the execution of the
(b) Any deed or other instrument of conveyance shall contain a
recital that the transaction is made pursuant to rescission by the
resident or transferor within 90 days from the date of first
(c) No action may be brought for the reasonable value of any
services rendered between the date of transfer and the date the
resident disaffirms the continuing care contract.
(d) With respect to real property, the right of disaffirmance or
rescission is conclusively presumed to have terminated if a notice of
intent to rescind is not recorded with the county recorder of the
county in which the real property is located within 90 days from the
date of first occupancy of the residential living unit.
(e) A transfer of money or property, real or personal, to anyone
pursuant to a continuing care contract that was not approved by the
department is voidable at the option of the department or transferor
or his or her assigns or agents.
(f) A transaction determined by the department to be in violation
of this chapter is voidable at the option of the resident or his or
her assignees or agents.
(a) The department may require a provider to submit a
financial plan, if either of the following applies:
(1) A provider fails to file a complete annual report as required
by Section 1790.
(2) The department has reason to believe that the provider is
insolvent, is in imminent danger of becoming insolvent, is in a
financially unsound or unsafe condition, or that its condition is
such that it may otherwise be unable to fully perform its obligations
pursuant to continuing care contracts.
(b) A provider shall submit its financial plan to the department
within 60 days following the date of the department's request. The
financial plan shall explain how and when the provider will rectify
the problems and deficiencies identified by the department.
(c) The department shall approve or disapprove the plan within 30
days of its receipt.
(d) If the plan is approved, the provider shall immediately
implement the plan.
(e) If the plan is disapproved, or if it is determined that the
plan is not being fully implemented, the department may consult with
its financial consultants to develop a corrective action plan at the
provider's expense, or require the provider to obtain new or
additional management capability approved by the department to solve
its difficulties. A reasonable period, as determined by the
department, shall be allowed for the reorganized management to
develop a plan which, subject to the approval of the department, will
reasonably assure that the provider will meet its responsibilities
under the law.
(a) When necessary to secure an applicant's or a provider'
s performance of its obligations to depositors or residents, the
department may record a notice or notices of lien on behalf of the
depositors or residents. From the date of recording, the lien shall
attach to all real property owned or acquired by the provider during
the pendency of the lien, provided the property is not exempt from
the execution of a lien and is located within the county in which the
lien is recorded. The lien shall have the force, effect, and
priority of a judgment lien.
(b) The department may record a lien on any real property owned by
the provider if the provider's annual report indicates the provider
has an unfunded statutory or refund requirement. A lien filed
pursuant to this section shall have the effect, force, and priority
of a judgment lien filed against the property.
(c) The department shall file a release of the lien if the
department determines that the lien is no longer necessary to secure
the applicant's or provider's performance of its obligations to the
depositors or residents.
(d) Within 10 days following the department's denial of a request
for a release of the lien, the applicant or provider may file an
appeal with the department.
(e) The department's final decision shall be subject to court
review pursuant to Section 1094.5 of the Code of Civil Procedure,
upon petition of the applicant or provider filed within 30 days of
service of the decision.
(a) When necessary to secure the interests of depositors
or residents, the department may require that the applicant or
provider reestablish an escrow account, return previously released
moneys to escrow, and escrow all future entrance fee payments.
(b) The department may release funds from escrow as it deems
appropriate or terminate the escrow requirement when it determines
that the escrow is no longer necessary to secure the performance of
all obligations of the applicant or provider to depositors or
The civil, criminal, and administrative remedies available
to the department pursuant to this article are not exclusive and may
be sought and employed by the department, in any combination to
enforce this chapter.
The department, in its discretion, may condition, suspend,
or revoke any permit to accept deposits, provisional certificate of
authority, or certificate of authority issued under this chapter if
it finds that the applicant or provider has done any of the
(a) Violated this chapter or the rules and regulations adopted
under this chapter.
(b) Aided, abetted, or permitted the violation of this chapter or
the rules and regulations adopted under this chapter.
(c) Had a license suspended or revoked pursuant to the licensing
provisions of Chapter 2 (commencing with Section 1250) or Chapter 3.2
(commencing with Section 1569).
(d) Made a material misstatement, misrepresentation, or fraud in
obtaining the permit to accept deposits, provisional certificate of
authority, or certificate of authority.
(e) Demonstrated a lack of fitness or trustworthiness.
