March 20, 2014, Introduced by Senators MOOLENAAR, HILDENBRAND, SCHUITMAKER, GREGORY, WARREN, NOFS, MARLEAU, KAHN, MEEKHOF and KOWALL and referred to the Committee on Appropriations.
A bill to regulate the offer and sale of life interests and
long-term leases in independent living units, nursing homes,
retirement homes, homes for the aged, and adult foster care
facilities; to prohibit fraudulent practices in relation to the
offer and sale of those life interests and long-term leases; to
provide for the powers and duties of certain state governmental
agencies; to provide for penalties and remedies; to prescribe civil
sanctions; and to repeal acts and parts of acts.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 1. This act shall be known and may be cited as the
"continuing care community disclosure act".
Sec. 3. As used in this act:
(a) "Administrator" means a person that performs
administrative or operational functions within or in connection
with the continuing care community.
(b) "Advertisement or marketing communication" means any
disclosure statement, prospectus, pamphlet, circular, form letter,
written or electronic advertisement, social media or other sales
literature or advertising communication, including a written,
printed, or pictorial communication, or a communication by means of
a recorded telephone message or message spoken on the radio,
television, or similar communications media, intended for
distribution or transmission to prospective members in connection
with an offer or sale of a continuing care agreement.
(c) "Amortized component of an entrance fee" means that
component of an entrance fee amortized at the rate of 1-1/2% per
month, to reflect the cost of continuing care as provided in an
amortization schedule prepared by the continuing care community,
unless, in case of death, the amortization schedule provides for a
different amortization.
(d) "Change in fees" means a change in either the amount or
type of fees for continuing care, including entrance fees and
monthly service fees, except for any change in fees mandated by a
state or federal referral assistance program.
(e) "Continuing care" means providing or arranging for the
provision of some or all of the following services:
(i) A living unit.
(ii) Meals.
(iii) Assisted living or personal care service.
(iv) Skilled nursing.
(v) Rehabilitative services.
(vi) Medical care.
(vii) Social activities.
(viii) Supervision.
(ix) All-inclusive care for the elderly.
(x) Continuing care at home.
(f) "Continuing care agreement" means a written agreement,
including a long-term lease or an agreement conferring a life
interest, between a member and a continuing care community for
continuing care upon payment of an entrance fee.
(g) "Continuing care at home" means, upon payment of an
entrance fee and subject to the terms and conditions of a
continuing care agreement, providing or arranging for the provision
of all of the following at the member's home other than a living
unit:
(i) Continuing care.
(ii) Access to comprehensive services, including, but not
limited to, care coordination, home assessments, and assistance
with activities of daily living.
(iii) Services with a higher level of care when required by the
health condition of the member, as determined by the continuing
care community in consultation with the member or the member's
representative.
(h) "Continuing care community" means a retirement community
in which a person undertakes to provide or arrange for continuing
care and which is 1 or more of the following:
(i) An adult foster care facility.
(ii) A home for the aged.
(iii) An independent living unit.
(iv) A nursing home.
(v) A home care services agency.
(vi) A hospice.
(vii) A place that undertakes to provide care to a member for
more than 1 year.
Sec. 5. As used in this act:
(a) "Department" means the department of licensing and
regulatory affairs.
(b) "Entrance fee" means money paid in a lump sum or
installments or property transferred pursuant to a continuing care
agreement before initiation of continuing care for 1 or more
individuals and that confers the right to the continuing care.
(c) "Executive officer" means an individual holding executive
power in an organization and generally responsible for the day-to-
day operations of the organization, such as a chief executive
officer, chief financial officer, or chief operating officer.
(d) "Initiation of continuing care" means the commencement of
a member's right to possess a living unit in a continuing care
community or the commencement of the actual provision of continuing
care, whichever occurs first.
(e) "Life interest" means the right, upon payment of an
entrance fee, to receive continuing care for life.
(f) "Living unit" means a physical space within a continuing
care community set aside for the exclusive use or control of 1 or
more specific members.
(g) "Long-term lease" means an agreement between a member and
a continuing care community whereby the member upon payment of an
entrance fee has the right to occupy a space for more than 1 year
but not for the life of the member.
Sec. 7. As used in this act:
(a) "Member" means an individual who enters into a continuing
care agreement with a continuing care community.
(b) "Monthly service fee" means a monthly charge to a member
for continuing care and not as rent or a daily prorated portion
thereof.
(c) "Nonrefundable portion of the entrance fee" means the
amortized component of an entrance fee and any other component of
an entrance fee that is not refundable upon death of the member
under the terms and conditions of a continuing care agreement.
(d) "Offer of a continuing care agreement" includes an attempt
to offer to sell, or a solicitation of an offer to enter into, a
continuing care agreement.
(e) "Order" means a consent, authorization, approval,
prohibition, or requirement applicable to a specific case issued by
the department.
Sec. 9. As used in this act:
(a) "Person" means an individual, partnership, corporation,
association, governmental entity, or other legal entity.
(b) "Publish" means to publicly issue or circulate by
newspaper, mail, radio, television, or electronic means or
otherwise to disseminate to the public.
(c) "Refundable portion of an entrance fee" means the
component of an entrance fee that is non-amortized and is
refundable to the member or his or her estate under the terms and
conditions of the continuing care agreement.
(d) "Reportable change", subject to subdivision (e), means any
of the following:
(i) Any change in the tax status of the registrant.
(ii) Termination of the registrant's sponsorship, or a portion
thereof, by a religious, nonprofit, or proprietary organization or
group, or the establishment of any new sponsorship for the
registrant.
(iii) Denial, suspension, or revocation of any license,
certification, or registration held by the registrant for that
continuing care community and required by state or federal law.
(iv) The entry of any cease and desist order, other order
similar in nature, or a temporary or permanent injunction by a
court of competent jurisdiction that restricts the registrant from
offering continuing care agreements to prospective members or
restricts the registrant from operating in any material respect in
compliance with the most recent registration.
(v) Any substantive amendments or changes in the disclosure
statement, continuing care agreement, or the rules and regulations
of the continuing care community.
(vi) Any significant alteration in the care, amenities, or
services indicated in the disclosure statement required under
section 19(1)(c) or 25(2)(b) or continuing care agreement.
(vii) A 10% or greater change in monthly service fees.
(viii) A variation of 10% or more between the actual amount of
any of the following items and the amount forecast in the
continuing care community's most recent pro forma financial plan
filed under section 19 or 25:
(A) Total assets.
(B) Total liabilities.
(C) Equity.
(D) Fund balance or deficit.
(E) Long-term debt.
(F) Total revenue.
(G) Total expenses.
(H) Cash flow.
(ix) A violation of any debt covenant applicable to the
applicant or registered continuing care community that is not cured
within 30 days after discovery by the applicant or continuing care
community.
(e) "Reportable change" does not include a change in the value
of an interest rate swap not related to the termination of the
interest rate swap.
Sec. 11. As used in this act:
(a) "Sale of a continuing care agreement" means the execution
of a continuing care agreement.
(b) "Sales agent" means any individual who represents a
continuing care community in effecting or attempting to effect the
offer or sale of a continuing care agreement.
(c) "Sell a continuing care agreement" means to secure the
sale of a continuing care agreement.
(d) "State" means a state of the United States, the District
of Columbia, the Commonwealth of Puerto Rico, the United States
Virgin Islands, or any territory or insular possession subject to
the jurisdiction of the United States.
Sec. 13. (1) A continuing care community may be organized and
operated by either a for-profit or nonprofit entity. The entity's
purposes shall be limited to ownership, organization, and operation
of the continuing care community.
(2) A continuing care community registered or seeking
registration under this act shall have and continuously maintain in
this state a registered office and a resident agent. If the entity
that owns and operates the continuing care community is not a
domestic entity, that entity shall procure and continuously
maintain a certificate of authority to conduct affairs in this
state.
(3) Each continuing care community shall elect or appoint at
least 1 member, along with an alternate, to serve in an advisory
capacity to its governing body. The member shall be notified in
advance of and invited to attend all meetings of the governing
body. The member shall not have a vote unless the governing body
grants such voting rights. The continuing care community is
responsible for expenses incurred by the member representative in
fulfilling his or her duties under this section.
