SB-0886, As Passed Senate, September 24, 2014

SUBSTITUTE FOR

SENATE BILL NO. 886

A bill to regulate the offer and sale of life interests and

long-term leases in retirement communities that provide certain

services and are independent living units, nursing homes, homes for

the aged, adult foster care facilities, home care service agencies,

hospices, or places that provide care for certain periods; 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 penalties and

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) "Administratively complete" means contains all the

information required under this act and rules promulgated under

this act.

(b) "Administrator" means a person that performs

administrative or operational functions within or in connection

with the continuing care community.

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.

(d) "Amortized component of an entrance fee" means the portion

of an entrance fee that is amortizable to reflect the cost of

continuing care, multiplied by 1.5% for each month from the time of

occupancy to the termination of membership by death or other cause.

(e) "Applicant" means a continuing care community applying for

initial registration under section 19, applying for renewal

registration under section 25, or applying to amend a registration

under section 33.

(f) "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.

(g) "Continuing care" means providing or arranging for the

provision of some or all of the following services:

(i) A living unit.

(ii) Meals.

(iii) Personal care services.

(iv) Skilled nursing.

(v) Rehabilitative services.

(vi) Medical care.

(vii) Social activities.

(viii) Supervision.

(ix) Program of all-inclusive care for the elderly.

(x) Continuing care at home.

(h) "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.

(i) "Continuing care at home" means, upon payment of an

entrance fee, providing or arranging for the provision of all of

the following at the member's home:

(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.

(j) "Continuing care community" or "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 health care services agency.

(vi) Hospice.

(vii) A place that undertakes to provide care to a member for

more than 1 year.

(k) "Continuing care administration fund" means the fund

creation in section 31(3).

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.

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 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.

amortized component of an entrance fee and any other component of

an entrance fee that is not refundable upon termination 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.

component of an entrance fee that is refundable to the member or

his or her estate under the terms and conditions of the continuing

care agreement, but excludes the amortized component of an entrance

fee.

(d) "Registrant" means a continuing care community registered

under this act.

(e) "Reportable change", subject to subdivision (f), means any

of the following:

(i) Any change in the tax status of the continuing care

community.

(ii) Termination of the continuing care community's

sponsorship, or a portion thereof, by a religious, nonprofit, or

proprietary organization or group, or the establishment of any new

sponsorship for the community.

(iii) Denial, suspension, or revocation of any license,

certification, or registration held by the 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 continuing care

community from offering continuing care agreements to prospective

members or restricts the community 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) Any 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 pro forma financial plan most recently

filed under this act:

(A) Total assets.

(B) Total liabilities.

(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

continuing care community.

(f) "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.

sale of a continuing care agreement.

Sec. 13. (1) A continuing care community may be organized and

operated as 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.

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) By rule or order, the department may, in whole or

in part, exempt a transaction or person from the registration

requirements of this act.

(2) In determining whether to grant an exemption under

subsection (1), 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.

rule, if any, that is requested to be waived and each transaction

or person 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 shall submit annual and semiannual

financial statements and sales and occupancy reports as required

under sections 41 and 49, respectively, for registrants.

(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 resident's access to a common area, subject to the

resident's need for care and supervision.

(7) A continuing care community may request a variance from

the application of a rule promulgated under article 17 of the

public health code, 1978 PA 368, MCL 333.20101 to 333.22260, or

promulgated under the adult foster care facility licensing act,

1979 PA 218, MCL 400.701 to 400.737, and applicable to a home for

the aged or adult foster care facility, respectively, that is part

of the continuing care community. The department of human services

may grant the variance upon a finding of both of the following:

(a) That the rule unnecessarily segregates members of the

continuing care community who reside in the home for the aged or

adult foster care facility from other members of the continuing

care community.

(b) That the variance will not result in a risk to human

health or safety.

(8) An area where room and board together with personal care,

protection and supervision, or supervised personal care are

provided to a member is not a home for the aged as defined in

section 20106 of the public health code, 1978 PA 368, MCL

333.20106, or an adult foster care facility as defined in section 3

of the adult foster care facility licensing act, 1979 PA 218, MCL

400.703, if the services are only provided on a temporary basis

under any of the following circumstances:

(a) While the member is recovering from an illness or

accident.

(b) Until a living unit in an appropriate licensed area of the

continuing care community becomes available.

(9) The relationship between a continuing care community and a

member 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, and all

amendments thereto, authorizing the applicant to conduct business

in this state and a copy of the most recent annual report, if

required under state law.

(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 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,

administrator, 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) An executed irrevocable consent to service of process

subject to section 61.

