Overview

Governor Newsom has signed AB 1983, which amends the California Health and Safety Code to add a new contracting option for Continuing Care Retirement Communities (CCRCs): the “repayable in sequential order contract.” The bill addresses continuing care retirement communities and repayable contracts and becomes effective January 1, 2027.

Until now, CCRCs offering repayable contracts were limited to the “repayable conditioned on resale” model, under which entrance fee repayments are triggered only upon resale or reoccupancy of the departing resident’s specific unit. A repayable conditioned on resale contract is a continuing care contract that includes a promise to repay all or a portion of an entrance fee that is conditioned upon resale or reoccupancy of the unit previously occupied by the resident.

AB 1983 creates a fundamentally different approach — a pooled, sequential repayment model — that decouples repayment from the resale of any specific unit.

What Is a “Repayable in Sequential Order Contract”?

A “repayable in sequential order contract” is a continuing care contract that includes a promise to repay all or a portion of an entrance fee based strictly on the sequential order in which repayable contracts are terminated. Key features include:

• Sequential Numbering: At the time a contract is terminated and all conditions for repayment under the contract have been met, the provider provides the resident, the resident’s estate, or other appropriate party with written notice of their sequential number on a repayment log.
• Strict Order of Repayment: A provider repays entrance fees solely in the sequential order in which the contracts were terminated and does not repay all or a portion of an entrance fee before the resident’s sequential number is reached.
• Safeguarding Funds for Unavailable Payees: If the resident, their estate, or other appropriate party is unable to receive the repayment when their sequential number is reached, the provider ensures the full repayment amount and any applicable interest is kept in the sequential repayment account until the payment can be made.

The Sequential Order Method and the Sequential Repayment Account

The “sequential order method” means the repayment of entrance fees in the order in which repayable contracts are terminated. To use the sequential order method, the provider assigns each terminated contract a sequential repayment number, to be paid from a sequential repayment account funded by entrance fees received from any reoccupied residential living units with sequential order contracts. Each time a unit is reoccupied, the repayment account is credited with an amount equal to the repayment owed to a unit’s prior resident. When the funds in the repayment account are sufficient to repay the next terminated contract in sequential order, the provider issues the repayment within 14 days.

The “sequential repayment account” is a separately accounted for financial bank account established and maintained by a provider for the exclusive purpose of funding repayments of entrance fees under repayable in sequential order contracts. The account indicates that the moneys in it are held for the exclusive benefit of the residents or their estates. The money remains separate, intact, and free from any liability the provider incurs.

Finally, the sequential repayment account is not deemed a refund reserve and is not subject to the refund reserve requirements, the existing tiered interest accrual statutory framework continues to apply, and providers offering repayable in sequential order contracts must include specific disclosures in their continuing care contracts.

Feature	Repayable Conditioned on Resale	Repayable in Sequential Order
Repayment Trigger	Conditioned upon resale or reoccupancy of the specific unit previously occupied by the resident	Based strictly on sequential order in which repayable contracts are terminated
Funding Source	Proceeds from the specific unit’s resale	Entrance fees received from any reoccupied residential living units with sequential order contracts (pooled account)
Timing of Payment	Within 14 calendar days after resale or reoccupancy of the unit	Within 14 calendar days after sufficient funds exist in the sequential repayment account to satisfy the contract’s assigned sequential repayment number

This alert is intended for informational purposes only and does not constitute legal advice. Please contact us to discuss how AB 1983 may apply to your specific community.