Sec. 15. (1) Subject to subsections (3) and (4), a continuing
care community shall not offer to enter into or enter into a
continuing care agreement unless the continuing care community is
registered or exempt from registration under this act.
(2) Subject to subsections (3) and (4), this act applies to
all written or oral arrangements between a continuing care
community and a member or prospective member in connection with the
offer or the sale of a continuing care agreement.
(3) An offer or sale of a continuing care agreement is subject
to this act if any of the following apply:
(a) Subject to subsection (4), the offer is made or accepted
in this state.
(b) The continuing care community is or will be operated in
this state.
(c) The offer originates from this state and is received at
the place to which the offer is directed.
(d) The offer is directed by the offeror to this state and is
received in this state.
(4) An offer of a continuing care agreement shall not be
considered to be made in this state solely because of 1 or more of
the following circumstances:
(a) Circulation in this state, by or on behalf of a publisher,
of a bona fide newspaper, electronic media, or other publication of
general, regular, and paid circulation that has had more than 2/3
of its circulation outside this state during the past 12 months.
(b) Reception in this state of a radio or television program
originating outside this state.
Sec. 17. (1) The department, by rule or order, may exempt from
registration requirements of this act, in whole or in part, a
transaction, person, or industry in accordance with this section.
(2) In determining whether an exemption shall be issued, the
department shall consider all of the following:
(a) Whether information that would be required to be disclosed
in a registration is material in determining whether the continuing
care community has a reasonable chance of success.
(b) Whether the exemption is in the public interest.
(3) To obtain an exemption from registration, an entity shall
submit to the department a letter requesting an exemption, together
with accompanying documentation that does all of the following:
(a) Demonstrates the entity grants each member the right to
cancel a continuing care agreement without cause upon 30 days'
notice and to receive a full refund of the entire entrance fee paid
with no reduction for sale expenses or for the cost of
refurbishing.
(b) Demonstrates the entity has no long-term debt, excluding
member refund obligations, has adequate reserves for refund and
maintenance, and has the ability to meet current obligations and
debt service requirements.
(c) Addresses each section or subsection of this act and each
rule, if any, that is requested to be waived and each transaction,
person, or industry requested to be exempted.
(4) An entity exempted from registration, in whole or in part,
shall notify the department, in writing, within 30 days after the
occurrence of any reportable change affecting the basis for the
exemption.
(5) An entity that is exempted from the registration
requirements of this act remains subject to requirements for
financial statements as otherwise required under sections 19 and 25
and sales and occupancy reports as otherwise required under section
49.
(6) A continuing care community that is licensed in whole or
part under article 17 of the public health code, 1978 PA 368,
333.20101 to 333.22260, or the adult foster care facility licensing
act, 1979 PA 218, MCL 400.701 to 400.737, is exempt from any rules
promulgated under article 17 of the public health code, 1978 PA
368, 333.20101 to 333.22260, or the adult foster care facility
licensing act, 1979 PA 218, MCL 400.701 to 400.737, that would
interfere with a continuing care community's ongoing delivery of
continuing care to a member or the unencumbered movement of a
member between areas of a continuing care community subject to
different licensure categories.
(7) The relationship between a continuing care community and a
current or prospective member is not subject to laws regulating the
relationship between a landlord and a current or prospective
tenant.
Sec. 19. (1) A continuing care community seeking initial
registration under this act shall submit the following information
to the department:
(a) An initial registration application on a form prescribed
by the department, signed and verified by an individual authorized
to act on behalf of the continuing care community.
(b) The organizing documents of the applicant entity, and all
amendments thereto, authorizing the entity to conduct business in
this state and a copy of the most recent annual report, if required
under state law.
(c) A disclosure statement that complies with section 37.
(d) A copy of each form of continuing care agreement for the
continuing care community, which shall comply with section 39, and
all exhibits or addenda to each form of continuing care agreement.
(e) A copy of any rules, policies, and procedures of the
applicant entity required for compliance with this act.
(f) A statement, on a form prescribed by the department, of
whether any of the following apply to any executive officer or
director identified in the application for registration:
(i) Has been convicted of a felony 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
misappropriation of property.
(ii) Is subject to an injunctive or restrictive order or
federal or state administrative order relating to business activity
or health care as a result of an action brought by a public agency
or department, including, without limitation, actions affecting a
license to operate a continuing care community, foster care
facility, nursing home, retirement home, or home for the aged.
The statement shall, if applicable, specify the court or agency,
any penalty imposed or damages assessed, and the date of conviction
or judgment or the date, nature, and issuer of the order.
(g) The social security numbers of the executive officers of
the continuing care community, for purposes of a detailed
background check. The department may obtain a credit report on any
executive officer. Information under this subdivision must be
submitted as a physical copy and is exempt from disclosure under
the freedom of information act, 1976 PA 442, MCL 15.231 to 15.246.
(h) An executed irrevocable consent to service of process
consistent with section 61, on a form prescribed by the department,
unless the applicant entity is organized under the laws of this
state.
(i) Financial statements that comply with section 41.
(j) Unless waived by the department, a statement of the use of
proceeds of entrance fees to be collected by the continuing care
community.
(k) A pro forma financial plan that complies with section 43.
(l) A feasibility study, unless waived in the reasonable
discretion of the department. The feasibility study shall be made
available for review upon the request of a member or prospective
member. The department may require the feasibility study to include
1 or more of the following:
(i) A statement of the purpose of the continuing care community
and the need for the proposed services.
(ii) Documentation of the financial resources to be made
available for the continuing care community.
(iii) A plan demonstrating the financial feasibility of the
proposed continuing care community, including future funding
sources.
(iv) An actuarial forecast that has been reviewed by a
qualified actuary.
(v) A study demonstrating the proposed market for the
continuing care community.
(vi) A detailed statement of the continuing care services to be
offered.
(m) For a continuing care community seeking to offer
continuing care at home, both of the following:
(i) A detailed business plan on how the needs and requirements
of the members receiving continuing care at home will be met.
(ii) Agreements showing how and under what circumstances future
specialized care, including assisted living, dementia care, and
skilled nursing, will be provided when appropriate.
(n) The name and address of the registered office and resident
agent required under section 13(2).
(o) Other material information as may reasonably be required
by the department.
(p) Other material information as the applicant wishes to
include.
(q) The initial registration application fee prescribed by
section 31.
(2) An application may request and the department may order
that 2 or more retirement communities be registered as a single
continuing care community.
(3) The department may consider the opinions, appraisals, and
reports of engineers, appraisers, or other experts presented by an
applicant or an interested party on a question of fact concerning
or affecting the continuing care agreements proposed to be offered
and sold.
Sec. 21. (1) If information required under section 19(1)(o) is
not furnished by the applicant, or the department considers
information submitted under section 19(1)(o) to be unreliable or
substantially incomplete, the department may investigate any
matters concerning the missing or unreliable information. The
applicant shall pay the actual cost of the investigation as
determined in the reasonable discretion of the department. The
payment shall be deposited in the state treasury to the credit of
the department.
(2) Effective 60 days after the department receives a
registration application, the application shall be considered to be
administratively complete unless the department proceeds as
provided in subsection (3).
(3) If, before the expiration of the 60-day period under
subsection (2), the department notifies the applicant that the
application is not administratively complete, specifying the
information necessary to make the application administratively
complete, or notifies the applicant that the fee required to
accompany the application has not been paid, specifying the amount
due, the running of the 60-day period under subsection (2) is
tolled until the applicant submits to the department the specified
information or fee amount due.
(4) Not more than 180 days after the expiration of the 60-day
period under subsections (2) and (3), the department shall enter an
order registering the continuing care community or denying the
registration and submit a copy of the order to the applicant. If
the department denies registration, the order shall specifically
describe the deficiencies in the registration application or
instances of noncompliance by the applicant with the requirements
of this act.
(5) If an order approving or denying registration is not
timely entered under subsection (4), the continuing care community
shall be considered to be registered by order of the department
unless the applicant has consented in writing to a waiver of
automatic registration.
Sec. 23. (1) The fact that an application for registration has
been filed or approved does not constitute any of the following:
(a) Approval of or a finding regarding the accuracy of any
information in or accompanying the registration application.
