N.Y. Mental Hygiene Law § 16.27: Residential facilities; receivership

§ 16.27 Residential facilities; receivership.

(a) The operator of any facility may at any time request the office to

take over the operation of such facility by the appointment of a

receiver. Upon receiving such a request, the office may, if it deems

such action desirable, enter into an agreement with any such operators

with respect to the appointment of a receiver to take charge of the

facility under conditions as found acceptable by both parties.

Receivership commenced in accordance with the provisions of this

subdivision shall terminate at such time as may be provided in the

receivership agreement, or one hundred twenty days after the receipt by

either party of written notice that the other party wishes to terminate

such receivership.

(b) (1) a. If the commissioner has reason to believe that it is

necessary to protect the health, safety and welfare of the persons with

developmental disabilities in a residential facility, at the time of

temporary suspension of the operating certificate of such a facility or

upon issuance of a notice of intention to revoke or suspend the

operating certificate of such a facility pursuant to section 16.17 of

this article, or at the time of any notice of disapproval of an

application for issuance or renewal of such certificate pursuant to

section 16.05 of this article, the commissioner may apply to the supreme

court in the county where the facility is situated for an order to show

cause why a receiver should not be appointed to take charge of the

facility. The supreme court shall, upon the request of the commissioner,

and upon determining that the notice was properly issued and that the

health, safety and welfare of the persons with developmental

disabilities would be served by the appointment of a receiver to operate

the facility, appoint a receiver to commence operating the facility upon

the effective date of the revocation, suspension, temporary suspension,

denial or nonrenewal of the operating certificate of such facility.

b. The receiver should, where reasonably possible, be a voluntary

association or not-for-profit corporation which holds a valid and

current operating certificate for a residential facility pursuant to

section 16.05 of this article (or which shall satisfactorily demonstrate

its lawful qualifications for such operating certificate) with the

approval of the commissioner, an employee of the office or other

designee.

c. Such application for an order to show cause, shall contain proof by

affidavit that the commissioner has temporarily suspended the facility's

operating certificate or has issued a notice of intention to revoke,

suspend, or deny issuance or renewal of its operating certificate.

d. In the case of a temporary suspension of an operating certificate,

a temporary receiver may be appointed and a temporary restraining order

may be granted. If the commissioner demonstrates that, unless a

temporary receiver is appointed and a temporary restraining order is

granted before a hearing can be held, the health or safety of any person

with developmental disabilities will be in imminent danger or that

property necessary to the operation of the facility will be in imminent

danger of removal or destruction, a temporary receivership and a

temporary restraining order may be granted without notice. The temporary

receivership and temporary restraining order shall be in effect pending

a determination of the order to show cause.

e. The order to show cause why a receiver should not be appointed

shall be returnable not less than five days after service is completed;

provided, however, that in the case of an appointment of a temporary

receiver without notice to the owner or operator pursuant to

subparagraph d of this paragraph, the order to show cause shall be

returnable no more than fourteen days from the appointment of a

temporary receiver.

f. The order to show cause shall provide for personal service of a

copy thereof and the papers on which it is based on the owner or owners

of the real property on or in which the facility is located and on the

facility operator. In the case of an appointment of a temporary receiver

without notice to the owner or operator pursuant to subparagraph d of

this paragraph, such order to show cause shall provide for personal

service upon such owner and operator within thirty-six hours after the

appointment of the temporary receiver. If any owner or operator cannot

with due diligence be served personally within the county where the

property is located and within the time fixed in such order, then

service may be made on such person by posting a copy thereof in a

conspicuous place within the facility in question, and by sending a copy

thereof by certified mail, return receipt requested, to such operator at

the last address registered by him with the department and such owner to

the address set forth in the last recorded deed with respect to such

real property on or in which the facility is located. Service shall be

deemed complete on filing proof of service thereof in the office of the

county clerk, or the clerk of the city of New York, as the case may be.

