CHAPTER 246. CONTINUING CARE FACILITIES
HEALTH AND SAFETY CODE
TITLE 4. HEALTH FACILITIES
SUBTITLE B. LICENSING OF HEALTH FACILITIES
CHAPTER 246. CONTINUING CARE FACILITIES
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 246.001. SHORT TITLE. This chapter may be cited as the
Texas Continuing Care Facility Disclosure and Rehabilitation Act.
Acts 1989, 71st Leg., ch. 678, Sec. 1, eff. Sept. 1, 1989.
Sec. 246.002. DEFINITIONS. In this chapter:
(1) "Board" means the State Board of Insurance.
(2) "Commissioner" means the commissioner of the State Board of
Insurance.
(3) "Continuing care" means the furnishing of a living unit,
together with personal care services, nursing services, medical
services, or other health-related services, regardless of whether
the services and the living unit are provided at the same
location:
(A) to an individual who is not related by consanguinity or
affinity, as determined under Chapter 573, Government Code, to
the person furnishing the care; and
(B) under a continuing care contract.
(4) "Continuing care contract" means an agreement that requires
the payment of an entrance fee by or on behalf of a resident in
exchange for the furnishing of continuing care by a provider and
that is effective for:
(A) the life of the resident; or
(B) more than one year.
(5) "Entrance fee" means an initial or deferred transfer of
money or other property valued at an amount exceeding three
months' rent, made, or promised to be made, as full or partial
consideration for acceptance by a provider of a specified
individual as a resident. The term does not include a deposit
made under a reservation agreement.
(6) "Facility" means a place in which a person provides
continuing care to an individual.
(7) "Living unit" means a room, apartment, cottage, or other
area that is in a facility and that is set aside for the
exclusive use or control of one or more specified individuals.
(8) "Long-term nursing care" means nursing care provided for a
period longer than 365 consecutive days.
(9) "Person" means an individual, corporation, association, or
partnership, and includes a fraternal or benevolent order or
society.
(10) "Provider" means a person who undertakes to provide
continuing care in a facility.
(11) "Reservation agreement" means an agreement that requires
the payment of a deposit to reserve a living unit for a
prospective resident.
(12) "Resident" means an individual entitled to receive
continuing care in a facility.
Acts 1989, 71st Leg., ch. 678, Sec. 1, eff. Sept. 1, 1989.
Amended by Acts 1991, 72nd Leg., ch. 14, Sec. 95, eff. Sept. 1,
1991; Acts 1991, 72nd Leg., ch. 561, Sec. 31, eff. Aug. 26, 1991;
Acts 1993, 73rd Leg., ch. 953, Sec. 1, eff. Sept. 1, 1993; Acts
1995, 74th Leg., ch. 76, Sec. 5.95(27), eff. Sept. 1, 1995.
Sec. 246.003. BOARD POWERS AND DUTIES. (a) The board shall
regulate providers as provided by this chapter.
(b) The board may adopt rules and take other action as necessary
to administer and enforce this chapter.
Acts 1989, 71st Leg., ch. 678, Sec. 1, eff. Sept. 1, 1989.
Sec. 246.004. RIGHTS OF RESIDENTS. A resident receiving care in
a portion of a facility licensed to provide nursing home care,
personal care, or custodial care is entitled to all statutory
rights provided to a nursing home, personal care, or custodial
care resident.
Acts 1989, 71st Leg., ch. 678, Sec. 1, eff. Sept. 1, 1989.
Sec. 246.005. LICENSING FOR CERTAIN TAX PURPOSES. A facility
regulated under this chapter is licensed for purposes of Section
151.314, Tax Code.
Acts 1989, 71st Leg., ch. 678, Sec. 1, eff. Sept. 1, 1989.
Sec. 246.006. QUALITY OF CARE. The commissioner may not
regulate or in any manner inquire into the quality of care
provided in a facility.
Acts 1989, 71st Leg., ch. 678, Sec. 1, eff. Sept. 1, 1989.
Sec. 246.007. REDUCTION OF FEES. The commissioner shall reduce
the annual filing fees under this chapter if the cumulative
amount of the fees exceeds the actual cost of regulation.
Acts 1989, 71st Leg., ch. 678, Sec. 1, eff. Sept. 1, 1989.
SUBCHAPTER B. CERTIFICATE OF AUTHORITY
Sec. 246.021. CERTIFICATE OF AUTHORITY REQUIRED. Unless a
provider holds a certificate of authority issued under this
subchapter, the provider may not:
(1) acquire a facility;
(2) enter into a continuing care contract; or
(3) enter into a reservation agreement unless the agreement
provides for the full refund, for any reason, of a deposit paid
in connection with the agreement.
Acts 1989, 71st Leg., ch. 678, Sec. 1, eff. Sept. 1, 1989.
Amended by Acts 1993, 73rd Leg., ch. 953, Sec. 2, eff. Sept. 1,
1993.
Sec. 246.022. APPLICATION FOR AND ISSUANCE OF CERTIFICATE OF
AUTHORITY. (a) The commissioner shall adopt rules stating the
information an applicant for a certificate of authority must
submit.
(b) On receiving an application for a certificate of authority,
the commissioner shall conduct a hearing on the application.
(c) The commissioner shall grant an application for a
certificate of authority if the commissioner finds that:
(1) the applicant or the facility is financially sound;
(2) the competence, experience, and integrity of the applicant,
its board of directors, its officers, or its management make it
in the public interest to issue the certificate; and
(3) the applicant is capable of complying with this chapter.
(d) The commissioner shall issue an order approving or
disapproving an application not later than the 180th day after
the date on which the application is filed.
(e) The commissioner may limit issuance of certificates of
authority to incorporated entities only.
Acts 1989, 71st Leg., ch. 678, Sec. 1, eff. Sept. 1, 1989.
Sec. 246.023. MANDATORY ISSUANCE OF CERTIFICATE OF AUTHORITY TO
CERTAIN FACILITIES. (a) The commissioner shall issue a
certificate of authority for a facility that:
(1) was occupied by at least one resident on September 1, 1987;
(2) was under construction on September 1, 1987; or
(3) incurred substantial financial obligations before September
1, 1987, related to the development of the facility.