(b) A recommendation, approval, or other finding by the
department concerning the merits or qualifications of a person,
life interest, long-term lease, transaction, or continuing care
community.
(2) A person shall not make or cause to be made to a
prospective member a representation inconsistent with this section.
Sec. 25. (1) A continuing care community registered under this
act shall submit an application for registration renewal within 120
days after each fiscal year-end unless waived in the reasonable
discretion of the department.
(2) A registration renewal application shall be in the form
and content prescribed by the department, which shall include at a
minimum all of the following:
(a) A registration renewal application form, as prescribed by
the department, which shall be signed and verified by the
administrator.
(b) The materials described in section 19(1)(b), (c), (d),
(e), (f), (i), (k), (n), (o), and (p). The disclosure statement and
each form of continuing care agreement for the continuing care
community, including all exhibits or addenda, shall be in a format
that identifies revisions to the last documents approved by the
department.
(c) The materials described in section 19(1)(g), but only to
the extent that an executive officer was not previously in that
position when the last application, whether an initial or renewal
application, was filed.
(d) Unless waived in the reasonable discretion of the
department, a feasibility study that complies with requirements
under section 19, if any of the following apply:
(i) The applicant proposes the construction of a number of new
living units equal to or greater than 25% of the number of existing
living units in the continuing care community.
(ii) The applicant proposes new or additional long-term debt
for the construction of new living units and a feasibility study is
required by the lender for the long-term debt issue.
(e) The registration renewal application fee prescribed by
section 31.
Sec. 27. (1) Subject to subsection (2), an application for
renewal of a registration shall be processed in the same manner as
an initial registration application under section 21.
(2) If, within 60 days after receiving notice from the
department under section 21(3), an applicant fails to complete the
application or pay the required fee, the department may deny the
registration renewal application.
(3) If an applicant files a renewal application under section
25, the current registration continues in effect until a new
registration renewal order is issued or denied or the department
revokes the registration.
(4) If an application for registration renewal is not filed
120 days after the continuing care community's fiscal year-end and
an extension has not been approved by the department, the
department may issue an order requiring the continuing care
community to submit an application under section 19 or an order
under section 67 revoking the continuing care community's
registration.
Sec. 29. (1) The department may extend the term of an existing
registration for a continuing care community for not more than 3
fiscal years if the department determines that all of the following
requirements are met:
(a) The continuing care community was registered under the act
during the immediately preceding 5 fiscal years.
(b) The continuing care community meets all of the following
financial requirements:
(i) Has not committed a material default in the payment of
principal or interest on its indebtedness during the immediately
preceding 3 years.
(ii) Has had income or revenues in excess of its expenses in
each of the immediately preceding 3 years.
(iii) Has a ratio of current assets to current liabilities of
not less than 1:1.
(iv) Has reserves or funds designated for the payment of its
indebtedness in an amount equal to or greater than 1 year's debt
service.
(c) The continuing care community or any person with joint and
several liability is not the subject of any action under sections
55 to 63.
(2) Waiver of an application for registration under subsection
(1) does not relieve a registered continuing care community from
the obligation to submit an amended registration if required under
section 27 or the fees required in section 31.
(3) Notwithstanding the waiver of an application for
registration renewal under subsection (1), the registrant shall
submit, within 120 days after each fiscal year, financial
statements for that fiscal year that comply with section 41. The
registrant also shall comply with section 49(2).
Sec. 31. (1) The department shall charge and collect the fees
required under this act. Fees and charges collected shall be
transmitted to the state treasurer as they are received,
accompanied by a statement of those fees and charges and shall be
credited to the general fund.
(2) The fee for filing an application for initial registration
of the offer or sale of continuing care agreements or continuing
care at home agreements is $250.00. If an application for
registration is withdrawn before the effective date of registration
or a stop order is issued before that date, the department shall
retain the following:
(a) A fee of $25.00 if the initial review has not been
commenced.
(b) The full application fee if the review has commenced.
(3) The fee for filing an application for registration renewal
is $100.00.
Sec. 33. (1) A registrant shall notify the department promptly
in writing within 45 days of any reportable change with respect to
the continuing care community measured semiannually.
(2) A registrant shall submit to the department an application
to amend a registration to address reportable changes or to address
any proposed revisions to the disclosure statement required under
section 19(1)(c) or 25(2)(b) or any form of continuing care
agreement previously approved by the department. The disclosure
statement and each form of continuing care agreement for the
continuing care community, including all exhibits or addenda, shall
be in a format that identifies revisions to the last documents
approved by the department. If required by the department, the
application to amend an application shall include a pro forma
financial plan that complies with section 43. The amended
registration shall be signed and verified by the administrator and
is subject to review and approval by the department within 30 days
after its submission. The department may require the production of
other financial information reasonably necessary for the purposes
of this act.
(3) An amendment to an application filed after the effective
date of the registration and approved by the department takes
effect on the date determined by the department, having due regard
for the public interest and the protection of prospective members.
Sec. 35. (1) A continuing care community shall deliver to a
prospective member and all continuing care agreements pertinent to
the continuing care sought by the prospective member and the
disclosure statement most recently approved by the department under
section 21, 27, or 33. The delivery shall be by a method considered
acceptable by the continuing care community and the prospective
member and shall occur by the earlier of the following:
(a) The continuing care community's acceptance of a
nonrefundable application fee from the prospective member, unless
all of the following apply:
(i) The application fee does not exceed $500.00.
(ii) The availability of a disclosure statement is disclosed in
writing to the prospective member.
(iii) A disclosure statement is made available to the
prospective member upon request.
(b) The prospective member's payment of at least 10% of the
total entrance fee to reserve a unit.
(2) Upon execution of the continuing care agreement and
payment of the full entrance fee amount, the continuing care
community shall provide the member with a physical copy of the
disclosure statement and executed continuing care agreement.
(3) A continuing care community shall make a feasibility study
required under section 19 available for review by a member or
prospective member upon request.
Sec. 37. (1) Subject to subsection (3), a disclosure statement
required under this act shall include at a minimum the following,
unless waived by the department in the reasonable exercise of
discretion:
(a) The name and address of the continuing care community and
its affiliated parent or subsidiary business entity or partnership.
(b) Information concerning organization of the legal entity of
the continuing care community as prescribed by the department.
(c) A statement of whether or not the continuing care
community or an affiliate, parent, or subsidiary is a religious,
nonprofit, or proprietary organization. If the continuing care
community uses a name designating or inferring a religious
affiliation, a statement explaining the relationship with the
religious organization or group or a statement that there is no
relationship shall be included.
(d) Information concerning the identity and experience of
persons affiliated with the continuing care community as the
department shall prescribe.
(e) Whether the continuing care community participates in
medicare or medicaid programs, or both.
(f) If the department has waived the submission of audited
financial statements pursuant to section 41, a statement that an
individual who purchases membership in a continuing care community
during that period is entitled to damages or rescission under the
same terms as provided in section 81 if, upon the availability of
audited financial statements or any other valid basis, the
department finds in the reasonable exercise of its discretion that
material adverse financial conditions existed as of the date of the
financial statements which were not disclosed.
(g) A statement that registration does not constitute approval
of or a finding regarding the accuracy of any information in or
accompanying the registration application.
(h) A statement of all fees required of members, including a
statement of the entrance fee, any monthly services fees and other
fees or charges that may be assessed to a member or prospective
member by the continuing care community.
(i) A statement that if a member dies before occupying the
continuing care community, or through illness, injury, or
incapacity would be precluded from being a resident under the terms
of the lease, the continuing care agreement is automatically
canceled and the member or a legal representative of the member
shall receive a full refund of all money paid to the continuing
care community. Those costs incurred by the continuing care
community at the request of the member and set forth in writing in
a separate addendum are not required to be refunded.
(j) A statement that monthly service fees and other fees
assessed to a member are subject to increase by the continuing care
community based on the reasonable cost of operations including the
provision of care and services, and that the continuing care
community shall give advance notice of not less than 60 days to
each member before a change or increase in fees becomes effective.
(k) A statement that members may be charged assessments and a
statement of the method used to allocate any assessment.
