§ 4621 — Priority reservation agreements; prior to obtaining a certificate of authority

§ 4621. Priority reservation agreements; prior to obtaining a\ncertificate of authority. The provisions of this section shall apply to\nentities that seek approval to enter into priority reservation\nagreements and to solicit, collect or receive priority reservation fees,\nwith respect to a proposed continuing care retirement community, prior\nto obtaining a certificate of authority under this article.\n 1. No person, partnership, corporation or other entity shall solicit,\ncollect or receive any priority reservation fee or enter into any\nagreement relating to the payment of any priority reservation fee with\nrespect to any continuing care retirement community to be operated\nwithin the state without first obtaining the written authorization of\nthe commissioner. The commissioner shall not grant such authorization to\nan entity that has not yet obtained a certificate of authority unless\nthe requirements of this section and any applicable regulations are met.\nUpon obtaining the authorization of the commissioner under this section,\na prospective continuing care retirement community applicant or an\nentity that has filed an application for a certificate of authority may\nenter into cancelable priority reservation agreements with prospective\nresidents and solicit, collect and receive refundable priority\nreservation fees for direct deposit into an escrow account, prior to\nobtaining a certificate of authority, for the purpose of evaluating\nmarket demand for a proposed continuing care retirement community and\nfor the purpose of guaranteeing to prospective residents an opportunity\nfor priority placement in a continuing care retirement community. A\npriority reservation fee shall not exceed two thousand dollars unless\nthe commissioner, in the discretion of such commissioner, establishes\nthat a priority reservation fee may exceed two thousand dollars. A\nnon-refundable priority reservation agreement application fee shall not\nexceed the maximum amount established by the commissioner, in such\ncommissioner's discretion.\n 2. In order to receive authorization by the commissioner to enter into\ncancelable priority reservation agreements and to solicit, collect or\nreceive any refundable priority reservation fee, a person, partnership,\ncorporation or other entity, hereinafter designated as the applicant,\nshall apply for such authorization on forms or in a format prescribed by\nthe commissioner and, as part of such application, shall submit the\nfollowing information:\n a. a description of the applicant's plan to implement the process of\nentering into cancelable priority reservation agreements and to solicit,\ncollect or receive refundable priority reservation fees;\n b. a general description of the proposed community, including the\nlocation and description of the proposed community site; the components\nto be included in the community, such as independent living units,\nskilled nursing facility and adult care facility; the estimated number\nof each type of unit or beds; and the services to be provided;\n c. an estimate of the pricing structure of the community including\nentrance fees and monthly care fees;\n d. a description of the anticipated market to be served;\n e. anticipated methods and sources of financing for the proposed\ncommunity;\n f. organizational structure of the applicant;\n g. the name and address of the escrow agent and a copy of the escrow\nagreement required pursuant to this section;\n h. a copy of the instructions to the escrow agent regarding the\nissuance of refunds;\n i. a copy of the forms to be used to document a request for a refund\nof a priority reservation fee and the issuance of such refund;\n j. a copy of the most recent set of financial statements of the\napplicant prepared in accordance with generally accepted accounting\nprinciples and certified to be true and accurate by an independent\ncertified public accountant;\n k. draft copies of all proposed marketing materials, including final\nmarketing materials as soon as available; provided that the provision of\nsuch material shall not be construed to require approval of such\nmaterials by the department or the council;\n l. a description of the sales office and a copy of the preliminary\nsite plans and drawings of any proposed model units;\n m. a copy of the proposed priority reservation agreement; and\n n. any other information as may be required by regulations adopted\npursuant to this article.\n 3. Any change in the legal entity authorized under this section to\nenter into cancelable priority reservation agreements and to solicit,\ncollect or receive refundable priority reservation fees shall require\napproval in the same manner as the original application; provided,\nhowever, that the commissioner may waive any requirement to provide\ninformation that is not relevant to such change.\n 4. a. As a condition to receiving the commissioner's authorization\nunder this section, an applicant shall establish a government insured\ninterest-bearing account, which earns interest at a rate which is\nconsistent with prevailing interest rates, and enter into an escrow\nagreement with a New York bank, New York savings and loan association or\nNew York trust company for the deposit of any priority reservation fees\ncollected by the applicant pursuant to this section, which escrow funds\nshall be subject to release as provided for in this section.\n b. The escrow agreement shall state that its purpose is to protect\nprospective residents who have paid a priority reservation fee to the\napplicant in furtherance of the applicant's efforts to evaluate market\ndemand for a proposed continuing care retirement community and to\nguarantee prospective residents an opportunity for priority placement in\na continuing care retirement community and that, upon presentation of\nevidence of compliance with applicable portions of this article, or upon\norder of a court of competent jurisdiction, the escrow agent shall\nrelease and pay over the funds, or portions thereof, together with any\ninterest accrued thereon or earned from investment of the funds, to the\napplicant, the prospective resident or the prospective resident's legal\nrepresentative as directed, within fifteen business days of receipt of\nthe notice by the escrow agent.\n c. Checks, drafts, and money orders for deposit from prospective\nresidents shall be made payable to the escrow agent only.