N.Y. Public Health Law § 4674: Priority reservation agreements; prior to obtaining a certificate of authority

§ 4674. Priority reservation agreements; prior to obtaining a

certificate of authority. The provisions of this section shall apply to

entities that seek approval to enter into priority reservation

agreements and to solicit, collect or receive priority reservation fees,

with respect to a proposed fee-for-service continuing care retirement

community, prior to obtaining a certificate of authority under this

article.

1. No person, partnership, corporation or other entity shall solicit,

collect or receive any priority reservation fee or enter into any

agreement relating to the payment of any priority reservation fee with

respect to any fee-for-service continuing care retirement community to

be operated within the state without first obtaining the written

authorization of the commissioner. The commissioner shall not grant such

authorization to an entity that has not yet obtained a certificate of

authority unless the requirements of this section and any applicable

regulations are met. Upon obtaining the authorization of the

commissioner under this section, a prospective community applicant or an

entity having filed an application for a certificate of authority may

enter into cancelable priority reservation agreements with prospective

residents and solicit, collect and receive refundable priority

reservation fees for direct deposit into an escrow account, prior to

obtaining a certificate of authority, for the purpose of evaluating

market demand for a proposed fee-for-service continuing care retirement

community and for the purpose of guaranteeing to prospective residents

an opportunity for priority placement in a fee-for-service continuing

care retirement community. A priority reservation fee shall not exceed

two thousand dollars unless the commissioner, in the discretion of such

commissioner, establishes that a priority reservation fee may exceed two

thousand dollars. A non-refundable priority reservation agreement

application fee shall not exceed the maximum amount established by the

commissioner, in such commissioner's discretion.

2. In order to receive authorization by the commissioner to enter into

cancelable priority reservation agreements and to solicit, collect or

receive any refundable priority reservation fee, a person, partnership,

corporation or other entity, hereinafter designated as the applicant,

shall apply for such authorization on forms or in a format prescribed by

the commissioner and, as part of such application, shall submit the

following information:

a. a description of the applicant's plan to implement the process of

entering into cancelable priority reservation agreements and to solicit,

collect or receive refundable priority reservation fees;

b. a general description of the proposed community, including the

location and description of the proposed community site; the components

to be included in the community, such as independent living units,

skilled nursing facility and adult care facility; the estimated number

of each type of unit or beds; and the services to be provided;

c. an estimate of the pricing structure of the community including

entrance fees and monthly care fees and the provisions of the

fee-for-services rates;

d. a description of the anticipated market to be served;

e. anticipated methods and sources of financing for the proposed

community;

f. organizational structure of the applicant;

g. the name and address of the escrow agent and a copy of the escrow

agreement required pursuant to this section;

h. a copy of the instructions to the escrow agent regarding the

issuance of refunds;

i. a copy of the forms to be used to document a request for a refund

of a priority reservation fee and the issuance of such refund;

j. a copy of the most recent set of financial statements of the

applicant prepared in accordance with generally accepted accounting

principles and certified to be true and accurate by an independent

certified public accountant;

k. draft copies of all proposed marketing materials, including final

marketing materials as soon as available; provided that the provision of

such material shall not be construed to require approval of such

materials by the department or the council;

l. a description of the sales office and a copy of the preliminary

site plans and drawings of any proposed model units;

m. a copy of the proposed priority reservation agreement; and

n. any other information as may be required by regulations adopted

pursuant to this article.

3. Any change in the legal entity authorized under this section to

enter into cancelable priority reservation agreements and to solicit,

collect or receive refundable priority reservation fees shall require

approval in the same manner as the original application; provided,

however, that the commissioner may waive any requirement to provide

information that is not relevant to such change.

4. a. As a condition to receiving the commissioner's authorization

under this section, an applicant shall establish a government insured

interest-bearing account, which earns interest at a rate which is

consistent with prevailing interest rates, and enter into an escrow

agreement with a New York state bank, New York state savings and loan

association or New York state trust company for the deposit of any

priority reservation fees collected by the applicant pursuant to this

section, which escrow funds shall be subject to release as provided for

in this section.

b. The escrow agreement shall state that its purpose is to protect

prospective residents who have paid a priority reservation fee to the

applicant in furtherance of the applicant's efforts to evaluate market

demand for a proposed fee-for-service continuing care retirement

community and to guarantee prospective residents an opportunity for

priority placement in a fee-for-service continuing care retirement

community 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 applicant, the

prospective resident or the prospective resident's legal representative

as directed, within fifteen business days of receipt of the notice by

the escrow agent.

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

residents shall be made payable to the escrow agent only.

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

of the prospective residents until released to the applicant in

accordance with this article, and the funds shall not be subject to any

liens or charges by the escrow agent or judgments, garnishments or

creditors' claims against the applicant.

e. At the request of the applicant, the commissioner or a prospective

resident, the escrow agent shall issue a statement indicating the status

of the escrow account.

f. A prospective resident's escrowed funds shall not be released to an

applicant unless the applicant obtains a certificate of authority to

operate the proposed fee-for-service continuing care retirement

community and to enter into fee-for-service continuing care contracts,

and the prospective resident has entered into a fee-for-service

continuing care contract with the applicant and has elected to apply the

priority reservation fee to an actual entrance fee or deposit on an

entrance fee. Upon release to the approved applicant, a prospective

resident's escrowed priority reservation fee funds shall be deposited

into the entrance fee escrow account provided for in section forty-six

hundred sixty-two of this article.