(l) A statement that the continuing care agreement is subject
and subordinate to any mortgages on the property or any other
creditors with a preferred status.
(m) A statement as to whether entrance fees are subject to an
escrow or other arrangement under section 43, including a
description of any applicable arrangement.
(n) A statement of the proposed application of the proceeds of
the entrance fee by the continuing care community.
(o) A statement of the location and description of any
physical property that is essential for and used or proposed to be
used for the provision of continuing care.
(p) A statement describing the continuing care services
provided and the extent to which medical care is furnished.
(q) A statement describing the health and financial conditions
required for a member to qualify for or to remain in the continuing
care community, including temporary or permanent transfer of the
member from his or her original living unit to a different type of
living unit or different level of care or services, and whether a
temporary or permanent transfer may result in termination of the
continuing care agreement.
(r) A statement that a member may rescind without penalty a
continuing care agreement within 7 days after executing the
agreement and that the entrance fee or the portion of the entrance
fee paid by the member shall be held by the continuing care
community for the benefit of the member in a separate escrow
account during that 7-day rescission period. A member shall not be
required to initiate continuing care before the expiration of the
7-day rescission period. Death of a member within the 7-day
rescission period automatically terminates the continuing care
agreement, and the continuing care community shall within 30 days
refund any entrance fee or portion of an entrance fee paid.
(s) A statement that following the 7-day rescission period
under subdivision (r), termination of a continuing care agreement,
whether by the member or, as provided in subdivision (u), as a
result of a member's death, will result in a refund of the entrance
fee within 30 days after the fulfillment of the conditions for a
refund set forth in the continuing care agreement. If the
continuing care agreement is for continuing care at home, the
refund shall be paid within 60 days after termination.
(t) A statement that the refundable portion of the entrance
fee is equal to the total entrance fee paid less all of the
following:
(i) The nonrefundable portion of the entrance fee.
(ii) A sales cost in conjunction with the continuing care
agreement, not to exceed 8% of the entrance fee.
(iii) A refurbishing fee that is the greater of 4% of the
entrance fee or the actual costs of refurbishing the living unit if
actual costs are known at the time of the refund and if an itemized
list of actual costs is provided to the member.
(u) A statement that upon the death of a member, the
continuing care agreement shall terminate as follows:
(i) As of the date that all possessions of the deceased member
are removed from the unit if the deceased member was the sole
occupant.
(ii) Immediately if the deceased member occupied a living unit
with another member. Any refundable portion of the second person's
entrance fee shall be refunded within 60 days after the death of
the first member, but the continuing care agreement shall remain in
effect for the living member.
(v) A detailed description of how the entrance fee refund is
affected if a member moves from his or her original living unit to
a different living unit.
(w) A statement as to whether the continuing care agreement
terminates so that a refund of the entrance fee is due if a member
permanently or temporarily transfers to a different level of care
within the continuing care community.
(x) A statement setting forth the conditions upon which a
member may reoccupy the member's living unit after termination of
the continuing care agreement.
(y) A statement of the fees that will be charged if a member
of the continuing care community marries, the terms and conditions
as to membership in the continuing care community by the new spouse
of a member or in the event of the divorce of a member, and the
consequences if the new spouse does not meet the requirements for
membership.
(z) A statement describing the circumstances under which a
person will be permitted to remain a member of the continuing care
community in the event of possible financial difficulties of the
member. The disclosure statement shall also specify whether, if
financial assistance is provided to the member either through a
charitable fund, spend down of the entrance fee otherwise required
for continued membership, reduction of monthly service fees or
other fees assessed under the continuing care agreement or under
some other arrangement, the financial assistance will either:
(i) Be offset from the entrance fee refund due to the member or
the member's estate upon termination of the continuing care
agreement and upon removal of all possessions of the member or
deceased member from the unit.
(ii) Vest in the continuing care community in the form of a
claim for repayment of such financial assistance against the member
or the member's estate.
(aa) Other material information as required by the department.
(bb) Other material information that the applicant or
registrant wishes to include.
(cc) The following items must be included in the beginning of
the disclosure statement in all capital letters and in
substantially the following language:
(i) "You may cancel the purchase and receive a full refund
within 7 days after either making a deposit and receiving a copy of
the disclosure statement or executing the continuing care
agreement. You are not required to move into the continuing care
community before the expiration of this 7-day period.".
(ii) "The purchase of a life interest or long-term lease is an
investment that may involve a high degree of risk, and you should
seek advice from an attorney or other financial advisor who is
independent of the continuing care community.".
(iii) "This disclosure statement is required by law to contain
all material facts regarding the offering it makes. No person is
authorized to make any promises in connection with this offering
other than those contained in this disclosure statement.".
(iv) "The department of insurance and financial services (DIFS)
has not passed upon the accuracy of this disclosure statement or
approved or disapproved of the offering described herein. Any
representation to the contrary is unlawful and should be reported
to the department.".
(v) "If you enter into a life interest or long-term lease
during the period when financial statements submitted by the
continuing care community to the department of insurance and
financial services are unaudited, you are entitled to damages or
rescission if the department finds in the reasonable exercise of
its discretion that material adverse conditions existed at the date
of the financial statements and were not disclosed.".
(vi) "More complete information is on file with DIFS and is
available free of charge at the offices of the continuing care
community.".
(2) Subject to subsection (3), a disclosure statement shall be
set forth in not less than 12-point type. The department may
prescribe the format of a disclosure statement or require a
registrant or applicant to set forth in its disclosure statement
potential adverse information in a position and in a type size
specified by the department.
(3) The department may accept, in place of the disclosure
statement that meets the requirements set forth in subsections (1)
and (2), a disclosure statement form required by a federal
government agency or a government agency of another state that the
department has determined by rule or order to meet the requirements
of this section.
Sec. 39. A continuing care agreement shall meet all of the
following requirements:
(a) Specify in reasonable detail the rights, privileges,
liabilities, and obligations of each party to the continuing care
agreement with respect to the statements required in the disclosure
statement under section 37(1)(h) to (bb).
(b) Specify whether a continuing care agreement may be
terminated due to a material breach by either party and if so, what
constitutes a material breach.
(c) Specify that the continuing care community may provide
access to an adequate alternative facility that will provide care
for the member, in place of or in mitigation of any damages.
(d) Specify that the continuing care community will not
terminate a member without 30 days' written notice unless the
continuing care community provides access to an adequate
alternative facility.
(e) Each continuing care agreement shall be set forth in not
less than 12-point type. The department may prescribe the format of
a continuing care agreement or require a continuing care community
to set forth in a continuing care agreement potential adverse
information in designated positions and in a type size specified by
the department.
Sec. 41. (1) Financial statements under section 17, 19, or 25
shall meet all of the following requirements:
(a) Be submitted with a statement of any adverse material
changes in the financial condition of the entity from the date of
the financial statement.
(b) Be an attachment to, and integral part of, the disclosure
statement.
(c) Subject to subdivision (d), be of form and content
required by the department.
(d) Not be consolidated financial statements except under
circumstances prescribed by the department. Requirements imposed by
the department under subdivision (c) or this subdivision shall be
consistent with generally accepted accounting principles or other
nationally recognized accounting standards applicable to the
applicant.
(e) Be submitted within 120 days after the fiscal year-end.
(f) Be audited and prepared by an independent certified public
accountant in accordance with generally accepted auditing
standards, subject to all of the following:
(i) Unaudited financial statements may be submitted if the
applicant has not been in existence for 1 complete fiscal year.
(ii) The department may waive this requirement if it is not
necessary for the protection of the public. The department may
impose conditions and restrictions on the waiver that it considers
appropriate.
(iii) Unaudited financial statements shall be accompanied by the
following written disclosure, or a substantially equivalent
statement, immediately adjacent thereto, in all capital letters and
at least 14-point type:
"These financial statements are prepared without audit. A
certified public accountant has not examined the financial
statements and accordingly has expressed no opinion on them.".
(iv) If the audited financial statements are more than 120 days
old, they shall be submitted with current unaudited financial
statements.
(2) Audited financial statements filed with the department
shall include a consent of the certified public accounting firm,
signed and dated at or near the effective date of the registration
order, approving the use of its name and its opinion in the
disclosure statements required under section 19(1)(c) or 25(2)(b)
and registration application. In the case of a substantial delay in
effectiveness or an adverse material change in the filing, the
department may require an updated consent.
