52:27D-342 - Release from escrow
52:27D-342. Release from escrow The commissioner shall require a provider to establish an interest bearing escrow account with a bank, trust company or other escrow agent approved by the commissioner, as a condition of issuing a certificate of authority. The provider shall place in the escrow account any entrance fees or payments in excess of 5% of the then existing entrance fee for the living unit that are received by the provider prior to the date the resident is permitted to occupy the living unit in the facility. The fees or payments are subject to release from the escrow account in the following manner:
a. If the entrance fee gives the resident the right to occupy a living unit which has been previously occupied, the entrance fee and any interest earned thereon shall be released to the provider when the living unit becomes available for occupancy by the new resident.
b. If the entrance fee applies to a living unit which has not been previously occupied, the entrance fee and any interest earned thereon shall be released to the provider when the commissioner is satisfied that:
(1) Aggregate entrance fees received or receivable by the provider pursuant to executed continuing care agreements equal at least 50% of the sum of the entrance fees due at full occupancy of the portion of the facility under construction, except that entrance fees receivable pursuant to an agreement shall be counted only if the facility has received a deposit of 35% or more of the entrance fee due from the individual signing the contract;
(2) The aggregate entrance fees received or receivable pursuant to the preceding paragraph plus anticipated proceeds of any first mortgage loan or other long-term financing commitment and funds from other sources in the actual possession of the provider are equal to at least 50% of the aggregate cost of constructing or purchasing, equipping and furnishing the facility plus at least 50% of the funds necessary to fund start-up losses as estimated by the provider in the statement of anticipated source and application of funds submitted pursuant to subsection j. of section 7 of this act; and
(3) The provider has received a preliminary commitment for any permanent mortgage loan or other long-term financing described pursuant to subsection j. of section 7 of this act and any conditions of the commitment prior to disbursement of funds thereunder, other than completion of the construction or closing of the purchase of the facility, are substantially satisfied.
c. If the funds in the escrow account established pursuant to this section and any interest earned thereon are not released within 36 months, or a greater time if so specified by the provider with the consent of the commissioner, the escrow agent shall return the funds to the individuals who made payments to the provider.
d. Nothing in this section shall require the provider to place any nonrefundable application fees charged to prospective residents in escrow.
e. In lieu of any escrow required pursuant to this section, a provider is entitled to post a letter of credit from a financial institution, negotiable securities or a bond by a surety authorized to do business in this State, in a form approved by the commissioner and in an amount not to exceed the amount required by paragraph (1) of subsection b. of this section. The provider shall execute the letter of credit, negotiable securities or bond in favor of the commissioner on behalf of individuals who are entitled to a refund of entrance fees from the provider.
f. A provider may apply to the commissioner for a waiver of the applicable escrow requirements of this section when a provider constructs additional living units in an amount that does not exceed 10% of the facility's existing living units for continuing care residents.
The provider shall apply for the waiver in writing to the commissioner. The commissioner may grant the waiver, which may be effective for a period of one year or longer, at the discretion of the commissioner, if the construction of additional units meets the requirements of this subsection.
g. Upon receipt of a notice from the provider that an individual is entitled to a refund of an entrance fee, the escrow agent shall return the funds held in the escrow account to the individuaL.
L. 1986, c. 103, s. 13.