(2) On the return of said order to show cause, determination shall

have precedence over every other business of the court unless the court

shall find that some other pending proceeding, having similar statutory

precedence, shall have priority. The court may conduct a hearing at

which all interested parties shall have the opportunity to present

evidence pertaining to whether the health, safety and welfare of the

residents with developmental disabilities will be served by the

appointment of a receiver to operate the facility. If the court shall

find that the facts warrant the granting thereof, then any such

qualified and approved agency, person or corporation, the commissioner,

or any person designated by the commissioner, shall be appointed

receiver to take charge and assume operation of the facility, and the

court shall determine a fair monthly rental for the facility consistent

with its usage as such facility, taking into account all relevant

factors, including the condition of such facility, which amount shall,

except in the case where the receiver is assuming an existing bona fide

arm's length lease, not exceed the amount which would be reimbursable to

the facility under the medical assistance program for real property

costs if each resident in the facility were a recipient of medical

assistance. Such rental shall be paid by the receiver to the owner or

owners of the facility for each month that the receivership remains in

effect, provided, however, that nothing contained herein shall be

construed to alter and diminish any rental obligation the operator may

have under any currently valid lease.

(3) Any receiver appointed pursuant to this subdivision shall have all

of the powers and duties of a receiver appointed in an action to

foreclose a mortgage on real property, together with such additional

powers and duties as are herein granted and imposed. The receiver shall

with all reasonable speed, but in any case, within eighteen months after

the date on which the receivership was ordered to provide for the

orderly transfer of all persons with developmental disabilities in the

facility to other facilities or make other provisions for their

continued safety and care. During the interim period when such persons

with developmental disabilities must remain in the facility, the

receiver may correct or eliminate those deficiencies in the facility

that seriously endanger the life, health or safety of such persons with

developmental disabilities provided that such correction or elimination

of deficiencies does not include major alterations of the physical

structure of the facility. The receiver shall, during this period

operate the facility in such a manner as to guarantee safety and

adequate care for such persons with developmental disabilities. The

receiver shall have the power to let contracts therefor or incur

expenses in accordance with the provisions of local laws, ordinances,

rules and regulations applicable to contracts for public works except

that advertisement shall not be required for each such contract.

Notwithstanding any such laws, ordinances, rules or regulations, the

receiver may let contracts or incur expenses for individual items of

repairs, improvements or supplies without the procurement of competitive

bids where the total amount of any such individual item does not exceed

five thousand dollars. Any receiver who is an official or employee of

the state of New York shall not be required to file any bond. The

receiver shall collect incoming payments from all sources and apply them

to the costs incurred in the performance of the receiver's functions.

The receiver shall honor all existing leases, mortgages and chattel

mortgages that had previously been undertaken as obligations of the

owners or operators of the facility. However, such receiver may make

application to the appointing court for recission, reformation or such

other relief as may be appropriate with respect to the executory

covenants or provisions of any contractual obligations of such owners or

operators as may be necessary or appropriate to protect the best

interests of the persons with developmental disabilities residing within

such facility. No security interest in any real or personal property

comprising the facility or contained within the facility, or in any

fixture of the facility, shall be impaired or diminished in priority by

the receiver. The receiver shall compensate the owner or owners of any

goods held in inventory for those goods which he uses or causes to be

used by reimbursing the costs of such goods, except that no such

compensation shall be made for any such goods for which the owners or

operators of the facility have already been reimbursed. Neither the

receiver nor the office shall engage in any activity that constitutes a

confiscation of property without the payment of fair compensation.

(4) The appointing court, upon application of the receiver, may make

such provision as justice may require for a reasonable compensation and

reimbursement of the reasonable expenses of such receiver. The receiver

shall be liable only in the receiver's official capacity for injury to

person and property by reason of conditions of the facility in a case

where an owner would have been liable; provided that the receiver

operates such facility in compliance with the terms of the appointment

the receiver shall not have any liability in a personal capacity, except

for gross negligence and intentional acts.