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

interest thereon, are not released to the applicant 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 person who had made

the payments or the person's legal representative.

h. A priority reservation fee, and the interest accrued thereon, held

in escrow shall be returned by the escrow agent to the person who paid

the fee upon receipt by the escrow agent of notice from the applicant or

the person who paid the fee or the person's legal representative that

the priority reservation agreement has been canceled. Any priority

reservation fee, and the interest accrued thereon, shall be returned by

the escrow agent to the person who paid the fee or the person's legal

representative within fifteen business days of receipt by the escrow

agent of notice of cancellation of the priority reservation agreement.

i. Refunds of priority reservation fees upon the death of a

prospective resident shall be made upon the same basis as refunds upon

cancellation of a priority reservation agreement.

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

escrow of any non-refundable priority reservation agreement application

fee, designated as such in the cancelable priority reservation

agreement, which fee is received by the applicant from a prospective

resident.

5. Any marketing materials, including all materials associated with a

sales office and model units, used in the solicitation of priority

reservation agreements or priority reservation fees shall, at a minimum,

contain the following:

a. a statement that the purpose of the marketing material is to

determine the market demand for a proposed fee-for-service continuing

care retirement community and to offer prospective residents an

opportunity for a guaranteed priority placement in a fee-for-service

continuing care retirement community by entering into cancelable

priority reservation agreements and accepting refundable priority

reservation fees;

b. a statement that the cancelable priority reservation agreement is

not a fee-for-service continuing care contract and may be canceled by

the person entering the agreement or the person's legal representative

at any time, without cause; and

c. a statement that any priority reservation fees paid shall be held

in escrow and shall be refunded, together with interest accrued at

prevailing rates, to the person paying the fee or the person's legal

representative upon request and cancellation of the priority reservation

agreement.

6. Any priority reservation fees with respect to a proposed

fee-for-service continuing care retirement community may be collected

only after issuance of a cancelable priority reservation agreement to

the person paying the fee, which agreement shall contain the following

information:

a. the name and location of the proposed community;

b. the name and address of the applicant;

c. the name, address and phone number of a contact person;

d. the name and address of the person paying the fee;

e. the name and address of the escrow agent;

f. the type of unit being reserved;

g. the estimated entry fee and monthly care fee clearly identified as

an estimate;

h. the amount of any non-refundable priority reservation agreement

application fee;

i. a notice in bold twelve point type that the cancelable priority

reservation agreement does not obligate the person entering into the

agreement in any way; that there is no guarantee by the applicant the

fees estimated in the agreement will not change; that the community

described is only a proposed community and any model units are only

representative of units in a proposed community which is subject to the

submission of a formal application by the applicant and the subsequent

approval or disapproval by the council; that there is no guarantee the

unit described in the agreement or represented by any model will be

built or otherwise made available as described in the agreement or at

all; that the person paying the priority reservation fee may receive a

refund of the fee plus interest accrued at prevailing rates upon

request; and that, should a certificate of authority be granted, he or

she shall be entitled on a priority basis to apply the priority

reservation fee to an actual entrance fee or entrance fee deposit on a

unit not already under contract;

j. the signature of the person paying the fee and the signature of the

applicant or the applicant's agent;

k. a statement of the effective period of the agreement not to exceed

the duration of the commissioner's authorization; and

l. an outline of the fees, their associative service, and guidelines

used for changing the residency status of a resident.

7. a. In order to approve an application under this section, the

commissioner shall have determined, as applicable, that:

(i) the applicant has satisfied the requirements of this section and

any applicable regulations; and

(ii) the applicant has demonstrated the capability to conduct a market

analysis of the demand for the proposed fee-for-service continuing care

retirement community and can be expected to meet its obligations in

accordance with this section and in accordance with its priority

reservation agreements with prospective residents.

b. If the commissioner approves an application, the commissioner shall

issue a written authorization to the applicant authorizing the applicant

to enter into cancelable priority reservation agreements and collect

refundable priority reservation fees from prospective residents

concerning the proposed fee-for-service continuing care retirement

community.

c. The commissioner's authorization shall remain in effect for a

period not to exceed eighteen months from the date of the commissioner's

authorization the commencement of said period to be specifically stated

in such authorization subject to the following:

(i) the commissioner may rescind the authorization, including any

extension thereof, at any time for just cause, including any material

misstatement of fact or misrepresentation in any of the application

materials or any materials subsequently disseminated;

(ii) the authorization may be extended upon written application to an

approval of the commissioner for the duration of time specified in the

commissioner's written approval;

(iii) unless already expired, the authorization shall be extended

automatically if an application for a certificate of authority is

submitted pursuant to this article, and such authorization shall remain

in effect as long as the application for a certificate of authority

remains active; and

(iv) unless already expired, the authorization shall be extended

automatically if a certificate of authority is obtained by the applicant

pursuant to this article, and such authorization shall remain in effect

as long as the certificate of authority remains in effect.

d. The applicant shall provide written notice to all parties who have

entered into cancelable priority reservation agreements of the

following:

(i) notice of the commissioner's recision of authorization to enter

into cancelable priority reservation agreements;

(ii) notice of the commissioner's extension of authorization to enter

into cancelable priority reservation agreements including the new

expiration date and the reason for such extension; and

(iii) notice upon issuance of a certificate of authority pursuant to

this article that the party to the agreement has the option on a

priority basis to apply the priority reservation fee to an actual

entrance fee or a deposit on an entrance fee.

e. The commissioner shall provide written notice to the escrow agent

of the commissioner's recision of authorization to enter into cancelable

priority reservation agreements, including instructions to release funds

held in escrow to the persons who have paid refundable priority

reservation fees.