(3) If the independent certified public accountant engaged as
the principal accountant to audit the continuing care community's
financial statements was not the principal accountant for the
continuing care community's most recently filed audited financial
statements, or a legal successor thereto, then all of the following
apply:
(a) The continuing care community shall furnish the department
with a statement of the date when the current independent
accounting firm was engaged and whether, in the 78 weeks preceding
the engagement, there were any disagreements with the former
principal accounting firm in a matter of accounting principles or
practices, financial statement disclosure, or accounting procedure
which, if not resolved to the satisfaction of the former accounting
firm, would have required a reference, in the accounting firm's
opinion, to the subject matter of the disagreement.
(b) The continuing care community shall request the former
accounting firm to furnish the continuing care community with a
letter stating whether it agrees with the statement of the
continuing care community under subdivision (a) and, if not,
stating why it does not agree. The letter shall be furnished by the
continuing care community to the department.
(4) If an entity owns multiple continuing care communities or
if the organization has 1 or more affiliates, the department may
require additional financial information for each continuing care
community or affiliate but shall not require any audited financial
statements other than the consolidated financial statements of the
entity.
(5) The department may require a continuing care community to
deposit with an escrow agent acceptable to the department an amount
the department considers necessary for the continuing care
community to fulfill its obligations or may require the continuing
care community to furnish a surety bond or guaranty as approved by
the department if both of the following apply:
(a) One or more of the following apply:
(i) The department determines in the reasonable exercise of its
discretion that the financial condition of the continuing care
community may materially jeopardize the care of current or
prospective members.
(ii) The department determines that the continuing care
community is insolvent.
(iii) The department determines that the continuing care
community is in jeopardy of becoming insolvent.
(b) That the requirement is necessary and appropriate to
protect current or prospective members.
Sec. 43. (1) A pro forma financial plan shall include a
financial forecast for a period of 3 years on the same basis that
the financial statements are presented, including the following:
(a) A balance sheet.
(b) A statement of changes and activities or statement of
operations.
(c) A statement of cash flow.
(d) Expected cash proceeds from sales of continuing care
agreements based on projected occupancy and attrition rates.
(e) Expected cash proceeds from monthly service fees,
donations, interest, and entrance fees.
(f) Amount of reserves expected to be provided for capital
replacement, improvements, maintenance, refunds, and other
expenses.
(g) A statement of assumptions and principles used to make the
forecast.
(2) The department may require a continuing care community to
deposit entrance fees with an escrow agent pursuant to section 45
or to establish an alternative financial arrangement pursuant to
section 47 as approved by the department and as necessary and
appropriate to protect current or prospective members.
Sec. 45. (1) If a member pays funds to a continuing care
community before occupancy, the funds shall be held in a trust
account unless this requirement is waived or modified by the
department. Any interest or other income from the investment of the
funds held in the trust account shall accrue to the benefit of the
member. The department may, by rule or order, determine the
conditions of the trust account. Funds placed with a continuing
care community for continuing care at home are not subject to the
requirements of this subsection.
(2) The department may require a deposit with an escrow agent
acceptable to the department of an amount the department considers
necessary for the continuing care community to fulfill its
obligations if both of the following apply:
(a) The department finds 1 or more of the following:
(i) The financial condition of the continuing care community
may materially jeopardize the care of members.
(ii) The continuing care community is insolvent or in jeopardy
of becoming insolvent.
(iii) The continuing care community is not meeting its pro forma
financial plan.
(b) The department determines the escrow to be necessary and
appropriate to protect prospective members.
(3) In addition to an escrow imposed by the department under
subsection (2), the department may summarily order the temporary
suspension of a continuing care community's approval to offer
continuing care agreements pending a hearing under section 67. The
department may direct the escrow agent to return all the escrowed
funds to the members if any of the following apply:
(a) The department finds that any condition of an escrow
agreement has not been satisfied or that any provision of this act
or rules promulgated under this act has not been complied with.
(b) The registration or exemption of the continuing care
community is revoked.
(4) An escrow agreement required under this section shall
comply with all of the following:
(a) Be executed by the escrow agent and continuing care
community.
(b) State that its purpose is to protect the members, that the
escrow is for the benefit of each member in the amount paid by each
member, and that all funds subject to the escrow shall be
deposited, held, or guaranteed under the arrangement to remain the
property of the respective members for whose account the proceeds
were deposited and not subject to any liens or charges by the
escrow agent or to judgments, garnishments, or creditor's claims
against the continuing care community until the funds are released
pursuant to this section.
(c) State that the department is authorized to inspect the
records of the escrow agent relating to the escrow account.
(d) State that, upon order of the department or a court of
competent jurisdiction, the escrow agent shall release and pay over
the funds, or a portion thereof, to the continuing care community
or member as ordered.
(e) Include on its face an acknowledgment executed by the
department indicating approval of the form and content of the
escrow agreement. The acknowledgment does not make the department a
party to the escrow agreement.
(5) An escrow account under this section shall comply with all
of the following:
(a) Checks shall be made payable to the depository approved by
the department.
(b) The account shall be established with an escrow agent
acceptable to the department and the funds shall be kept and
maintained in an account separate and apart from any depository
account of the continuing care community.
(c) All proceeds deposited in escrow remain the property of
the respective members for whose account the proceeds were
deposited and are not subject to a lien or charge by the escrow
agent or to a judgment, garnishment, or creditor's claim against
the continuing care community until the funds are released to the
continuing care community as provided in this section.
(d) If required by the department, a quarterly statement
indicating the status of the escrow account shall be furnished by
the escrow agent to the department.
(6) After submission of a request for release of funds
pursuant to subsection (7), the department may approve release to
the continuing care community of funds held in escrow pursuant to
subsection (2). However, the continuing care community shall not
change the methodology for calculating a release of funds except as
approved by the department. Funds shall be released in the
following amounts:
(a) An amount up to 75% of the funds as a result of occupancy
of at least 75% of living units in the continuing care community.
The continuing care community may request release of an additional
5% of the funds in proportion to each 5-percentage-point increase
in occupancy. Upon achieving 90% occupancy of living units, the
continuing care community may request and the department may
authorize release of all the funds. For purposes of this
subsection, occupancy shall be measured by the total number of
living units of the entire continuing care community designated for
occupancy under continuing care agreements.
(b) An amount equal to 1-1/2% per month of the total entrance
fees escrowed that are fully amortized and earned by the continuing
care community, with amortization beginning as of the date of
occupancy of a living unit by the member. Upon achieving 90%
occupancy of living units, the continuing care community may
request and the department may approve release of all funds subject
to the escrow arrangement.
(7) A request for release of escrow funds or for the
discontinuance or modification of an escrow arrangement shall be
submitted by the administrator and shall include the following
documentation, unless the documentation was previously provided in
the most recent registration application or unless waived or
modified, in whole or in part, by the department in the reasonable
exercise of its discretion:
(a) The methodology under subsection (6) for calculating the
amount of funds to be released and supporting documentation.
(b) A statement by the continuing care community that the
funds were placed in escrow as required by an order of the
department imposing the escrow arrangement and pursuant to the
terms and conditions of the escrow agreement.
(c) A statement by the continuing care community that it has
satisfied all obligations for release of funds from escrow.
(d) If required by the department, a statement by the escrow
agent, signed by an appropriate officer, setting forth the
aggregate amount of escrowed funds placed with the escrow agent.
(e) The name of each member and the amount held in escrow for
the account of the member.
(f) A pro forma financial plan.
(g) Documentation evidencing availability of adequate
resources to fund the continuing care community's capital
expenditures, debt service, refund of entrance fees, operating
costs, continuing care community maintenance, and other costs and
expenses projected for not less than 3 years.
(h) Audited financial statements for the continuing care
community's most recent 4 fiscal years and financial statements for
any portion of the current fiscal year ending within 120 days after
the date of filing.
(i) Commitments for construction and permanent loan financing
together with a copy of an adequate construction bond.
(j) Irrevocable lines or letters of credit, other irrevocable
instruments of credit, confirmations of deposits of proceeds of
sales of securities, leases, or evidences of any other valid
commitments or income.
