The Overview

If you or a family member lives in a California continuing-care retirement community (CCRC) and paid an entrance fee with a promise of repayment, a new state law changes how and when that money comes back to you. California's Continuing care retirement communities: repayable contracts, AB 1983 became law when Gov. Gavin Newsom (D) signed it Sept. 18. When a CCRC runs into financial trouble, residents can lose some or all of their entrance fees, according to a U.S. Senate Special Committee on Aging hearing record, which described a bankruptcy in which a community used residents' entrance fees to stay afloat but ultimately could not pay promised refunds. ​

What the Law Does

The law creates a new contract type called a "repayable in sequential order contract," under which a CCRC promises to return all or part of an entrance fee based on the order in which contracts are terminated, not on whether a specific unit has been resold. Providers offering this contract must set up a dedicated repayment account, assign each terminated contract a sequential number, and pay former residents in that order from proceeds of future sequential-order contracts; the full amount owed must be paid within 14 calendar days after enough money exists in the account to cover that number.

The law also renames the existing resale-based refund contract as a "repayable conditioned on resale contract" and requires both contract types to disclose average and longest repayment or resale times over the prior five calendar years. For resale-based contracts, the existing 14-day payment deadline now runs from resale or reoccupancy of the unit. The State Department of Social Services, which already certifies and regulates CCRCs in California, oversees compliance under the existing framework the law amends.

Legislative Status

Asm. Blanca Rubio (D) sponsored the bill. The full Assembly passed it 72–0 on May 21 and the full Senate passed it 40–0 on Aug. 28. JD Supra described the law as creating a new "repayable in sequential order" contract option for California CCRCs.

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