N.Y. Public Health Law § 4670: Receiverships

§ 4670. Receiverships. 1. The commissioner may, upon a determination

that serious operational deficiencies exist or serious financial

problems exist and such action is desirable, enter into an agreement

with the operator or owners of a fee-for-service continuing care

retirement community with respect to the appointment of a receiver to

take charge of the community 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 at such time as either party notifies the

other in writing that it wishes to terminate such receivership.

2. The commissioner shall, at the time of revocation, suspension or

temporary suspension of a certificate of authority, apply to the supreme

court where the community is situated for an order directing the owner

of the land and/or structure on or in which the community is located, to

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

community. In those cases where the certificate of authority has been

revoked, suspended or temporarily suspended, the supreme court shall

appoint a receiver that, where reasonably possible, is a legal entity

that holds a valid certificate of authority. Such application shall

contain proof by affidavit that the facility has had its certificate of

authority revoked, suspended or temporarily suspended. Such order to

show cause shall be returnable not less than five days after service is

completed and shall provide for personal service of a copy thereof and

the papers on which it is based, on the owner or owners of the land

and/or structures on or in which the community is located. If any such

owner and manager 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 community in question, and by

sending a copy thereof by registered mail, return receipt requested, to

such owner at the last address registered by such owner with the

department or in the absence of such registration to the address set

forth in the last recorded deed with respect to the facility. 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.

3. On the return of said order to show cause, the matter shall have

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

find that some other pending proceeding, having a 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 the application. If the court shall find the

facts warrant the granting thereof, then any such qualified and approved

agency, person or corporation, or the commissioner or any person

designated by the commissioner, shall be appointed receiver to take

charge and assume operation of the community. However, such receiver may

make application to the appointing court for decision, reformation or

such other relief as may be appropriate to protect the best interests of

the residents residing within such community. No security interest in

any real or personal property comprising the community 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 or she uses or causes to be used by reimbursing the costs of such

goods, except that no such compensation shall be made for any goods for

which the owners or operators of the community have already been

reimbursed.

4. Any receiver appointed pursuant to this section 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 granted and imposed pursuant to this section. The receiver

may correct or eliminate those deficiencies in the facility that

seriously endanger the life, health, safety or finances of such

residents subject to such terms as the court may direct. The receiver

shall operate the community in such a manner as intended to assure

safety and adequate care for such residents. Any receiver who is an

official or employee of the state shall not be required to file any

bond. 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 community.

5. The appointing court, upon application of the receiver, may make

such provision as justice may require for reasonable compensation and

reimbursement of the reasonable expenses of the receiver. The receiver

shall be liable only in his or her official capacity for injury to

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

where an owner would have been liable; provided that he or she operates

such facility in compliance with the terms of his or her appointment,

the receiver shall not have any liability in his or her personal

capacity, except for gross negligence and intentional acts.

6. a. The court shall terminate the receivership only under the

following circumstances:

(i) when the community is issued a new certificate of authority; or

(ii) at such time as all of the residents in the community have been

provided alternate residential and health care 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 discretion of the court.

7. 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

community, or services rendered by the community, 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 such payments made

to him or her. The receipt provided by the receiver for any sum paid to

him or her shall, in all suits and proceedings and for every other

purpose, be as effectual in favor of any person holding the receipt as

actual payment of the amount thereof to the operator or other person or

persons who would, but for the provisions of this section, have been

entitled to receive the sum to be paid. No resident 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 operator, owner, contractor or other person any sum so paid to the

receiver.

8. Any other provision of this article notwithstanding, the

commissioner may, if such commissioner deems appropriate, grant to any

community operating or scheduled to operate under a receivership

authorized by this section a certificate of authority, the duration of

which shall be limited to the duration of the receivership.

9. a. No provision of this section shall be deemed to relieve the

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

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

operator, owner or manager prior to the appointment of any receiver

pursuant to this section, nor shall anything in this section be

construed to suspend during the receivership any obligation of the owner

for the payment of taxes or other operating and maintenance expenses of

the community nor of the owner or any other person for the payment of

mortgages or liens.

b. The receiver shall not be responsible for any obligations incurred

by the owner, manager or prime lessor, if any, prior to the appointment

of the receiver, other than those obligations to residents pursuant to

the fee-for-service continuing care contracts.

c. The receiver shall be entitled to use for operating and maintenance

expenses and the basic needs of the residents of the community 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.