(k) Assumptions and the basis of schedules for attrition
rates, occupancy rates, refund of entrance fees, debt service,
operating expenses, and operating income.
(l) A commitment to notify the department promptly in writing
of a material change in the information submitted under this
subsection.
(8) An order issued by the department approving the release of
escrow funds, in whole or in part, or for modification or
discontinuance of an escrow arrangement imposed pursuant to
subsection (2), shall include authorization for the escrow agent to
release to the continuing care community those amounts of the
escrowed funds applicable to a specified member as stated in the
order.
Sec. 47. (1) In lieu of an escrow arrangement imposed pursuant
to section 45(2), the department may approve an alternative
financial arrangement that separates or secures a designated amount
of funds of the continuing care community for the benefit of
members of the continuing care community or provides for the
payment of funds on behalf of members through a surety bond,
irrevocable letter of credit, trust account, guarantee, or other
acceptable financing method or arrangement approved by the
department. Documentation establishing an alternative financial
arrangement shall be approved by the department and shall name the
department as a party or third party beneficiary of the alternative
financial arrangement to act on behalf of the members of the
continuing care community.
(2) An alternative financial arrangement approved pursuant to
this section shall comply with all of the following requirements:
(a) Be established pursuant to 1 or more written agreements
approved by the department between the continuing care community
and a reputable financial institution, escrow agent, surety,
lender, guarantor, or other entity, which may include an affiliate
of the continuing care community, authorized to transact business
in this state.
(b) State that the purpose of the arrangement is to protect
members of the continuing care community from the inability of the
continuing care community to refund entrance fees when due.
(c) Be in an amount that is at least equal to the total
entrance fees that would be collected for the continuing care
community and that allows the continuing care community to fulfill
its obligations to members consistent with the purpose for
imposition of the arrangement.
(d) Require that all proceeds deposited, held, or guaranteed
under the arrangement remain the property of the respective members
for whose account the proceeds were deposited and are not subject
to any liens or charges by the escrow agent or to judgments,
garnishments, or creditor's claims against the continuing care
community until the proceeds are released pursuant to this section.
(e) Provide that, upon order of the department or a court of
competent jurisdiction, the appropriate amount of funds described
in this section shall be released and paid to the continuing care
community or member as ordered.
(f) Require that quarterly balance statements be provided to
the department directly from the escrow agent, financial
institution, or other entity with custody of the funds and
authorize the department to inspect the records pertinent to the
arrangement.
(g) Comply with such other terms or conditions imposed by the
department by rule or order.
(3) The department shall take into consideration the amount of
the entrance fees and other fees to be charged in addition to the
number of continuing care agreements to be offered, granted, or
sold in determining the initial amount of the alternative financial
arrangement and shall amend the amount of the alternative financial
arrangement, as the public interest requires, using the same
factors.
(4) If a continuing care community fails to complete its
obligations under a continuing care agreement, the financial
institution that is a party to the alternative financial
arrangement with the continuing care community shall, upon order of
the department, pay funds to the department or its designee for the
benefit of all members.
(5) If an instrument comprising an alternative financial
arrangement expires or is canceled and the continuing care
community is still under an obligation to provide certain items
under the continuing care agreement, the continuing care community,
at its option, may either post a surety bond or guaranty or have an
escrow of entrance and other fees imposed by the department. Until
a surety bond or guaranty acceptable to the department is purchased
or escrow is imposed, the continuing care community shall not enter
into any additional continuing care agreements. An alternative
financial arrangement approved under this section may be released
in whole or in part by order of the department, subject to the
requirements for release of escrow funds pursuant to section 45.
Sec. 49. (1) A registered continuing care community shall
prepare and maintain for not less than 6 years all of the following
records:
(a) Accounts and records of each day's sales of memberships in
the continuing care community, receipts of cash, and other debits
and credits.
(b) Copies of contracts, including continuing care agreements,
management contracts for any material component of operations,
contracts for construction of buildings or other structures used to
provide continuing care, and contracts with affiliated persons
related to any material component of operations.
(c) Records of compensation paid to persons, directly or
indirectly, in connection with the offer or sale of continuing care
agreements. These records shall include all the following
information:
(i) The persons to whom payments are made.
(ii) The date and amount of each payment.
(iii) The reason for each payment.
(iv) The transaction from which each payment arose.
(d) Member records of all of the following:
(i) Each member's name, address, and age.
(ii) The total amount paid to date by each member and the dates
on which the payments were made.
(iii) The aggregate amount to be paid by each member.
(iv) The terms of payment.
(e) Complaint records of all of the following:
(i) Each written complaint by a member alleging violations of
this act or rules promulgated under this act.
(ii) The date of the complaint.
(iii) Any action taken by the continuing care community in
response to the complaint.
(2) Not more than 30 days after the end of each fiscal year
quarter, or such later date as may be authorized by the department,
a registered continuing care community shall submit the following
to the department, unless waived by the department:
(a) A quarterly report setting forth the continuing care
community's sales executed by new members and the proceeds derived
from the collection of entrance fees from such members.
(b) A quarterly occupancy report stating the percentage of
occupancy of living units in a continuing care community, the
number of occupants who have continuing care agreements, and the
number of members who have died or moved out of the continuing care
community since the last occupancy report was submitted.
(3) If required by the department in the reasonable exercise
of its discretion, a registered continuing care community shall
submit to the department a report that compares any increases in
monthly service fees to the annual consumer price index - all urban
consumers, over 5 preceding calendar years. This report shall be
submitted no later than February 1 following the end of each 5-year
period. The first 5-year period begins January 1 after the
effective date of this act.
(4) The records required by this section are subject to
reasonable examination by a representative of the department,
within or outside of this state.
Sec. 51. (1) A person shall not distribute or transmit an
advertisement or marketing communication unless a true copy of the
advertisement or marketing communication has been submitted to and
approved by the department or unless an advertising waiver has been
approved by the department.
(2) The department shall approve or reject in writing any
advertisement or marketing communication proposed to be used by a
continuing care community within 10 days after the date it is
received. If a written approval or rejection is not issued by the
department with respect to an advertisement or marketing
communication within 10 days after the date of receipt, the
advertisement or marketing communication shall be considered
approved unless the continuing care community has consented in
writing to a delay or the advertising or marketing communication
contains any of the following information:
(a) An entrance fee.
(b) A monthly service fee.
(c) A disclosure statement as required under section 19(1)(c)
or 25(2)(b).
(d) A continuing care agreement.
(3) To obtain an advertising waiver, a continuing care
community shall submit to the department a written request that
includes the reasons why the waiver should be approved. The
department shall grant or deny a waiver request in writing within
30 days after receipt. If the waiver is granted, the waiver shall
specify its expiration date, if any.
(4) This act does not impose liability, civil or criminal,
upon a person regularly engaged in the business of publishing a
bona fide newspaper or operating a radio or television station, and
acting solely in the person's official capacity, who publishes an
advertisement or marketing communication in good faith and without
knowledge that the advertisement or marketing communication
constitutes a violation of this act.
(5) A continuing care community shall maintain advertising or
marketing communications for not less than 3 years in physical copy
or electronic format and make these records available to the
department upon written request.
Sec. 53. (1) A sales agent shall not do any of the following:
(a) Offer or sell a continuing care agreement unless the
continuing care community is registered or exempt from registration
under this act.
(b) Engage in the offer or sale of life interests or long-term
leases for more than 1 principal.
(c) Execute sales contracts of life interests or long-term
leases or collect funds pertaining to such sales contracts unless
the sales agent has written authorization from the continuing care
community.
(2) A person shall not act as a sales agent if the person has
done any of the following:
(a) Employed, in connection with the purchase or sale of a
life interest or long-term lease, a device, scheme, or artifice to
defraud.
(b) Violated this act or a rule promulgated or order issued
under this act.
(c) Engaged in unfair, unconscionable, or deceptive business
practices. Such practices include recommending the purchase of a
life interest or long-term lease without reasonable grounds to
believe that the recommendation is suitable for the individual on
the basis of information furnished by the individual after such
reasonable inquiry as may be necessary under the circumstances.