(h) Financial statements that comply with section 41.

(i) Unless waived by the department, a statement of the use of

proceeds of entrance fees to be collected by the continuing care

community.

(j) A pro forma financial plan that complies with section 43.

(k) 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.

(l) 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.

(m) The name and address of the registered office and resident

agent required under section 13(2).

(n) Other material information as may reasonably be required

by the department.

(o) Other material information as the applicant wishes to

include.

(p) The initial registration application fee specified in

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) 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 (2).

(2) If, before the expiration of the 60-day period under

subsection (1), 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 (1) is

tolled until the applicant submits to the department the specified

information or fee amount due.

(3) Not more than 180 days after the expiration of the 60-day

period under subsections (1) and (2), 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.

(4) If an order approving or denying registration is not

timely entered under subsection (3), the registration is

immediately effective unless the applicant has consented in writing

to a waiver or delay of automatic effectiveness.

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 information described in section 19(1)(b), (c), (d),

(e), (f), (j), (m), (n), and (o). 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.

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.

(d) The registration renewal application fee specified in

section 31.

Sec. 27. (1) Subject to subsections (2) and (3), 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 information required pursuant to section 19(1)(n) is

not furnished by the applicant, or the department considers

information submitted pursuant to section 19(1)(n) 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 continuing care administration

fund.

(4) 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.

(5) 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 69 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 this

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.

several liability is not the subject of any action under sections

55 to 63.

(2) Notwithstanding the grant of an extension of its

registration, a continuing care community shall annually submit to

the department the registration renewal fees specified in section

31 and annual and semiannual financial statements under section 41.

A registered continuing care community shall do all of the

following:

(a) Submit the fees specified in section 31.

(b) Submit financial statements for that fiscal year that

comply with section 41.

Sec. 31. (1) 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.

(2) The fee for filing an application for registration renewal

is $100.00.

(3) The continuing care administration fund is created within

the state treasury. Fees collected by the department under this act

shall be deposited into the fund. The state treasurer may receive

money or other assets from any source for deposit into the fund.

The state treasurer shall direct the investment of the fund. The

state treasurer shall credit to the fund interest and earnings from

fund investments. Money in the fund at the close of the fiscal year

shall remain in the fund and shall not lapse to the general fund.

The department shall be the administrator of the fund for auditing

purposes.

(4) The department shall expend money from the continuing care

administration fund, upon appropriation, only for the purposes of

administration and enforcement of this act.

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 a registration shall include a pro forma

financial plan that complies with section 43. The department may

require the production of other financial information reasonably

necessary for the purposes of this act. The amended registration

shall be signed and verified by the administrator.

(3) Effective 30 days after the department receives an

application to amend a registration, the application shall be

considered to be administratively complete unless the department

proceeds as provided in subsection (4).

(4) If, before the expiration of the 30-day period under

subsection (3), the department notifies the applicant that the

application is not administratively complete, specifying the

information necessary to make the application administratively

complete, the running of the 30-day period under subsection (3) is

tolled until the applicant submits to the department the specified

information or fee amount due.

(5) Not more than 30 days after the expiration of the 30-day

period under subsections (3) and (4), the department shall enter an

order amending the registration of the continuing care community or

denying the amendment and submit a copy of the order to the

applicant. If the department denies the amendment, the order shall

specifically describe the deficiencies in the application or

instances of noncompliance by the applicant with the requirements

of this act.

(6) If an order approving or denying an amendment is not

timely entered under subsection (5), the amendment is immediately

effective unless the applicant has consented in writing to a waiver

or delay of automatic effectiveness.

(7) An amendment to an application filed after the effective

date of the registration and approved by the department under

subsection (5) 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 all continuing care agreements pertinent to the

continuing care sought by the prospective member and the disclosure

statement under section 21, 27, or 33 most recently approved by the

department. 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 nonrefundable 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 living 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 both of

the following:

(a) The executed continuing care agreement.

(b) A physical copy of the disclosure statement, unless a

physical copy has already been provided under subsection (1).

(3) A continuing care community shall make the 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

information, 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) The organization of the legal entity of the continuing

care community as prescribed by the department.

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 77 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) The entrance fee, any monthly services fees, and any other

fees or charges that may be assessed to a member or prospective

member by the continuing care community.

(i) All of the following statements as to the effect of the

death of a member on the continuing care agreement:

(i) If, before receiving continuing care from the continuing

care community, a member dies before occupying the continuing care

community, or through illness, injury, or incapacity is precluded

from being a member under the terms of the continuing care

agreement, 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. However, 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.