(b) A certificate of authority issued under this section may be
suspended or revoked as any other certificate.
(c) This section prevails over Section 246.022.
Acts 1989, 71st Leg., ch. 678, Sec. 1, eff. Sept. 1, 1989.
Sec. 246.024. TRANSFER OF CERTIFICATE OF AUTHORITY. A
certificate of authority may not be transferred without the prior
approval of the commissioner.
Acts 1989, 71st Leg., ch. 678, Sec. 1, eff. Sept. 1, 1989.
Amended by Acts 1991, 72nd Leg., ch. 14, Sec. 96, eff. Sept. 1,
1991.
Sec. 246.025. SUSPENSION OR REVOCATION OF CERTIFICATE OF
AUTHORITY. The commissioner may suspend or revoke a provider's
certificate of authority if the provider:
(1) draws on its entrance fee escrow in an amount greater than
provided for by Section 246.073;
(2) draws on its loan reserve fund escrow in an amount greater
than provided for by Section 246.078; or
(3) intentionally violates this chapter.
Acts 1989, 71st Leg., ch. 678, Sec. 1, eff. Sept. 1, 1989.
Amended by Acts 1991, 72nd Leg., ch. 14, Sec. 97, eff. Sept. 1,
1991.
Sec. 246.026. MANAGEMENT BY OTHERS. A holder of a certificate
of authority may not contract for management of the facility
unless the commissioner is notified of the contract.
Acts 1989, 71st Leg., ch. 678, Sec. 1, eff. Sept. 1, 1989.
Sec. 246.027. CERTIFICATE OF AUTHORITY FEES. (a) Except as
provided by Subsection (b), a facility that files an application
for a certificate of authority must pay to the commissioner a fee
of $10,000.
(b) A facility that files an application for a certificate of
authority issued under Section 246.023 must pay to the
commissioner:
(1) a fee of $500; and
(2) a fee of $2 for each living unit in the facility, excluding
a unit devoted to that portion of the facility that is a licensed
nursing home.
Acts 1989, 71st Leg., ch. 678, Sec. 1, eff. Sept. 1, 1989.
SUBCHAPTER C. CONTINUING CARE CONTRACTS AND DISCLOSURE STATEMENTS
Sec. 246.041. PRECONTRACTUAL RECORDING REQUIREMENTS. (a) A
provider shall file with the board a current disclosure statement
that meets the requirements of this subchapter and shall file
copies of the agreements establishing the escrows under
Subchapter D or a verified statement explaining that an escrow is
not required before the provider:
(1) contracts to provide continuing care in a facility located
or to be located in this state;
(2) extends the term of an existing continuing care contract in
a facility that is located or to be located in this state and
that requires or allows an entrance fee from any person,
regardless of whether the extended contract requires an entrance
fee; or
(3) including a person acting on the provider's behalf, solicits
for an individual who is a resident of this state a continuing
care contract in this state.
(b) A contract is solicited in this state if, during the
12-month period preceding the date on which a continuing care
contract for a facility is signed or accepted by either party,
information concerning the facility or the availability of a
continuing care contract for the facility is given:
(1) by personal, telephone, mail, or other communication
directed to and received by a person at a location in this state;
or
(2) in a paid advertisement published or broadcast from within
this state, other than in a publication in which more than
two-thirds of the circulation is outside this state.
Acts 1989, 71st Leg., ch. 678, Sec. 1, eff. Sept. 1, 1989.
Sec. 246.042. DELIVERY OF DISCLOSURE STATEMENT. (a) A provider
who has not been issued a certificate of authority under
Subchapter B must deliver a disclosure statement to any person
from whom the provider accepts a deposit in connection with a
reservation agreement before the provider accepts the deposit.
(b) A provider who has been issued a certificate of authority
under Subchapter B must deliver a disclosure statement to a
person with whom a continuing care contract is to be made before
the earlier of:
(1) the execution of the continuing care contract; or
(2) the transfer of any entrance fee or nonrefundable deposit to
the provider by or on behalf of the person.
(c) The most recently filed disclosure statement is the only
statement that:
(1) is current for purposes of this chapter; and
(2) may be delivered under this section.
Acts 1989, 71st Leg., ch. 678, Sec. 1, eff. Sept. 1, 1989.
Amended by Acts 1993, 73rd Leg., ch. 953, Sec. 3, eff. Sept. 1,
1993.
Sec. 246.043. COVER PAGE OF DISCLOSURE STATEMENT. The cover
page of a disclosure statement must state:
(1) the date of the statement in a prominent location and in
type that is boldfaced, capitalized, underlined, or otherwise set
out from the surrounding written material so as to be
conspicuous;
(2) that if the provider has not been issued a certificate of
authority under Subchapter B, this chapter requires the delivery
of a disclosure statement to a prospective resident before the
payment of any deposit to reserve a living unit;
(3) that this chapter requires the delivery of a disclosure
statement to a contracting party before the execution of a
continuing care contract or the payment of an entrance fee or
nonrefundable deposit; and
(4) that the disclosure statement has not been approved by a
governmental agency or representative to ensure the accuracy of
its information.
Acts 1989, 71st Leg., ch. 678, Sec. 1, eff. Sept. 1, 1989.
Amended by Acts 1991, 72nd Leg., ch. 14, Sec. 98, eff. Sept. 1,
1991; Acts 1993, 73rd Leg., ch. 953, Sec. 4, eff. Sept. 1, 1993.
Sec. 246.044. CONTENTS OF DISCLOSURE STATEMENT: PROVIDER. (a)
The disclosure statement must include the name and business
address of the provider and a statement of whether the provider
is a partnership, corporation, or other type of legal entity. If
the provider is not an individual, the statement must include:
(1) the name and business address of each officer, director,
trustee, and managing or general partner; and
(2) the name and business address of each person who has at
least a 10 percent interest in the provider and a description of
the person's interest in or occupation with the provider.
(b) The provider may include in the disclosure statement any
other material information concerning the facility or the
provider.
Acts 1989, 71st Leg., ch. 678, Sec. 1, eff. Sept. 1, 1989.
