The CHOW Process: Transferring an Assisted Living Facility License in Arizona

Every assisted living facility in Arizona operates under a license issued by the Arizona Department of Health Services (ADHS). When a facility changes hands — whether through a sale, a change in the controlling entity, or a restructuring of ownership — the license must be transferred to the new owner through a process called the Change of Ownership, or CHOW.

The CHOW process is one of the most important and most misunderstood aspects of ALF transactions. Delays in the CHOW application are the single most common cause of extended closing timelines. Understanding the process, preparing the required documentation, and submitting a complete application on the first attempt will save you weeks or months of unnecessary delays.

What Triggers a CHOW

A CHOW is required whenever there is a change in the person or entity that holds the assisted living facility license. Specifically:

• Sale of the facility: When the licensed operator sells the facility and business to a new owner.
• Change in controlling interest: When 50% or more of the ownership interest in the licensed entity transfers to a new person or group.
• Entity restructuring: When the licensed entity is dissolved, merged, or reorganized in a way that changes controlling ownership.
• New management entity: In some cases, a change in the management company that operates the facility may trigger CHOW requirements, depending on the management agreement structure and how ADHS classifies the relationship.

A CHOW is not required for:

• Minor ownership changes: Transfers of less than 50% of the ownership interest in the licensed entity.
• Internal transfers: Transfers between existing owners that do not change the controlling person or entity.
• Refinancing: Changing the lender or mortgage does not trigger a CHOW.

When in doubt, contact ADHS before the transaction closes. Transferring operational control without completing a CHOW is a regulatory violation that can result in license revocation.

The CHOW Application: What You Need

The CHOW application package includes several components. Every document must be complete, accurate, and current. Incomplete applications are returned, and the clock resets.

Core Application Documents

1. CHOW Application Form: The ADHS Change of Ownership application form, completed and signed by the new owner.
2. Business Entity Documentation: Articles of organization (for LLCs) or articles of incorporation (for corporations), filed with the Arizona Corporation Commission. The operating agreement or bylaws must be included.
3. Ownership Disclosure: A complete list of all owners, officers, directors, and members of the new entity, including their ownership percentages and roles.
4. Designated Manager Information: The name, qualifications, and credentials of the person who will serve as the facility's designated manager. This includes training certificates, CPR/first aid certification, and a current resume.

Background Clearance

1. Level 1 Fingerprint Clearance Cards: Every controlling person — all owners, officers, directors, and the designated manager — must have a valid Level 1 Fingerprint Clearance Card issued by the Arizona Department of Public Safety.
2. Disclosure of Prior Licensing History: The applicant must disclose any prior healthcare facility licenses held in any state, including any disciplinary actions, revocations, or denials.
3. Disclosure of Criminal History: Any criminal history must be disclosed, even if the fingerprint clearance card was granted.

Facility Documentation

1. Proof of Ownership or Lease: A copy of the purchase agreement, deed, or lease that establishes the new owner's right to occupy the facility.
2. Insurance: Proof of liability insurance and property insurance for the facility.
3. Policies and Procedures: The new owner's policies and procedures manual for the facility. This may be the existing policies (with updates reflecting the new ownership) or entirely new policies.
4. Staffing Plan: Documentation of the staffing plan, including the number and qualifications of staff at each shift.
5. Fire Inspection: A current fire inspection report from the local fire department or fire marshal.

Financial Documentation

1. Proof of Financial Capacity: ADHS may request evidence that the new owner has sufficient financial resources to operate the facility. This can include bank statements, a personal financial statement, or a lender commitment letter.

Step-by-Step CHOW Process

Step 1: Prepare Before You Apply (Weeks 1 to 4)

Begin preparing the CHOW application as soon as the purchase agreement is executed — not after due diligence is complete.

Priority actions during weeks one through four:

• Apply for fingerprint clearance cards immediately. Processing takes four to six weeks. This is the most common source of delay.
• Form the new business entity and file with the Arizona Corporation Commission.
• Identify and hire the designated manager if you are not filling the role yourself. The manager must have completed all required training before the application is submitted.
• Gather all required documents. Use the ADHS checklist and verify every item.

Step 2: Submit the Application (Week 4 to 6)

Submit the complete CHOW application package to ADHS. Include every document listed above. Double-check for signatures, dates, and supporting attachments.

Submit online through the ADHS licensing portal or by mail. Online submission is faster and provides confirmation of receipt.

Step 3: ADHS Administrative Review (Weeks 6 to 10)

ADHS reviews the application for completeness and compliance:

• Completeness check: ADHS verifies that all required documents are included and properly completed. If anything is missing, ADHS issues a deficiency notice and the application is paused until the deficiency is corrected.
• Background check verification: ADHS verifies all fingerprint clearance cards and reviews disclosure responses.
• Policy review: ADHS reviews the policies and procedures manual for compliance with regulatory standards.
• Entity verification: ADHS confirms the business entity is properly registered and in good standing.

Respond to any deficiency notices immediately. Every day of delay extends the overall timeline.