(ii) If a member dies within the 7-day rescission period under

subdivision (j), the continuing care agreement automatically

terminates, and the continuing care community shall within 30 days

refund any entrance fee or portion of an entrance fee paid.

(iii) If a member dies after the 7-day rescission period under

subdivision (j), the continuing care agreement terminates as

follows:

(A) As of the date that all possessions of the deceased member

are removed from the living unit if the deceased member was the

sole occupant. The entrance fee shall be refunded within 30 days

after the fulfillment of the conditions for a refund set forth in

the continuing care agreement.

(B) Immediately if the deceased member occupied a living unit

with another member. Any refundable portion of the deceased

member's entrance fee shall be refunded within 60 days after the

death of that member, but the continuing care agreement shall

remain in effect for the living member.

continuing care at home. The refund shall be paid within 60 days

after death of the member.

(j) 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.

(k) A statement that following the 7-day rescission period

under subdivision (j), termination of a continuing care agreement

by the member, other than by the 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.

(l) 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 the

member before a new fee or change in a fee becomes effective.

(m) A statement that members may be charged assessments and a

statement of the method used to allocate any assessment.

(n) 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.

(o) Whether entrance fees are subject to an escrow under

section 45(2) or an alternative financial arrangement under section

47, including a description of any applicable arrangement.

(p) The proposed application of the proceeds of the entrance

fee by the continuing care community.

(q) The location and description of any premises that are used

or proposed to be used for the provision of continuing care.

(r) A description of the continuing care services provided and

the extent to which medical care is furnished.

(s) A description of 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.

(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) Any balance owed to the continuing care community for

monthly service fees or other charges under the continuing care

agreement.

(iv) 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 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.

(v) Whether the continuing care agreement terminates and

whether 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.

(w) The conditions upon which a member may reoccupy the

member's living unit after termination of the continuing care

agreement.

(x) 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.

(y) 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.

(z) Whether, if financial assistance is provided to the member

through a charitable fund, a spend down of the entrance fee

otherwise required for continued membership, or a reduction of

monthly service fees or other fees assessed under the continuing

care agreement or under some other arrangement, the financial

assistance will be subject to either of the following:

(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) An annual financial statement under section 41 as an

attachment to and integral part of the disclosure statement.

(bb) Other material information as required by the department.

(cc) Other material information that the applicant wishes to

include.

(dd) The following items 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 less

damages to the living unit 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 major financial committment, 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 licensing and regulatory affairs 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 licensing and

regulatory affairs 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 the department

of licensing and regulatory affairs 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 and may require an

applicant to set forth any of the following in its disclosure

statement in a specified position and type size:

(a) Potential adverse information.

(b) That registration does not constitute approval,

recommendation, or endorsement by the department.

(3) The department shall 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 included in the disclosure

statement under section 37(1)(h) to (cc).

(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.

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.

(f) Specify that a continuing care agreement does not confer a

property interest, an individual or partial ownership of a

continuing care community, or voting rights in the operation of a

continuing care community.

Sec. 41. (1) Financial statements under section 17, 19, 25, or

29 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) Subject to subdivision (c), be of form and content

required by the department.

circumstances prescribed by the department. Requirements imposed by

the department under subdivision (b) or this subdivision shall be

consistent with generally accepted accounting principles or other

nationally recognized accounting standards applicable to the

entity.

(d) Be submitted within 120 days after the end of the entity's

fiscal year.

(e) Be audited and prepared by a certified public accountant

in accordance with generally accepted auditing standards, subject

to all of the following:

(i) The department may waive all or part of 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.

(ii) Unaudited financial statements may be submitted if the

entity has not been in existence for 1 complete fiscal year.

(iii) If the audited financial statements are more than 120 days

old, they shall be submitted with current unaudited financial

statements.

(iv) Unaudited financial statements authorized under

subparagraph (i), (ii), or (iii) 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.".

(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 audit,

approving the use of its name and its opinion in the disclosure

statements required under section 19 or 25 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 18 months 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) Within 30 days after the end of the first half of its

fiscal year, a continuing care community shall submit to the

department an unaudited semiannual financial statement that

includes at least all of the following:

(a) A balance sheet.

(b) An income statement.

(d) A statement of how entrance fee proceeds are used.

(e) A management discussion explaining material fluctuations

in the balance sheet and income statement, compared to the prior

period or prior year-to-date.

Sec. 43. A pro forma financial plan shall include a financial

forecast for a period of 3 years, presented on the same accounting

basis as the financial statements, including all of the following:

(a) A balance sheet.

(b) A statement of changes and activities or statement of

operations.

(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.

