N.Y. Public Health Law § 4610: Entrance fee escrow account

§ 4610. Entrance fee escrow account. As a condition for approval to

advertise and collect refundable entry fees/deposits:

1. The operator shall establish an interest-bearing account with a New

York bank, New York savings and loan association, or New York trust

company for any entrance fees received by the operator, which escrow

funds shall be subject to release as provided by subdivision seven of

this section.

2. An escrow agreement shall be entered into between the bank, savings

and loan association, or trust company and the operator of the

community. The agreement shall state that its purpose is to protect the

resident or the prospective resident and that, upon presentation of

evidence of compliance with applicable portions of this article, or upon

order of a court of competent jurisdiction, the escrow agent shall

release and pay over the funds, or portions thereof, together with any

interest accrued thereon or earned from investment of the funds, to the

operator or resident as directed.

3. Checks, drafts, and money orders for deposit from prospective

residents shall be made payable to the escrow agent only.

4. All funds deposited in the escrow account shall remain the property

of the resident until released to the operator in accordance with this

section, and the funds shall not be subject to any liens or charges by

the escrow agent or judgments, garnishments, or creditor's claims

against the operator or community.

5. At the request of the operator, the commissioner, or the

superintendent, the escrow agent shall issue a statement indicating the

status of the escrow account.

6. Escrowed funds shall not be released to the operator unless:

a. construction or purchase of the community has been substantially

completed, an occupancy permit covering the living unit has been issued

by the local government having authority to issue such permits, and the

living unit becomes available for occupancy; or

b. the operator has submitted an application to the commissioner, on

forms approved by the department, for authorization to use escrowed

entrance fees to assist the operator in financing the construction or

purchase of a proposed community and the commissioner, with the advice

of the superintendent, and in accordance with such regulations as may be

promulgated by the council, has approved such application. The

commissioner shall not approve such application over the objection of

the superintendent, and shall not approve it unless satisfied that the

following conditions have been met:

(i) the operator has executed contracts accompanied by an entrance fee

or entrance fee deposit for at least sixty percent of all proposed

living units;

(ii) the aggregate entrance fees or deposits received by the operator

pursuant to executed contracts equal at least twenty-five percent of the

total of the entrance fees due at occupancy for at least sixty percent

of all proposed living units, or at least ten percent of the total

entrance fee due at occupancy for at least seventy percent of all

proposed living units, whichever is less;

(iii) the operator has entered into a contract for the construction or

purchase of the community which contract has a fixed maximum price and,

if a construction contract, the contractor has secured a performance or

completion bond for the benefit of the operator;

(iv) the operator has received a firm commitment for a permanent

mortgage loan or other long term financing and conditions to the

commitment prior to disbursement of funds thereunder, other than

completion of construction or purchase, are substantially satisfied;

(v) the total amount of escrowed entrance fees or deposits that may be

approved for release under this paragraph shall not exceed fifteen

percent of the total costs of acquiring, constructing and equipping the

proposed community;

(vi) use of the entrance fees or deposits shall not impair the

operator's ability to comply with the requirements of section forty-six

hundred eleven of this article;

(vii) the operator's executed contracts or amended contracts referred

to in subparagraph (i) of this paragraph, and all contracts generating

the entrance fees for which release is sought, contain a provision

conspicuously disclosing the intended use of entrance fees, and that all

refunds shall be in accordance with the otherwise applicable provisions

of this article, the regulations adopted pursuant thereto and the

contract;

(viii) the use of the entrance fees or deposits under this paragraph

will promote the efficient and cost-effective acquisition or development

of the proposed community; and

(ix) the release, availability and use of the entrance fees comply

with any other conditions the council shall establish.

7. If the funds in an escrow account under this section and any

interest thereon are not released to the operator within such time as

provided by rules and regulations adopted by the council, then such

funds shall be returned by the escrow agent to the persons who had made

payment to the operator.

8. An entrance fee held in escrow may be returned by the escrow agent

to the person who paid the fee upon receipt by the escrow agent of

notice from the operator that such person is entitled to a refund of the

entrance fee.

9. Nothing in this section shall be interpreted as requiring the

escrow of any nonrefundable application fee, designated as such in the

contract, received by the operator from a prospective resident.

10. Construction of housing or other facilities shall not begin until:

a. the operator has executed contracts accompanied by a deposit of at

least ten percent of the entry fee payment for fifty percent of all

units; and

b. all permits and approvals necessary for operation of the community

have been granted except those that depend upon construction;

Provided, nothing in this subdivision shall prohibit an operator, upon

the approval of the council, or an applicant or prospective applicant

upon the approval of the commissioner pursuant to section forty-six

hundred twenty-one of this article, from constructing model units and a

sales office.

11. Any entry fee deposit required by an operator shall be fully

refundable if the contract is cancelled within seventy-two hours of its

execution. In the event of cancellation, the entry fee deposit shall be

refunded within three business days of receipt of cancellation.