Sec. 246.045. CONTENTS OF DISCLOSURE STATEMENT: THIRD PARTY
MANAGEMENT. If a person, other than an individual directly
employed by the provider, is to be the day-to-day manager of a
facility, the disclosure statement must include:
(1) a description of the person's business experience, if any,
in the operation or management of a similar facility;
(2) the name and address of any professional service, firm,
association, trust, partnership, or corporation that:
(A) has in the person, or in which the person has, at least a 10
percent interest; and
(B) proposes to provide goods, leases, or services to the
facility or to the residents of the facility, of an aggregate
value of at least $500 in a year;
(3) a description of any goods, leases, or services under
Subdivision (2), and a statement of their probable or anticipated
cost to the facility, provider, or residents, or a statement that
their cost cannot be estimated; and
(4) a description of any matter in which the person:
(A) has been convicted of a felony, pleaded nolo contendere to a
felony charge, or has 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;
(B) is subject to an injunction or restrictive order of a court
of record; or
(C) has had any state or federal license or permit suspended or
revoked as a result of an action brought by a governmental agency
if the order or action arose out of or was related to a business
activity in a health care field, including an action affecting a
license to operate a foster care facility, a nursing home, a
retirement home, a home for the aged, or a facility subject to
this chapter or a similar statute in another state.
Acts 1989, 71st Leg., ch. 678, Sec. 1, eff. Sept. 1, 1989.
Sec. 246.046. CONTENTS OF DISCLOSURE STATEMENT: AFFILIATION WITH
NONPROFIT ORGANIZATION. The disclosure statement must state
whether the provider is affiliated with a religious, charitable,
or other nonprofit organization, and if so, the statement must:
(1) describe the extent of the affiliation;
(2) explain the extent to which the organization is responsible
for the financial and contractual obligations of the provider;
and
(3) cite any provision of the Internal Revenue Code of 1986
under which the provider or affiliate claims to be exempt from
the payment of income tax.
Acts 1989, 71st Leg., ch. 678, Sec. 1, eff. Sept. 1, 1989.
Sec. 246.047. CONTENTS OF DISCLOSURE STATEMENT: PHYSICAL
PROPERTY. (a) The disclosure statement must provide the
location and a description of the proposed or existing physical
property of the facility.
(b) If the physical property of the facility is proposed, the
disclosure statement must state:
(1) the estimated completion date;
(2) whether construction has begun; and
(3) any contingencies under which construction may be deferred.
Acts 1989, 71st Leg., ch. 678, Sec. 1, eff. Sept. 1, 1989.
Sec. 246.048. CONTENTS OF DISCLOSURE STATEMENT: CONTRACTS AND
FEES. The disclosure statement must describe:
(1) the services provided at the facility under a continuing
care contract, including:
(A) the extent to which medical care is furnished; and
(B) those services that are included for specified basic fees
for continuing care and those services that are made available at
extra charge;
(2) all fees required of residents, including the entrance fee
and any periodic charges;
(3) the conditions under which a continuing care contract at the
facility may be canceled by the provider or the resident;
(4) any conditions under which all or part of the entrance fee
is refundable on cancellation of the contract by the provider or
the resident, or by the death of the resident before or during
the occupancy of a living unit; and
(5) the manner by which the provider may adjust periodic charges
or other recurring fees and any limitations on those adjustments.
Acts 1989, 71st Leg., ch. 678, Sec. 1, eff. Sept. 1, 1989.
Sec. 246.049. CONTENTS OF DISCLOSURE STATEMENT: CHANGE OF
CIRCUMSTANCES. The disclosure statement must state:
(1) the policy of the facility regarding changes in the number
of people residing in a living unit because of marriage or other
relationships;
(2) the policy of the facility relating to the admission of a
spouse to the facility and the consequences if the spouse does
not meet the requirements for admission;
(3) the conditions under which a living unit occupied by a
resident may be made available by the facility to a different
resident other than on the death of the previous resident; and
(4) the health and financial conditions required for acceptance
as a resident and for continuation as a resident, including the
effect of any change in the health or financial condition of an
individual between the date of the continuing care contract and
the date on which the individual initially occupies a living
unit.
Acts 1989, 71st Leg., ch. 678, Sec. 1, eff. Sept. 1, 1989.
Sec. 246.050. CONTENTS OF DISCLOSURE STATEMENT: FINANCIAL
INFORMATION. (a) The disclosure statement must:
(1) describe any provisions made or to be made to provide
reserve funding or security to enable the provider to fully
perform its obligations under a continuing care contract at a
facility, including:
(A) the establishment of escrow accounts, trusts, or reserve
funds and the manner in which those funds will be invested; and
(B) the name and experience of any individual in the direct
employment of the provider who will make the investment
decisions; and
(2) provide financial statements of the provider, including:
(A) a balance sheet as of the end of the most recent fiscal
year; and
(B) income statements and a statement of cash flow for each of
the three most recent fiscal years that the provider has been in
existence.
(b) Financial statements required by Subsection (a)(2) must be
prepared in accordance with generally accepted accounting
principles and must be audited by an independent certified public
accountant, who shall state in the audit report whether the
financial statements were prepared in accordance with those
principles.
Acts 1989, 71st Leg., ch. 678, Sec. 1, eff. Sept. 1, 1989.
Amended by Acts 1991, 72nd Leg., ch. 14, Sec. 99, eff. Sept. 1,
1991.
Sec. 246.051. CONTENTS OF DISCLOSURE STATEMENT: ANNUAL INCOME
STATEMENTS. The disclosure statement must contain estimated
annual income statements for the facility for at least five
fiscal years, including:
(1) anticipated earning on any cash reserves;
(2) estimates of net receipts from entrance fees, other than
entrance fees included in the statement of anticipated source and
application of funds required under Section 246.052, minus
estimated entrance fee refunds, including a description of the
actuarial basis and method of computation for the projection of
entrance fee receipts;
(3) an estimate of gifts or bequests to be relied on to meet
operating expenses;
(4) a projection of estimated income from fees and charges,
excluding entrance fees, that:
(A) states individual rates anticipated to be charged; and
(B) includes a description of the assumptions used for computing
the estimated occupancy rate of the facility and the effect on
the income of the facility of any government subsidies for health
care services to be provided under the continuing care contract;
(5) a projection of the facility's operating expenses,
including:
(A) a description of the assumptions used in computing the
expenses; and
(B) a separate allowance for the replacement of equipment and
furnishings and anticipated major structural repairs or
additions; and
(6) an estimate of annual payments of principal and interest
required by a mortgage loan or other long-term financing
arrangement relating to the facility.