(d) Been convicted of a misdemeanor involving deceit and has
not been convicted of any felony.
(e) Been the subject of an administrative order of a state or
federal agency relating to, or been permanently or temporarily
enjoined by a court of competent jurisdiction from engaging in or
continuing, any conduct or practice involving any aspect of the
securities, franchise, real estate, banking, or insurance business.
(f) Been the subject of an order of a state, federal, or self-
regulatory agency denying, suspending, or revoking registration as
a broker-dealer, agent, investment adviser, or franchise agent or
any other similar registration.
(3) The department may, by order and in the reasonable
exercise of its discretion, waive any of the criteria specified in
subsection (1) or (2) and allow a person to participate in the
offer or sale of a life interest or long-term lease as a sales
agent.
Sec. 55. (1) A person shall not, in connection with the offer
or sale of a continuing care agreement, directly or indirectly do
any of the following:
(a) Employ a device, scheme, or artifice to defraud.
(b) Engage in an act, practice, or course of business which
operates or would operate as a fraud or deceit.
(c) Make an untrue statement of a material fact or fail to
state a material fact necessary in order to make the statements
made not misleading, in the light of the circumstances under which
they are made, including an untrue statement of a material fact or
failure to state a material fact in any application, notice, or
report filed with the department under this act.
(d) Fail to notify the department of a reportable change as
required by section 33.
(e) Publish any advertisement or marketing communication that
contains false, fraudulent, misleading, or deceptive information.
(2) Each of the following practices constitutes a false,
fraudulent, misleading, or deceptive advertising or marketing
communication for purposes of subsection (1)(e):
(a) A statement or inference that the purchase of a membership
in a continuing care community is a safe investment.
(b) A statement or inference that a continuing care community
is affiliated with a religious, nonprofit, or proprietary
organization if it is not so affiliated.
(c) A material misrepresentation of services, care, or
amenities, provided or to be provided by a continuing care
community.
Sec. 57. If a member becomes mentally or physically
incapacitated and is unable to handle his or her own personal or
financial affairs, the continuing care community may petition a
court of competent jurisdiction to appoint an independent
conservator or guardian. If the court approves the petition as well
as the costs associated with the petition, the continuing care
community may charge these costs to the member.
Sec. 59. (1) A dispute, claim, or grievance arising between a
member or a member's estate and a continuing care community shall
upon written consent of the parties be submitted to arbitration.
The arbitrator's decision is final and binding. The arbitration is
subject to the rules of the American arbitration association in
effect at the time of the dispute, claim, or grievance.
(2) A condition, stipulation, or provision purporting to bind
a member to waive compliance with any provision of this act or a
rule promulgated or order issued under this act is void.
Sec. 61. (1) An applicant for registration under this act,
other than a domestic corporation, shall file with the department,
in a form prescribed by the department, an irrevocable consent
appointing the department to be its attorney to receive service of
lawful process in a noncriminal action or proceeding against it or
its successor, executor, or administrator that arises under this
act or a rule promulgated or order issued under this act after the
consent has been filed. After the filing of the consent, process
received by the department has the same force and validity as if
served personally on the person filing consent.
(2) Service under subsection (1) may be made by leaving a copy
of the process in the office of the department but it is not
effective unless all of the following requirements are met:
(a) The plaintiff, who may be the department in an action or
proceeding instituted by it, immediately sends notice of the
service and a copy of the process by certified mail to the
defendant or respondent at its last address on file with the
department.
(b) The plaintiff's affidavit of compliance is filed in the
action, on or before the return day of the process, if any, or
within such further time as the court may allow.
(3) When a person, including a nonresident of this state,
engages in conduct prohibited or made actionable by this act or a
rule promulgated or order issued under this act, whether or not a
consent to service of process has been filed and personal
jurisdiction can otherwise be obtained in this state, that conduct
shall be considered equivalent to the appointment of the department
to be the attorney to receive service of a lawful process in a
civil action or proceeding against the person or a successor,
executor, or administrator arising out of that conduct and which is
brought under this act or a rule promulgated or order issued under
this act, with the same force and validity as if served on the
person personally.
(4) Service under subsection (3) may be made by leaving a copy
of the process in the office of the department, but it is not
effective unless all of the following requirements are met:
(a) The plaintiff, which may be the department in an action or
proceeding instituted by it, immediately sends notice of the
service and a copy of the process by certified mail to the
defendant or respondent at its last known address or takes other
steps that are reasonably calculated to give actual notice.
(b) The plaintiff's affidavit of compliance with this section
is filed in the case on or before the return day of the process, if
any, or within such further time as the court allows.
Sec. 63. (1) The department may conduct investigations within
or outside this state to determine if any of the following apply:
(a) An offering of a continuing care agreement under this act
poses or may pose an unreasonable risk as described in subsection
(3).
(b) A person has violated or is about to violate this act or a
rule promulgated or order issued under this act.
(2) The department may require or permit a person to file a
written statement under oath or otherwise as to all the facts and
circumstances concerning the matter to be investigated under
subsection (1). If the person fails to reply with all required
information to a written request from the department within 15 days
after receipt of the letter, the department may issue a cease and
desist order.
(3) The department may determine that an offering creates an
unreasonable risk to prospective or current members under this act
if any of the following apply:
(a) The officers or directors of a continuing care community
have received, or will receive, unreasonable compensation. The
following compensation is reasonable:
(i) Compensation specifically approved by an appropriate state
or federal agency.
(ii) Compensation which corresponds to compensation received by
those performing the same or similar tasks in continuing care
communities of a comparable size or situation and proportionate to
the amount of services provided.
(b) Management companies, consultants, or their affiliates
have received, or will receive, unreasonable compensation with
respect to the offering. Compensation is reasonable if specifically
approved by an appropriate state or federal agency, or if the
compensation corresponds to that received by individuals performing
the same or similar services in relation to continuing care
communities of a comparable size or situation. A representation by
the continuing care community that the compensation is reasonable
creates a rebuttable presumption that the compensation is
reasonable.
(c) The offering provides for compensation to officers,
directors, or persons affiliated with them for goods or services
other than in the normal course of employment with the continuing
care community, unless appropriate steps have been taken by the
continuing care community to ensure that the goods or services are
necessary, that the amount paid for the goods or services does not
exceed that which the continuing care community would have paid to
obtain the goods or services from independent parties, and that the
officers, directors, or persons affiliated with them were
previously engaged in the business of rendering these goods or
services as an ordinary and ongoing business independent of the
continuing care community's business. A representation by the
continuing care community that the compensation paid is reasonable
creates a rebuttable presumption that the compensation is
reasonable.
(d) Monthly service fees or assessments are not used for the
purpose designated.
(e) With respect to an offering by a continuing care community
seeking registration or exemption, the offering fails to provide
for adequate reserves or other adequate revenue sources for
operations, repairs, and renovations.
(f) With respect to a continuing care community making an
offering, the continuing care community has been in operation less
than 1 year or is in the development stage at the time of
registration and has failed to achieve reservations for 75% of the
living units at the date of first occupancy, unless the department
finds that the financial condition of the continuing care community
or the escrow arrangements established in connection with the
offering are such as to outweigh any special risk.
(4) For the purpose of an investigation or proceeding under
this act, the department may administer oaths and affirmations and
receive evidence. To subpoena witnesses or require the production
of books, papers, or other documents or records, the department
must obtain an order of the circuit court by a showing that there
is good cause to believe that a violation has taken place or is
about to take place. However, in a contested case, the department
itself may issue subpoenas and is subject to section 73 of the
administrative procedures act of 1969, 1969 PA 306, MCL 24.273.
Sec. 65. (1) A court or the department may by order authorize
a registrant to suspend repayment of an entrance fee for not more
than 180 days, upon a showing by the registrant that payment would
jeopardize the care of members in the continuing care community.
The order may be extended upon a showing of substantial progress in
resolving the financial difficulties of the continuing care
community.
(2) To obtain an order from the department allowing the
temporary suspension of repayment of an entrance fee pursuant to
subsection (1), a continuing care community shall submit to the
department a letter requesting a temporary suspension order. The
letter shall contain all of the following information:
(a) The name of the facility involved and its affiliates, if
any.
(b) The particular facts relied upon as a basis for the
suspension request.