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) If subsection (2)(a) and (b) applies, 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 69(2).

(4) The department may direct the escrow agent to return all

the funds escrowed under subsection (2) 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.

(5) 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.

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.

(f) Specify 1 of the following methodologies to be used to

determine the amount of funds that may be released pursuant to a

request under subsection (7):

(i) 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

subparagraph and subparagraph (ii), occupancy shall be measured by

the total number of living units of the entire continuing care

community designated for occupancy under continuing care

agreements.

(ii) An amount equal to 1-1/2% per month of the total entrance

fees escrowed, 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.

(6) 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.

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.

(7) A request for release of escrow funds under subsection (2)

or for the discontinuance or modification of an escrow arrangement

under subsection (2) shall be submitted by the administrator. The

request 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 (5)(f) 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.

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 that complies with section 43.

(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) The amount released shall be based on the methodology

specified in the escrow agreement pursuant to subsection (5)(f),

unless a switch to the alternative methodology specified in

subsection (5)(f) is requested by the continuing care community and

approved by the department.

(9) 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). An order issued by the department approving the

release of funds held in escrow under subsection (2), 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.

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 establish a new alternative financial

arrangement under subsection (1) or have the department impose

under section 45(2) an escrow of entrance and other fees. Until an

alternative financial arrangement acceptable to the department is

established 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

and terminated 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.

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 sales 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.

Sec. 51. (1) A person shall not distribute or transmit an

advertisement or marketing communication described in this

subsection 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. This subsection applies only to an advertising or

marketing communication that contains any of the following

information:

(a) An entrance fee.

(b) A monthly service fee.

or 25(2)(b).

(d) A continuing care agreement.

(2) The department shall approve or reject in writing any

advertisement or marketing communication submitted under subsection

(1) within 10 days after the date it is received.

(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.

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.

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 or of any

felony.

(e) 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.

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.

This subdivision does not apply to a person that publishes an

advertisement or marketing communication on behalf of a continuing

care community and is not affiliated with the continuing care

community.

(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.

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,

on 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 with subdivision

(a) 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 members under this act if any of the following

apply:

(a) Monthly service fees or assessments are not used for the

purpose designated.

(b) 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. The department may utilize an

industry representative or accounting representative to determine

the adequacy of revenue sources.

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) The department shall review all documents

submitted to the department under this act for compliance with this

act. The department may require the submission of supplemental

documents if the department considers the additional information

necessary for the purposes of this act.

(2) The records of a continuing care community are subject to

reasonable audit by a representative of the department, inside or

outside of this state, that the department considers necessary or

appropriate in the public interest and for the protection of

members or prospective members. The department may copy records the

department reasonably considers necessary to conduct the audit.

(3) A routine audit shall be conducted during normal business

hours and with reasonable advance notice. An audit in response to a

complaint or other special audit may be conducted at any time and

without advance notice.

Sec. 67. (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.

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. 69. (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.

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 registrant or 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 registrant has failed to submit an application for

renewal of a registration as required under section 25.

(2) Before issuing an order under subsection (1) or section

45(3), 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 or other condition

under which entry of an order is authorized 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. 71. (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 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 person that 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, may be

fined not more than $10,000.00.

Sec. 73. 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. 75. (1) 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.

(2) After providing an opportunity for a contested case

hearing under the administrative procedures act of 1969, 1969 PA

306, MCL 24.201 to 24.328, the department may impose any of the

following sanctions on a person that violates this act or a rule

promulgated or order issued under this act:

(a) If the person is registered under this act, an

administrative fine of not more than $10,000.00 for each violation.

(b) A requirement that restitution be made. The registration

of the person required to make the restitution may be suspended

until the restitution is made.

(3) If a continuing care agreement does not comply with the

requirements of this act, the continuing care agreement is

voidable. If the agreement is voided, the continuing care community

shall refund to the member the amount that the member paid when the

continuing care agreement was entered into.

Sec. 77. (1) A person that offers or sells a continuing care

agreement in violation of section 15 or 55 or an order issued under

section 69 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.

(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. 79. 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. 81. A person that directly controls a person that

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 that 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 that 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. 83. 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. 85. (1) A person that knowingly violates this act is

guilty of a felony punishable by imprisonment for not more than 7

years or a fine of not more than $10,000.00, or both.

(2) The proceeds, the substituted proceeds, or an

instrumentality of a crime described in subsection (1) are subject

to seizure and forfeiture in the manner provided in chapter 47 of

the revised judicature act of 1961, 1961 PA 236, MCL 600.4701 to

600.4709.

Sec. 87. 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. 89. (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. 91. 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.