Acts 1989, 71st Leg., ch. 678, Sec. 1, eff. Sept. 1, 1989.
Amended by Acts 1991, 72nd Leg., ch. 14, Sec. 100, eff. Sept. 1,
1991.
Sec. 246.052. CONTENTS OF DISCLOSURE STATEMENT: ANTICIPATED
SOURCE AND APPLICATION OF FUNDS. If a facility has not begun
operation, the disclosure statement must include a statement of
the anticipated source and application of the funds to be used in
the purchase or construction of the facility, including:
(1) an estimate of the cost of purchasing or constructing and of
equipping the facility, including financing expenses, legal
expenses, land costs, occupancy development costs, and similar
costs that the provider expects to incur or to become obligated
to pay before operations begin;
(2) a description of any mortgage loan or other long-term
financing arrangement for the facility, including the anticipated
terms and costs of the financing;
(3) an estimate of the total entrance fees to be received from,
or on behalf of, residents before the operation of the facility
begins; and
(4) an estimate of any funds anticipated to be necessary to
cover initial losses and to provide reserve funds to assure full
performance of the obligations of the provider under a continuing
care contract.
Acts 1989, 71st Leg., ch. 678, Sec. 1, eff. Sept. 1, 1989.
Sec. 246.053. STANDARD CONTRACT FORM. (a) A copy of the
standard contract form used by a provider must be attached as an
exhibit to each disclosure statement.
(b) The standard contract form must specify the refund
provisions of Sections 246.056 and 246.057.
Acts 1989, 71st Leg., ch. 678, Sec. 1, eff. Sept. 1, 1989.
Amended by Acts 1991, 72nd Leg., ch. 14, Sec. 101, eff. Sept. 1,
1991.
Sec. 246.054. ANNUAL DISCLOSURE STATEMENT REVISION. (a) A
provider shall file a revised disclosure statement with the board
not later than the 120th day after the date on which the
provider's fiscal year ends.
(b) The revised disclosure statement must revise, as of the end
of the provider's fiscal year, the information required by this
subchapter.
(c) The revised disclosure statement must describe any material
differences between:
(1) the estimated income statements filed under Section 246.052
as a part of the disclosure statement filed after the start of
the provider's most recently completed fiscal year; and
(2) the actual result of operations during that fiscal year with
the revised estimated income statements filed as a part of the
revised disclosure statement.
(d) A provider may revise its disclosure statement and may file
the revised disclosure statement at any other time if, in the
provider's opinion, revision is necessary to prevent a disclosure
statement from containing a material misstatement of fact or
omitting a material fact required to be included in the
disclosure statement.
(e) The commissioner shall review the disclosure statement for
completeness but is not required to review the disclosure
statement for accuracy.
Acts 1989, 71st Leg., ch. 678, Sec. 1, eff. Sept. 1, 1989.
Sec. 246.055. ADVERTISEMENT IN CONFLICT WITH DISCLOSURES. A
provider may not engage in any type of advertisement for a
continuing care contract or facility if the advertisement
contains a statement or representation in conflict with the
disclosures required under this subchapter.
Acts 1989, 71st Leg., ch. 678, Sec. 1, eff. Sept. 1, 1989.
Sec. 246.056. RESCISSION OF CONTRACT; REQUIRED LANGUAGE. (a) A
person who executes a continuing care contract with a provider
may rescind the contract at any time before the later of midnight
of the seventh day, or a later day if specified in the contract:
(1) after the date on which the continuing care contract is
executed; or
(2) after the date on which the person receives a disclosure
statement that meets the requirements of this subchapter.
(b) A resident who executes a continuing care contract may not
be required to move into the facility before the expiration of
the period during which the contract may be rescinded.
(c) If a continuing care contract is rescinded under this
section, any money or property transferred to the provider, other
than periodic charges specified in the contract and applicable
only to the period a living unit was actually occupied by the
resident, shall be refunded not later than the 30th day after the
date of rescission.
(d) Each continuing care contract must include the following
statement or a substantially equivalent statement in type that is
boldfaced, capitalized, underlined, or otherwise set out from the
surrounding written material so as to be conspicuous:
"You may cancel this contract at any time prior to midnight of
the seventh day, or a later day if specified in the contract,
after the date on which you sign this contract or you receive the
facility's disclosure statement, whichever occurs later. If you
elect to cancel the contract, you must do so by written notice
and you will be entitled to receive a refund of all assets
transferred other than periodic charges applicable to your
occupancy of a living unit."
(e) Each continuing contract also must include the following
statement in type that is boldfaced, capitalized, underlined, or
otherwise set out from the surrounding written material so as to
be conspicuous:
"This document, if executed, constitutes a legal and binding
contract between you and __________. You may wish to consult a
legal or financial advisor before signing, although it is not
required that you do so to make this contract binding."
Acts 1989, 71st Leg., ch. 678, Sec. 1, eff. Sept. 1, 1989.
Amended by Acts 1991, 72nd Leg., ch. 14, Sec. 102, eff. Sept. 1,
1991; Acts 1993, 73rd Leg., ch. 953, Sec. 5, eff. Sept. 1, 1993.
Sec. 246.057. CANCELLATION OF CONTRACT: DEATH OR INCAPACITY
BEFORE OCCUPANCY. (a) A continuing care contract is canceled if
the resident:
(1) dies before occupying a living unit in the facility; or
(2) is precluded under the terms of the contract from occupying
a living unit in the facility because of illness, injury, or
incapacity.
(b) If a continuing care contract is canceled under this
section, the resident or the resident's legal representative is
entitled to a refund of all money or property transferred to the
provider, minus:
(1) any nonstandard costs specifically incurred by the provider
or facility at the request of the resident that are described in
the contract or in an addendum to the contract signed by the
resident; and
(2) a reasonable service charge, if set out in the contract,
that may not exceed the greater of $1,000 or two percent of the
entrance fee.
Acts 1989, 71st Leg., ch. 678, Sec. 1, eff. Sept. 1, 1989.