(c) The time during which the facility desires the suspension
to be effective.
(d) Financial statements dated not more than 45 days before
the date of the request.
(e) Other information required by the department.
(3) The department may hold a public hearing to determine
whether the suspension should be granted.
Sec. 67. (1) The department may issue an order denying,
suspending, or revoking a registration if it finds that the order
is in the public interest and finds 1 or more of the following:
(a) The application for registration or the registration
statement in effect is incomplete in a material respect or contains
a statement that was, in the light of the circumstances under which
it was made, false or misleading with respect to a material fact.
(b) The registrant or applicant, or its agent or employee, has
violated this act or a rule promulgated or order issued under this
act.
(c) The offer and sale of a continuing care agreement is not
fair, just, and equitable or has worked or tended to work a fraud
or imposition or would so operate, or the terms of the offering
would create an unreasonable risk to members as defined by rules.
(d) The registrant's or applicant's method of business
includes or would include activities that are illegal where
performed.
(e) A person identified in the application is described in
section 19(1)(f)(i) or (ii) as a result of an act or omission
involving the illegal offering of a continuing care agreement,
franchise, or security and the department determines that the
involvement of the person in the sale of leases or management of
the continuing care community creates an unreasonable risk to
members.
(f) The applicant is the subject of a permanent or temporary
injunction entered under a federal or state act, and the injunction
is applicable to the offer and sale of a continuing care agreement.
(g) The registrant or applicant has failed to pay the proper
fee required by, or fine imposed under, this act.
(h) The applicant has failed to submit an application for
renewal of a registration as required under section 25.
(2) Before issuing an order under subsection (1), the
department shall notify the registrant or applicant by registered
or certified mail. The notice shall include the proposed order, the
reasons for the proposed order, and a statement that, if a hearing
is requested in writing within 15 days after issuance of the notice
of intent, a hearing will be conducted on the matter within 45 days
after the receipt of the request, unless the registrant or
applicant consents to a later date. If a hearing is not timely
requested by the continuing care community and is not ordered by
the department, the department shall issue an order under
subsection (1). The order shall remain in effect until it is
modified or vacated by the department. If a hearing is timely
requested or ordered, the department, after notice and an
evidentiary hearing pursuant to the administrative procedures act
of 1969, 1969 PA 306, MCL 24.201 to 24.328, may enter an order
under subsection (1), or find that a violation has not occurred.
(3) The department may vacate or modify an order under this
section if it finds that the conditions on which it was based have
changed or that it is otherwise in the public interest to do so.
Sec. 69. (1) Subject to subsection (2), if the department
determines that a person has engaged, is engaging, or is about to
engage in an act, practice, or course of business constituting a
violation of this act or a rule promulgated or order issued under
this act, or that a person has materially aided, is materially
aiding, or is about to materially aid an act, practice, or course
of business constituting such a violation, the department may issue
an order directing the person to cease and desist from engaging in
the act, practice, or course of business or to take other action
necessary as appropriate to comply with this act.
(2) Before issuing an order under subsection (1), the
department shall notify the person. The notice shall include the
proposed order, the reasons for the proposed order, and a statement
that, if a hearing is requested in writing within 15 days after
issuance of the notice of intent, a hearing will be conducted on
the matter within 45 days after receipt of the request, unless the
person consents to a later date. If a hearing is not timely
requested, the department shall issue an order under subsection
(1). If a hearing is timely requested, the department, after notice
and an evidentiary hearing pursuant to the administrative
procedures act of 1969, 1969 PA 306, MCL 24.201 to 24.328, may
enter a cease and desist order or find that a violation has not
occurred.
(3) A continuing care community, its agent, an entity
purporting to operate as a continuing care community under this act
or its agent who knowingly authorizes, directs, or aids in
violation of a final cease and desist order, or who knowingly fails
to comply with the terms of a final cease and desist order, and may
be fined not more than $10,000.00. Each violation constitutes a
separate offense.
Sec. 71. If it appears to the department that a person has
engaged or is about to engage in an act or practice constituting a
violation of this act or a rule promulgated or order issued under
this act, the attorney general may bring an action in the name of
the people in the circuit court to enjoin the acts or practices or
to enforce compliance with this act or the rule or order. Upon a
proper showing, a preliminary or permanent injunction, restraining
order, or writ of mandamus shall be granted and a receiver or
conservator may be appointed for the defendant or the defendant's
assets. The court shall not require the department to post a bond.
Sec. 73. If the director of the department finds that a person
violated this act or a rule promulgated or order issued under this
act, after an opportunity for an evidentiary hearing under the
administrative procedures act of 1969, 1969 PA 306, MCL 24.201 to
24.328, the director may order the person to pay a civil fine of
not less than $1,000.00 or more than $50,000.00. The director may
also order the respondent to pay the costs of the investigation.
Sec. 75. (1) A person who offers or sells a continuing care
agreement in violation of section 15 or 55 or an order issued under
section 67 is liable to the person executing the continuing care
agreement for all of the following:
(a) Damages.
(b) Repayment of all fees paid to the continuing care
community or entity purporting to operate as a continuing care
community under this act less, in the case of a continuing care
community, the reasonable cost of continuing care provided by the
continuing care community until discovery or until the violation
should reasonably have been discovered.
(c) 6% interest on the amounts under subdivisions (a) and (b).
(d) Reasonable attorney fees.
(e) Court costs.
(2) A person may not file or maintain an action under this
section if, before filing the action, the person received an offer
of rescission approved by the department to refund the entrance fee
together with interest at 6% per year from the date of purchase
less the reasonable cost of continuing care provided until
discovery, and the member failed to accept the offer within 30 days
after its receipt. When a continuing care community makes written
offer of rescission, the continuing care community shall file a
copy with the department. The rescission offer shall recite the
provisions of this section.
Sec. 77. Except as explicitly provided in this act, civil
liability in favor of a private party does not arise against a
person by implication from or as a result of the violation of this
act or a rule promulgated or order issued under this act. This act
does not limit liability that may exist under any other statute or
under common law.
Sec. 79. A person who directly controls a person who violates
this act, a partner in a firm that violates this act, a principal
executive officer or paid director or trustee of a corporation that
violates this act, a person occupying a similar status as an
executive officer or director performing similar functions, or an
employee of a person who violates this act who materially aids in
the act or transaction constituting the violation is also liable
jointly and severally with and to the same extent as the person who
violates this act, unless the person did not have knowledge of or
reasonable grounds to believe in the existence of the facts
constituting the violation.
Sec. 81. An action shall not be maintained to enforce a
liability created under this act unless brought before the
expiration of 3 years after the date of the act or transaction
constituting the violation.
Sec. 83. Pursuant to the administrative procedures act of
1969, 1969 PA 306, MCL 24.201 to 24.328, the department may
promulgate rules to implement this act.
Sec. 85. (1) Applications, reports, and other papers and
documents filed by applicants or registrants or experts or
appraisers with the department under this act are subject to
disclosure under the freedom of information act, 1976 PA 442, MCL
15.231 to 15.246. However, pro forma financial statements,
marketing plans, feasibility studies, and social security numbers
are exempt from disclosure. In addition, a continuing care
community may request, and the department may grant, subject to
section 13 of the freedom of information act, 1976 PA 442, MCL
15.243, confidentiality as to any other document received under
this act.
(2) Subject to subsection (1) the department or its examiners,
investigators, assistance, clerks, or deputies shall not disclose
information filed with or obtained by them under this act except
among themselves or when necessary or appropriate in a proceeding
or investigation under this act or to other federal or state
regulatory agencies. However, to aid in the enforcement of this act
or in the prescribing of rules and forms under this act, the
department may publish information concerning a violation of this
act or a rule promulgated or order issued under this act.
(3) The department shall take reasonable steps to protect the
confidentiality of social security numbers provided to the
department under this act.
Sec. 87. A life interest or long-term lease agreement entered
into under the former 1976 PA 440 is not invalidated by the repeal
of that act and the adoption of this act.
Enacting section 1. The living care disclosure act, 1976 PA
440, MCL 554.801 to 554.844, is repealed.
Enacting section 2. This act takes effect 90 days after the
date this act is enacted into law.