(5) a. The court shall terminate the receivership only under any of

the following circumstances:

(i) eighteen months after the date on which it was ordered;

(ii) when the office grants the facility a new operating certificate,

whether the structure of the facility or the land on which it is located

shall be under the same or different ownership; or

(iii) at such time as all of the persons with developmental

disabilities in the facility have been provided alternative residential

services.

b. At the time of termination, the receiver shall render a full and

complete accounting to the court and shall make disposition of surplus

money at the direction of the court.

(6) a. Any person who is served a copy of an order of the court

appointing the receiver shall, upon being notified of the name and

address of the receiver, make all payments for goods supplied by the

facility, or services rendered by the facility, to the receiver. A

receipt shall be given for each such payment, and copies of all such

receipts shall be kept on file by the receiver. The amount so received

shall be deposited by the receiver in a special account which shall also

be used for all disbursements made by the receiver.

b. Any person refusing or omitting to make such a payment after such

service and notice may be sued therefor by the receiver. Such person

shall not in such suit dispute the authority of the receiver to incur or

order such expenses, or the right of the receiver to have such payments

made to him. The receipt of the receiver for any sum paid to him shall,

in all suits and proceedings and for every purpose, be as effectual in

favor of any person holding the same as actual payment of the amount

thereof to the owner or other person or persons who would, but for the

provisions of this subdivision, have been entitled to receive the sum to

be paid. No person with developmental disabilities shall be discharged,

nor shall any contract or rights be forfeited or impaired, nor any

forfeiture or liability be incurred, by reason of any omission to pay

any owner, contractor or other person any sum so paid to the receiver.

(7) Any other provision of this chapter notwithstanding, the office

may, if it deems appropriate, grant to any facility operating or

scheduled to operate under a receivership authorized by this subdivision

an operating certificate the duration of which shall be limited to the

duration of the receivership.

(8) (i) No provision contained herein shall be deemed to relieve the

owner or operator of any civil or criminal liability incurred, or any

duty imposed by law, by reason of acts or omissions of the owner or

operator prior to the appointment of any receiver hereunder, nor shall

anything contained herein be construed to suspend during the

receivership any obligation of the owner or operator for the payment of

taxes or other operating and maintenance expenses of the facility nor of

the owner or any other person for the payment of mortgages or liens.

(ii) The receiver shall not be responsible for any obligations

incurred by the owner, operator or prime lessor, if any, prior to the

appointment of the receiver.

(iii) The receiver shall be entitled to use for operating and

maintenance expenses and the basic needs of the residents of the

facility a portion of the revenues due the operator during the month in

which the receiver is appointed which portion shall be established on

the basis of the amounts of the unpaid operating and maintenance

expenses for such month.

(iv) Any sums determined to be due and owing by the receiver to the

owner, operator or prime lessor shall be off-set by any charges

determined to be the obligations of the owner, operator or prime lessor.

(c) (1) Subject to paragraph two of this subdivision, and subject to

the approval of the director of the budget, the commissioner is

authorized to make payments to receivers appointed pursuant to the

provisions of subdivision (b) of this section, only if the receiver

demonstrates to the satisfaction of the commissioner that the facility's

funds which are available are insufficient to meet operating and

maintenance expenses of the facility and the basic needs of the

residents of the facility.

(2) Notwithstanding any inconsistent provisions of law, payments made

pursuant to this section shall be made from funds appropriated therefor

and such payments shall be made only if a certificate of allocation and

a schedule of amounts to be available therefor shall have been issued by

the director of the budget and a copy of such certificate filed with the

comptroller, the chairman of the senate finance committee and the

chairman of the assembly ways and means committee. Such certificate may

be amended from time to time by the director of the budget and a copy of

each such amendment shall be filed with the comptroller, the chairman of

the senate finance committee and the chairman of the assembly ways and

means committee.

(d) This section shall apply only to the facilities under the

jurisdiction of the office for people with developmental disabilities.

Reference to the commissioner in this section shall mean the

commissioner of developmental disabilities.