Amended by Acts 1993, 73rd Leg., ch. 953, Sec. 6, eff. Sept. 1,
1993.
Sec. 246.058. DISCLOSURE STATEMENT FEES. A facility that files
a disclosure statement under Section 246.041 or 246.054 shall pay
to the commissioner:
(1) a filing fee of $500; and
(2) a fee of not more than $2 for each living unit in the
facility, excluding a unit devoted to that portion of the
facility that is a licensed nursing home.
Acts 1989, 71st Leg., ch. 678, Sec. 1, eff. Sept. 1, 1989.
Amended by Acts 1991, 72nd Leg., ch. 14, Sec. 103, eff. Sept. 1,
1991.
SUBCHAPTER D. ENTRANCE FEE AND RESERVE FUND ESCROW ACCOUNTS
Sec. 246.071. ENTRANCE FEE ESCROW ACCOUNT; ESCROW AGENT. (a)
Before a provider may accept the payment of a deposit made under
a reservation agreement or any portion of an entrance fee, the
provider must establish an entrance fee escrow account with a
bank or trust company, as escrow agent, that is located in this
state.
(b) The provider shall deposit with the escrow agent any deposit
or any portion of an entrance fee received by the provider not
later than 72 hours after the provider receives the deposit or
fee.
Acts 1989, 71st Leg., ch. 678, Sec. 1, eff. Sept. 1, 1989.
Amended by Acts 1993, 73rd Leg., ch. 953, Sec. 7, eff. Sept. 1,
1993.
Sec. 246.072. RETURN OF DEPOSITS; RELEASE OR RETURN OF ENTRANCE
FEE. (a) On a written request from or on behalf of the provider
or a prospective resident, the escrow agent shall return the
amount on deposit to the person who paid the deposit or shall
maintain the deposit as an entrance fee in the entrance fee
escrow account.
(b) Unless the escrow agent receives a written request from or
on behalf of a provider or a resident for the return of an
entrance fee under Section 246.056, the agent shall release the
fee to the provider or place the fee in a loan reserve fund
escrow.
Acts 1989, 71st Leg., ch. 678, Sec. 1, eff. Sept. 1, 1989.
Amended by Acts 1991, 72nd Leg., ch. 14, Sec. 104, eff. Sept. 1,
1991; Acts 1993, 73rd Leg., ch. 953, Sec. 8, eff. Sept. 1, 1993.
Sec. 246.073. RELEASE TO THE PROVIDER. (a) Except as provided
by Subsection (b), an escrow agent shall release an entrance fee
to the provider if:
(1) a minimum of 50 percent of the number of living units in the
facility have been reserved for residents, as evidenced by:
(A) uncanceled executed continuing care contracts with those
residents; and
(B) the receipt by the agent of entrance fee deposits of at
least 10 percent of the entrance fee designated in each
continuing care contract;
(2) the total amount of aggregate entrance fees received or
receivable by the provider under binding continuing care
contracts, the anticipated proceeds of any first mortgage loan or
other long-term financing commitment described under Subdivision
(3), and funds from other sources in the actual possession of the
provider are equal to or more than the total amount of:
(A) 90 percent of the aggregate cost of constructing or
purchasing, equipping, and furnishing the facility;
(B) 90 percent of the funds estimated, in the statement of
anticipated source and application of funds included in the
disclosure statement, to be necessary to cover initial losses of
the facility; and
(C) 90 percent of the amount of any loan reserve fund escrow
required to be maintained by the provider under Section 246.077;
and
(3) a commitment has been received by the provider for any
permanent mortgage loan or other long-term financing described in
the statement of anticipated source and application of funds
included in the current disclosure statement and any conditions
of the commitment before disbursement of funds have been
substantially satisfied, other than completion of the
construction or closing on the purchase of the facility; and:
(A) if construction of the facility has not been substantially
completed:
(i) all necessary government permits or approvals have been
obtained;
(ii) the provider and the general contractor responsible for
construction of the facility have entered into a maximum price
contract;
(iii) a recognized surety authorized to do business in this
state has executed in favor of the provider a bond covering
faithful performance of the construction contract by the general
contractor and the payment of all obligations under the contract;
(iv) the provider has entered a loan agreement for an interim
construction loan in an amount that, when combined with the
amount of entrance fees in escrow plus the amount of funds from
other sources in the actual possession of the provider, equals or
exceeds the estimated cost of constructing, equipping, and
furnishing the facility;
(v) the lender has disbursed not less than 10 percent of the
amount of the construction loan for physical construction or
completed site preparation work; and
(vi) the provider has placed orders at firm prices for not less
than 50 percent of the value of items necessary for equipping and
furnishing the facility in accordance with the description in the
disclosure statement, including any installation charges; or
(B) if construction or purchase of the facility has been
substantially completed:
(i) an occupancy permit covering the living unit has been issued
by the local government that has authority to issue the permit;
and
(ii) if the entrance fee applies to a living unit that has been
previously occupied, the living unit is available for occupancy
by the new resident.
(b) Before the date on which the loan reserve fund escrow
required under Section 246.077 is first established, the
aggregate amount of entrance fees that may be released to the
provider under this section may not exceed an amount equal to the
aggregate amount of entrance fees received or receivable by the
provider under binding continuing care contracts minus the amount
of entrance fees received or receivable that are required to be
maintained initially in the loan reserve fund escrow.
Acts 1989, 71st Leg., ch. 678, Sec. 1, eff. Sept. 1, 1989.
Amended by Acts 1991, 72nd Leg., ch. 14, Sec. 105, eff. Sept. 1,
1991; Acts 1993, 73rd Leg., ch. 953, Sec. 9, eff. Sept. 1, 1993.
Sec. 246.0735. PHASE-IN FACILITIES. The commissioner may create
requirements for escrow release different from those under
Section 246.073 for facilities that obtain a certificate of
authority issued under this subchapter before the commencement of
facility construction. A facility that meets the commissioner's
requirements under this section is not required to satisfy
Section 246.073.
Added by Acts 2007, 80th Leg., R.S., Ch.
1228, Sec. 1, eff. June 15, 2007.