(f) Engaged in any fraudulent or dishonest practices of management
in the conduct of business.
(g) Misappropriated, converted, or withheld moneys.
(h) After request by the department for an examination, access to
records, or information, refused to be examined or to produce its
accounts, records, and files for examination, or refused to give
information with respect to its affairs, or refused to perform any
other legal obligations related to an examination.
(i) Manifested an unsound financial condition.
(j) Used methods and practices in the conduct of business so as to
render further transactions by the provider or applicant hazardous
or injurious to the public.
(k) Failed to maintain at least the minimum statutory reserves
required by Section 1792.2.
( l) Failed to maintain the reserve fund escrow account for
prepaid continuing care contracts required by Section 1792.
(m) Failed to comply with the refund reserve requirements stated
in Section 1793.
(n) Failed to comply with the requirements of this chapter for
maintaining escrow accounts for funds.
(o) Failed to file the annual report described in Section 1790.
(p) Violated a condition on its permit to accept deposits,
provisional certificate of authority, or certificate of authority.
(q) Failed to comply with its approved financial and marketing
plan or to secure approval of a modified plan.
(r) Materially changed or deviated from an approved plan of
operation without the prior consent of the department.
(s) Failed to fulfill his or her obligations under continuing care
(t) Made material misrepresentations to depositors, prospective
residents, or residents of a continuing care retirement community.
(u) Failed to submit proposed changes to continuing care contracts
prior to use, or using a continuing care contract that has not been
previously approved by the department.
(v) Failed to diligently submit materials requested by the
department or required by the statute.
(a) If the department conditions, suspends, or revokes any
permit to accept deposits, provisional certificate of authority, or
certificate of authority issued pursuant to this chapter, the
provider shall have a right of appeal to the department. The
proceedings shall be conducted in accordance with Chapter 5
(commencing with Section 11500) of Part 1 of Division 3 of Title 2 of
the Government Code, and the department shall have all of the powers
granted therein. A suspension, condition, or revocation shall remain
in effect until completion of the proceedings in favor of the
provider. In all proceedings conducted in accordance with this
section, the standard of proof to be applied shall be by a
preponderance of the evidence.
(b) The department may, upon finding of changed circumstances,
remove a suspension or condition.
(a) During the period that the revocation or suspension
action is pending against the permit to accept deposits, provisional
certificate of authority, or certificate of authority, the provider
shall not enter into any new deposit agreements or continuing care
(b) The suspension or revocation by the department, or voluntary
return of the provisional certificate of authority or certificate of
authority by the provider, shall not release the provider from
obligations assumed at the time the continuing care contracts were
(a) If the department finds that any entity has violated
Section 1793.5 or one or more grounds exist for conditioning,
revoking, or suspending a permit to accept deposits, provisional
certificate of authority, or a certificate of authority issued under
this chapter, the department, in lieu of the condition, revocation,
or suspension, may impose an administrative fine upon an applicant or
provider in an amount not to exceed one thousand dollars ($1,000)
(b) The administrative fine shall be deposited in the Continuing
Care Provider Fee Fund and shall be disbursed for the specific
purposes of offsetting the costs of investigation and litigation and
to compensate court-appointed administrators when continuing care
retirement community assets are insufficient.
In the case of any violation or threatened violation of
this chapter, the department may institute a proceeding or may
request the Attorney General to institute a proceeding to obtain
injunctive or other equitable relief in the superior court in and for
the county in which the violation has occurred or will occur, or in
which the principal place of business of the provider is located. The
proceeding under this section shall conform with the requirements of
Chapter 3 (commencing with Section 525) of Title 7 of Part 2 of the
Code of Civil Procedure, except that no undertaking shall be required
of the department in any action commenced under this section, nor
shall the department be required to allege facts necessary to show
lack of adequate remedy at law, or to show irreparable loss or
(a) The district attorney of every county may, upon
application by the department or its authorized representative,
institute and conduct the prosecution of any action for violation of
this chapter within his or her county.
(b) This chapter shall not limit or qualify the powers of the
district attorney to institute and conduct the prosecution of any
action brought for the violation within his or her county of this
chapter or any other provision of law, including, but not limited to,
actions for fraud or misrepresentation.
(c) The department shall provide access to any records in its
control on request of a district attorney and shall cooperate in any
investigation by a district attorney.