Step 4: Facility Inspection (Weeks 10 to 14)

ADHS may conduct an on-site inspection of the facility before approving the CHOW. The inspection verifies:

• Physical plant compliance with ADHS standards
• Fire safety compliance
• Adequate staffing
• Proper medication storage and management
• Emergency preparedness
• Resident care documentation

If the facility is currently licensed and operating in compliance, the inspection may be expedited or waived. Facilities with recent deficiencies or complaints are more likely to receive a full inspection.

Step 5: License Issuance (Weeks 14 to 16)

Once the application is approved and any inspection is cleared, ADHS issues a new license in the new owner's name. The license specifies:

• Licensed entity name
• Facility address
• Maximum number of residents
• Level of care authorized
• License effective date

The new license effective date is coordinated with the closing date of the sale so there is no gap in licensure.

Timeline Summary

Phase	Duration	Running Total
Pre-application preparation	2 to 4 weeks	2 to 4 weeks
Application submission	1 to 2 weeks	3 to 6 weeks
ADHS administrative review	4 to 6 weeks	7 to 12 weeks
Facility inspection (if required)	2 to 4 weeks	9 to 16 weeks
License issuance	1 to 2 weeks	10 to 18 weeks

Total expected timeline: 60 to 120 days from application submission. Applications submitted with all documents complete and no deficiencies close to the shorter end. Applications with missing documents, fingerprint delays, or inspection issues push toward the longer end.

Common Delays and How to Avoid Them

Delay 1: Fingerprint Clearance Card Processing

The problem: Fingerprint clearance cards take four to six weeks to process. If an owner or the designated manager does not apply until the CHOW application is ready, the entire process is delayed by at least a month.

The solution: Apply for all fingerprint clearance cards on day one of the purchase agreement. Do not wait. The $67 application fee is trivial compared to the cost of a delayed closing.

Delay 2: Incomplete Applications

The problem: ADHS returns incomplete applications with a deficiency notice. The applicant must gather the missing documents and resubmit, effectively restarting the review clock.

The solution: Use the ADHS application checklist. Have a second person review the application package before submission. Every document, every signature, every attachment — verified before the package goes out.

Delay 3: Entity Formation Issues

The problem: The new business entity is not properly formed, registered, or in good standing with the Arizona Corporation Commission. ADHS will not process the application until the entity issue is resolved.

The solution: Form the entity early in the process. File the articles with the ACC, obtain the certificate of good standing, and include it in the CHOW application.

Delay 4: Designated Manager Qualifications

The problem: The designated manager has not completed all required training, does not have a current CPR or first aid certification, or does not meet the minimum qualifications.

The solution: Identify the designated manager early and verify all credentials before the application is submitted. If the manager needs additional training, enroll them immediately.

Delay 5: Policy and Procedure Deficiencies

The problem: The submitted policies and procedures do not meet ADHS standards. ADHS issues a deficiency notice requiring revisions.

The solution: Develop or update policies using ADHS guidelines as the framework. If you are purchasing an existing facility, obtain the current policies from the seller and update them for the new ownership. Consider hiring a healthcare compliance consultant to review policies before submission.

Delay 6: Outstanding Facility Deficiencies

The problem: The facility has unresolved ADHS deficiencies from a prior inspection. ADHS may require these to be corrected before approving the CHOW.

The solution: During due diligence, request all ADHS inspection reports and verify that any cited deficiencies have been corrected. If deficiencies remain, negotiate with the seller to resolve them before closing — or adjust the purchase price to reflect the remediation cost.

Special Situations

CHOW for Multiple Facilities

If you are acquiring multiple facilities from the same seller, each facility requires a separate CHOW application. However, common documents (background checks, entity documentation) can often be submitted once and cross-referenced across applications. Coordinate with ADHS to streamline the process.

CHOW with Simultaneous Closing

In most ALF transactions, the real estate closing and the license transfer happen simultaneously or within days of each other. This requires careful coordination between the buyer, seller, title company, lender, and ADHS. The purchase agreement should include provisions for handling any gap between closing and license issuance.

Temporary Manager During CHOW

If the new owner's designated manager is not yet in place at the time of CHOW application, ADHS may allow a temporary manager to serve during the transition period. The temporary manager must meet all ADHS qualifications.

Working With Crawford Commercial on the CHOW Process

Crawford Commercial has guided dozens of buyers through the CHOW process in Arizona. We know the common delays, the documentation requirements, and the ADHS review process inside and out.

Our approach:

• Day-one preparation: We start the CHOW preparation process as soon as the purchase agreement is executed. Fingerprint applications go out immediately.
• Complete applications: We verify every document before submission. Our goal is zero deficiency notices.
• ADHS coordination: We maintain communication with ADHS throughout the review process to monitor progress and resolve questions quickly.
• Closing coordination: We align the CHOW approval with the real estate closing to minimize gaps and ensure a smooth transition.

The CHOW process does not have to be a source of anxiety or delay. With proper preparation and experienced guidance, it is a predictable, manageable part of the transaction.

Contact Crawford Commercial at info@crawford.team or visit crawford.team.