Sec. 246.0736. CONTINUING RELEASE OF ESCROW. (a) After the
initial release of an entrance fee by an escrow agent for a
specific facility, the commissioner shall authorize an escrow
agent to continue to release escrowed entrance fees for that
facility to the provider without further proof of satisfying the
requirements of Section 246.073 if:
(1) the provider provides a monthly report to the department on
marketing activities for living units of the facility; and
(2) the provider immediately informs the department of any
problems, issues, or irregularities encountered in its marketing
activities for the facility.
(b) If the provider fails to meet the requirements of Subsection
(a), the commissioner may require the provider to satisfy the
requirements of Section 246.073 before the commissioner
authorizes the escrow agent to continue releasing escrowed
entrance fees to the provider.
(c) The commissioner shall adopt rules to implement this
section.
Added by Acts 2007, 80th Leg., R.S., Ch.
1228, Sec. 1, eff. June 15, 2007.
Sec. 246.074. RETURN OF ENTRANCE FEE. The escrow agent shall
return an entrance fee to the person who paid it if the fee is
not released to the provider or placed in the loan reserve fund
escrow required under Section 246.077 within:
(1) 36 months after the date on which any portion of the
entrance fee is received by the provider; or
(2) a longer time specified by the provider in the disclosure
statement delivered with the continuing care contract under which
the fee was paid.
Acts 1989, 71st Leg., ch. 678, Sec. 1, eff. Sept. 1, 1989.
Amended by Acts 1991, 72nd Leg., ch. 14, Sec. 106, eff. Sept. 1,
1991; Acts 1993, 73rd Leg., ch. 953, Sec. 10, eff. Sept. 1, 1993.
Sec. 246.075. ESCROW OF APPLICATION FEE NOT REQUIRED. This
subchapter does not require the escrow of any nonrefundable
portion of a deposit or entrance fee that:
(1) does not exceed an amount equal to two percent of the
entrance fee; and
(2) is clearly designated as nonrefundable in the continuing
care contract or reservation agreement.
Acts 1989, 71st Leg., ch. 678, Sec. 1, eff. Sept. 1, 1989.
Amended by Acts 1993, 73rd Leg., ch. 953, Sec. 11, eff. Sept. 1,
1993.
Sec. 246.076. INTEREST ACCRUED ON ENTRANCE FEE FUNDS. Unless
otherwise provided in a continuing care contract, interest that
accrues on funds held in an entrance fee escrow account is the
property of the provider.
Acts 1989, 71st Leg., ch. 678, Sec. 1, eff. Sept. 1, 1989.
Amended by Acts 1993, 73rd Leg., ch. 953, Sec. 12, eff. Sept. 1,
1993.
Sec. 246.077. RESERVE FUND ESCROW. (a) When a facility is
first occupied by a resident, the provider shall establish and
maintain in an escrow account with a bank or trust company, as
escrow agent, that is located in this state a reserve fund equal
to the total of all principal and interest payments due during
the next 12 months on any first mortgage loan or other long-term
financing arrangement for the facility. The requirements of this
section may be met in whole or in part by other reserve funds
held for the purpose of meeting loan obligations if the total
amount equals or exceeds the amount required by this subsection.
(b) At the option of the facility, the loan reserve fund escrow
amount may exclude the portion of principal and interest payments
applicable to that portion of the facility that is a licensed
nursing home.
(c) The provider shall maintain the loan reserve fund escrow in
an account that is fully covered by federal deposit insurance and
is separate from the provider's business account or in other
accounts or investments approved by the commissioner. The funds
in the reserve fund escrow account may be invested, with earnings
payable to the provider.
Acts 1989, 71st Leg., ch. 678, Sec. 1, eff. Sept. 1, 1989.
Amended by Acts 1991, 72nd Leg., ch. 14, Sec. 107, eff. Sept. 1,
1991.
Sec. 246.078. RELEASE OF RESERVE FUND ESCROW. (a) The escrow
agent may release an amount equal to not more than one-twelfth of
the loan reserve fund required by Section 246.077 if the provider
requests the release in writing.
(b) The escrow agent must give written notice to the board not
later than the 11th day before the date of the release.
(c) The escrow agent may not release funds from the loan reserve
fund escrow under this section more than once during a calendar
year. A provider at any time may apply to the commissioner for
the withdrawal of all or part of the loan reserve escrow funds.
The provider may withdraw the funds on the approval of the
withdrawal by the commissioner. The application must be made and
the approval given as provided by rule.
(d) The provider must repay to the loan reserve fund escrow
account the amount released to the provider under Subsection (a)
or (c) not later than 18 months after the date the amount is
released. The commissioner may place the provider or facility
under supervision under Section 246.091 or take any other
appropriate action as provided by law if the provider does not
repay the loan reserve fund escrow account within the required
period.
Acts 1989, 71st Leg., ch. 678, Sec. 1, eff. Sept. 1, 1989.
Amended by Acts 1991, 72nd Leg., ch. 14, Sec. 108, eff. Sept. 1,
1991.
Sec. 246.079. TRANSITION. (a) A provider who operates a
facility that existed on September 1, 1987, must comply with the
filing requirements imposed under Section 246.041 and the escrow
requirements imposed under Sections 246.077 and 246.078 not later
than September 1, 1990.
(b) The commissioner may extend the time for compliance under
this section for a reasonable period if the commissioner
determines that the provider is unable to comply with this
section after making a good faith effort to comply.
Acts 1989, 71st Leg., ch. 678, Sec. 1, eff. Sept. 1, 1989.
Amended by Acts 1991, 72nd Leg., ch. 14, Sec. 109, eff. Sept. 1,
1991.
Sec. 246.080. APPLICABILITY. Sections 246.071 through 246.076
do not apply to a facility that on September 1, 1987, was
completed and occupied by at least one person.
Added by Acts 1991, 72nd Leg., ch. 14, Sec. 110, eff. Sept. 1,
1991.
SUBCHAPTER E. SUPERVISION, REHABILITATION, AND LIQUIDATION
Sec. 246.091. SUPERVISION BY COMMISSIONER. (a) The
commissioner may place a provider or facility under supervision
if:
(1) the provider draws on the provider's entrance fee escrow in
an amount greater than permitted by Section 246.073;
(2) the provider draws on the provider's loan reserve fund
escrow in an amount greater than permitted or more frequently
than permitted by Section 246.078;
(3) the commissioner determines, after a complaint and
investigation, that the provider is financially unsound or is
unable to meet the income or available cash projections
previously filed by the provider and that the ability of the
provider to fully perform its obligations under continuing care
contracts is endangered; or
(4) the provider is bankrupt, insolvent, or has filed for
protection from creditors under a federal or state
reorganization, bankruptcy, or insolvency law.
