CCRC Turmoil Prevented by Calif. Governor’s Veto

Senior housing providers are breathing easier and expressing support for California Governor Jerry Brown, who recently vetoed a bill that would have increased regulations on continuing care retirement communities (CCRCs) and impacted business models. Brown vetoed the bill on October 11.  

The bill would have changed the way CCRCs repay entrance fees to residents who either terminate their contracts or become deceased. New regulations would have forced communities to repay entrance fees during a certain period of time or accrue interest added to the amount, putting CCRCs at risk for their financial stability. Many refundable entrance fee contracts are dependent on the resale of a unit, which enables CCRCs to remain financial solvent. Major changes to that model could have serious implications across the industry. 

Governor Brown noted that the regulation would have broadened the role of government in private contracts that people can choose whether or not to purchase. 


“While it is important that residents who buy into these communities be treated fairly, this bill would change the terms of contracts interest into by willing participants,” the Governor wrote in his decision. “It would also insert the department into the resolution of contract disputes. For these reasons, I am not signing this bill.”

The bill underwent numerous changes from its initial version after Senator Monning made several concessions to the groups that opposed the legislation. Even after toning down the bill, CCRCs still warily eyed the bill, noting that it could spell trouble for business models in the industry. 

Erickson Living, a senior housing operator that works with for-profit and non-profit CCRCs in 10 states, was one organization that remained in opposition to the bill after its amendments and concessions by its sponsor. While Erickson Living does not have a CCRC presence in California, the group keeps a close watch on regulatory changes across the country.


“We’re very pleased the Governor saw to it to point out the needs for more senior housing options as opposed to limiting options,” Adam Kane, senior vice president of corporate affairs at Erickson Living, told SHN. 

Kane does not expect that similar legislation will appear elsewhere in the country following this victory for CCRCs.

The veto decision also echoed concerns from CCRCs that the regulation was not needed, as most communities are able to repay departed residents in a reasonable amount of time. 

“With the economy improving, the real estate market stabilizing and the market growing, our belief is that CCRCs have done a really good job keeping their commitments on refunds and services,” Kane told SHN. “So we see less activity on the regulatory front than we did during the recession.”

American Baptist Homes of the West (ABHOW), a non-profit operator of CCRCs, voiced its opposition to the legislation and views the veto as a victory for CCRCs that were already under development while the bill was being considered. 

“My strong preference is for providers to do an enhanced job of ‘self policing’ on this issue now that it has gotten this level of exposure,” Pamela Claassen, senior vice president and chief financial officer at ABHOW told SHN. “I am also pleased this veto provides a ‘breather’ for organizations such as our that are in the middle of new developments for which commitments have already been made for expects performance to bondholders.”

Written by Amy Baxter

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