(b) The commissioner appoints the supervisor.
(c) The commissioner may provide that the provider may not,
during the supervision period and without the prior approval of
the commissioner or the supervisor:
(1) dispose of, convey, or encumber its assets;
(2) withdraw its bank accounts;
(3) lend its funds;
(4) invest its funds;
(5) transfer its property;
(6) incur a debt, obligation, or liability; or
(7) merge or consolidate with another facility.
(d) The commissioner shall terminate the supervision and restore
to a provider the authority to manage the affairs of the facility
if the commissioner determines that the facility is capable of
meeting its financial obligations.
(e) The facility or provider shall pay the costs of a
supervisor.
Acts 1989, 71st Leg., ch. 678, Sec. 1, eff. Sept. 1, 1989.
Amended by Acts 1991, 72nd Leg., ch. 14, Sec. 111, eff. Sept. 1,
1991.
Sec. 246.092. APPLICATION FOR COURT ORDER FOR REHABILITATION OR
LIQUIDATION. (a) The commissioner shall request the attorney
general to apply to a district court of this state, or to the
federal bankruptcy court that has exercised jurisdiction over a
provider or facility, for an order directing the appointment of a
trustee to rehabilitate or liquidate the facility if the
commissioner elects not to place the facility under supervision
and:
(1) the provider draws from the provider's loan reserve fund
escrow an amount greater than permitted by Section 246.078;
(2) the provider does not repay the loan reserve fund escrow as
required by Section 246.078;
(3) the board determines, after a complaint and investigation,
that the provider is financially unsound or is unable to meet the
income or available cash projections previously filed by the
provider and that the ability of the provider to fully perform
its obligations under continuing care contracts is endangered; or
(4) the provider is bankrupt, insolvent, or has filed for
protection from creditors under a federal or state
reorganization, bankruptcy, or insolvency law.
(b) In connection with an application for an order to
rehabilitate or liquidate a facility, the court shall consider
the manner in which the welfare of persons who have previously
contracted with the provider for continuing care at the facility
may be best served, and may order that the proceeds of a lien
imposed under Section 246.111 may be used in full or partial
payment of entrance fees to other facilities on behalf of the
residents of the facility being liquidated.
Acts 1989, 71st Leg., ch. 678, Sec. 1, eff. Sept. 1, 1989.
Amended by Acts 1991, 72nd Leg., ch. 14, Sec. 112, eff. Sept. 1,
1991.
Sec. 246.093. ORDER TO REHABILITATE. An order to rehabilitate a
facility must direct the trustee to:
(1) take possession of the provider's property in order to
conduct the business, including employing any managers or agents
the trustee considers necessary; and
(2) take action as directed by the court to eliminate the causes
and conditions that made rehabilitation necessary.
Acts 1989, 71st Leg., ch. 678, Sec. 1, eff. Sept. 1, 1989.
Sec. 246.094. ORDER TO LIQUIDATE. (a) If the trustee
determines that further efforts to rehabilitate the provider
would be impractical or useless, the trustee may apply to the
court that ordered the rehabilitation for an order of
liquidation.
(b) A court that has jurisdiction may issue an order to
liquidate a facility on application of the board, regardless of
whether an order to rehabilitate the facility exists. If the
court issues an order to liquidate, the court shall appoint a
trustee to collect and liquidate all of the provider's assets
located in this state.
(c) A person may not contract for continuing care at a facility
after an order to liquidate that facility has been entered.
Acts 1989, 71st Leg., ch. 678, Sec. 1, eff. Sept. 1, 1989.
Sec. 246.095. BOND. A court may refuse to make or may vacate an
order to rehabilitate under this subchapter if the provider posts
a bond that is:
(1) in an amount determined by the court to be equal to the
reserve funding needed to fulfill the provider's obligations
under its continuing care contracts at the facility;
(2) issued by a recognized surety authorized to do business in
this state; and
(3) executed in favor of the state on behalf of all persons
entitled to refunds of entrance fees from the provider or other
damages if the provider is unable to fulfill its continuing care
contracts at the facility.
Acts 1989, 71st Leg., ch. 678, Sec. 1, eff. Sept. 1, 1989.
Sec. 246.096. TERMINATION OF REHABILITATION. (a) A court may
terminate a rehabilitation and order return of a facility and its
assets and affairs to the management of the provider if the
court, on petition of the trustee or the provider or on its own
motion, finds that:
(1) the objectives of the order to rehabilitate the facility
have been accomplished; and
(2) the facility can be returned to the provider's management
without further jeopardy to the residents, creditors, or owners
of the facility or the public.
(b) A court may enter an order under this section after:
(1) a full report and accounting of the conduct of the
facility's affairs during the rehabilitation; and
(2) a report on the facility's financial condition.
Acts 1989, 71st Leg., ch. 678, Sec. 1, eff. Sept. 1, 1989.
Sec. 246.097. PAYMENT OF TRUSTEE. The reasonable costs,
expenses, and fees of the trustee are payable from the assets of
the facility.
Acts 1989, 71st Leg., ch. 678, Sec. 1, eff. Sept. 1, 1989.
SUBCHAPTER F. ENFORCEMENT
Sec. 246.111. LIEN. (a) To secure the obligations of the
provider under any continuing care contract, a lien attaches on
the date a resident first occupies a facility. The lien covers
the real and personal property of the provider located at the
facility. The provider shall prepare a written notice sworn to by
an officer of the provider for each county where the provider has
a facility. The notice must contain the name of the provider, the
legal description of each facility of the provider, and a
statement that the facility is subject to this chapter and the
lien provided by this section. The provider shall file for record
the notice in the real property records of each county where the
provider has a facility on or before the later of January 1,
1994, or the date of the execution of the first continuing care
contract relating to the facility.
(b) The commissioner may remove a lien under this section if
requested by a provider to obtain secondary financing or
refinancing of a facility if:
(1) the facility is financially sound; and
(2) removal of the lien does not adversely affect the residents.
(c) A lien under this section is subordinate to any liens on the
property of the facility if the proceeds of the loan secured by
the liens were used in whole or in part to:
(1) construct, acquire, replace, or improve the facility; or
(2) refinance an earlier loan used to construct, acquire,
replace, or improve the facility.
(d) A lien under this section is effective for 10 years.
(e) A lien under this section may be foreclosed on application
of the board if the facility is liquidated or the provider is
insolvent or bankrupt. The proceeds from a foreclosed lien shall
be used for full or partial satisfaction of the provider's
obligations under continuing care contracts in effect on the date
of the foreclosure.
Acts 1989, 71st Leg., ch. 678, Sec. 1, eff. Sept. 1, 1989.
Amended by Acts 1993, 73rd Leg., ch. 953, Sec. 13, 15, eff. Sept.
1, 1993.
Sec. 246.112. INVESTIGATIONS. The commissioner may conduct an
examination or investigation as necessary to:
(1) determine whether a person has violated or is about to
violate this chapter;
(2) aid in the enforcement of this chapter;
(3) determine the financial solvency of a facility; or
(4) verify a statement contained in a disclosure statement filed
or delivered under this chapter.
Acts 1989, 71st Leg., ch. 678, Sec. 1, eff. Sept. 1, 1989.
Sec. 246.113. PRODUCTION OF EVIDENCE. (a) In an investigation
or proceeding under this chapter, the board may:
(1) require or allow a person to file a written statement
regarding any of the facts and circumstances concerning the
matter to be investigated;
(2) administer oaths and affirmations;
(3) subpoena witnesses;
(4) compel attendance;
(5) take evidence; and
(6) require the production of any books, papers, correspondence,
memoranda, agreements, or other documents or records considered
relevant to the inquiry.
(b) The board may bring suit in district court to enforce a
subpoena if the person to whom a subpoena is directed fails to
comply.
Acts 1989, 71st Leg., ch. 678, Sec. 1, eff. Sept. 1, 1989.
Sec. 246.114. ACTUARIAL REVIEW. (a) This section applies only
to a facility whose contracts offer future guarantees of
long-term nursing care that develop current actuarial
liabilities.
(b) A facility subject to this section that initially filed with
the commissioner an actuarial review performed on or after
September 1, 1982, and before September 1, 1987, shall file with
the commissioner subsequent actuarial reviews at five-year
intervals from the date of completion of the initial actuarial
review.
(c) A facility subject to this section that initially filed with
the commissioner an actuarial review performed on or after
September 1, 1987, shall file with the commissioner subsequent
actuarial reviews at five-year intervals from the date of the
filing of the initial actuarial review.
(d) The commissioner may require an actuarial review of a
facility before the end of the five-year interval in which the
facility would otherwise be required to file an actuarial review
if, in the opinion of the commissioner, the facility exhibits
conditions of financial instability warranting an earlier review.
Acts 1989, 71st Leg., ch. 678, Sec. 1, eff. Sept. 1, 1989.
Amended by Acts 1991, 72nd Leg., ch. 14, Sec. 113, eff. Sept. 1,
1991; Acts 1993, 73rd Leg., ch. 953, Sec. 14, eff. Sept. 1, 1993.
Sec. 246.115. CEASE AND DESIST ORDERS; INJUNCTIONS. (a) The
board may request that the attorney general bring an action to
prohibit a person from engaging in an act or practice and to
order compliance with this chapter if the board determines, after
a complaint or by other means, that the act or practice violates
this chapter or an order made under this chapter.
(b) The action may be brought in the district court of a county
in which:
(1) the defendant resides;
(2) the defendant has done business;
(3) the principal place of business of the defendant is located;
or
(4) the transaction occurred.
(c) The court may grant an injunction or restraining order on a
proper showing. If the court grants an injunction or restraining
order, the court shall issue it without bond.
Acts 1989, 71st Leg., ch. 678, Sec. 1, eff. Sept. 1, 1989.
Sec. 246.116. CRIMINAL PENALTY. (a) A person commits an
offense if the person intentionally violates this chapter.
(b) An offense under this section is a Class A misdemeanor.
Acts 1989, 71st Leg., ch. 678, Sec. 1, eff. Sept. 1, 1989.
Sec. 246.117. CIVIL LIABILITY. (a) A provider who makes a
continuing care contract without complying with the disclosure
statement requirement under Subchapter C, or who makes a
continuing care contract with a person who has relied on a
disclosure statement that omits a material fact required to be
stated in the statement or necessary to make the statement
accurate, is liable to the person with whom the continuing care
contract is made for:
(1) actual damages;
(2) repayment of all fees paid to the provider minus the
reasonable value of care and lodging provided to the person by or
on whose behalf the continuing care contract was made before the
violation, misstatement, or omission was discovered or reasonably
should have been discovered;
(3) interest at the legal rate for judgments;
(4) court costs; and
(5) reasonable attorney's fees.
(b) A provider is liable under this section regardless of
whether the provider had actual knowledge of the misstatement or
omission.
(c) A person may not file or maintain an action under this
section if the person, before filing the action, received a
written offer of a refund of all amounts paid to the provider,
facility, or person violating this chapter and reasonable
interest from the date of payment, minus the reasonable value of
care and lodging provided before the receipt of the offer and:
(1) the offer states the provisions of this section; and
(2) the recipient of the offer fails to accept the offer within
30 days after the date the offer is received.
(d) A person must bring suit under this section not later than
three years after:
(1) the date on which the continuing care contract was entered
into; or
(2) the violation, misstatement, or omission is discovered or
reasonably should have been discovered.
(e) Except as expressly provided by this chapter, civil
liability does not arise in favor of a private party by
implication from or as a result of the violation of this chapter
or a rule or order adopted under this chapter.
(f) This chapter does not limit a liability that would exist
under any other statute or common law if this chapter were not in
effect.
(g) The provisions of this chapter are not exclusive and the
remedies provided by this chapter are in addition to any other
remedies provided by any other law.
Acts 1989, 71st Leg., ch. 678, Sec. 1, eff. Sept. 1, 1989.