\n d. All funds deposited in the escrow account shall remain the property\nof the prospective residents until released to the applicant in\naccordance with this section, and the funds shall not be subject to any\nliens or charges by the escrow agent or judgments, garnishments, or\ncreditors' claims against the applicant.\n e. At the request of the applicant, the commissioner, or a prospective\nresident, the escrow agent shall issue a statement indicating the status\nof the escrow account.\n f. A prospective resident's escrowed funds shall not be released to an\napplicant unless the applicant obtains a certificate of authority to\noperate the proposed continuing care retirement community and to enter\ninto continuing care retirement contracts, and the prospective resident\nhas entered into a continuing care retirement contract with the\napplicant and has elected to apply the priority reservation fee to an\nactual entrance fee or deposit on an entrance fee. Upon release to the\napproved applicant, a prospective resident's escrowed priority\nreservation fee funds shall be deposited into the entrance fee escrow\naccount provided for in section forty-six hundred ten of this article.\n g. If the funds in an escrow account under this section, and any\ninterest thereon, are not released to the applicant within such time as\nprovided by rules and regulations adopted by the commissioner, then such\nfunds shall be returned by the escrow agent to the person who had made\nthe payments or the person's legal representative.\n h. A priority reservation fee, and the interest accrued thereon, held\nin escrow shall be returned by the escrow agent to the person who paid\nthe fee upon receipt by the escrow agent of notice from the applicant or\nthe person who paid the fee or the person's legal representative that\nthe priority reservation agreement has been cancelled. Any priority\nreservation fee, and the interest accrued thereon, shall be returned by\nthe escrow agent to the person who paid the fee or the person's legal\nrepresentative within fifteen business days of receipt by the escrow\nagent of notice of cancellation of the priority reservation agreement.\n i. Refunds of priority reservation fees upon the death of a\nprospective resident will be made upon the same basis as refunds upon\ncancellation of a priority reservation agreement.\n j. Nothing in this section shall be interpreted as requiring the\nescrow of any non-refundable priority reservation agreement application\nfee, designated as such in the cancelable priority reservation\nagreement, which fee is received by the applicant from a prospective\nresident.\n 5. Any marketing materials, including all materials associated with a\nsales office and model units, used in the solicitation of priority\nreservation agreements or priority reservation fees shall, at a minimum,\ncontain the following:\n a. a statement that the purpose of the marketing material is to\ndetermine the market demand for a proposed continuing care retirement\ncommunity and to offer prospective residents an opportunity for a\nguaranteed priority placement in a continuing care retirement community\nby entering into cancelable priority reservation agreements and\naccepting refundable priority reservation fees;\n b. a statement that the cancelable priority reservation agreement is\nnot a continuing care retirement contract and may be cancelled by the\nperson entering the agreement or the person's legal representative at\nany time, without cause; and\n c. a statement that any priority reservation fees paid shall be held\nin escrow and shall be refunded, together with interest accrued at\nprevailing rates, to the person paying the fee or the person's legal\nrepresentative upon request and cancellation of the priority reservation\nagreement.\n 6. Any priority reservation fees with respect to a proposed continuing\ncare retirement community may be collected only after issuance of a\ncancelable priority reservation agreement to the person paying the fee,\nwhich agreement shall contain the following information:\n a. the name and location of the proposed community;\n b. the name and address of the applicant;\n c. the name, address and phone number of a contact person;\n d. the name and address of the person paying the fee;\n e. the name and address of the escrow agent;\n f. the type of unit being reserved;\n g. the estimated entry fee and monthly care fee clearly identified as\nan estimate;\n h. the amount of any non-refundable priority reservation agreement\napplication fee;\n i. a notice in bold twelve point type that the cancelable priority\nreservation agreement does not obligate the person entering into the\nagreement in any way; that there is no guarantee by the applicant that\nthe fees estimated in the agreement will not change; that the community\ndescribed is only a proposed community and any model units are only\nrepresentative of units in a proposed community which is subject to the\nsubmission of a formal application by the applicant and the subsequent\napproval or disapproval by the council; that there is no guarantee that\nthe unit described in the agreement or represented by any model will be\nbuilt or otherwise made available as described in the agreement or at\nall; that the person paying the priority reservation fee may receive a\nrefund of the fee plus interest accrued at prevailing rates upon\nrequest; and that should a certificate of authority be granted that he\nor she shall be entitled on a priority basis to apply the priority\nreservation fee to an actual entrance fee or entrance fee deposit on a\nunit not already under contract;\n j. the signature of the person paying the fee and the signature of the\napplicant or the applicant's agent; and\n k. a statement of the effective period of the agreement not to exceed\nthe duration of the commissioner's authorization.\n 7. a. In order to approve an application under this section, the\ncommissioner shall have determined, as applicable, that:\n (i) the applicant has satisfied the requirements of this section and\nany applicable regulations; and\n (ii) the applicant has demonstrated the capability to conduct a market\nanalysis of the demand for the proposed continuing care retirement\ncommunity and can be expected to meet its obligations in accordance with\nthis section and in accordance with its priority reservation agreements\nwith prospective residents.\n b. If the commissioner approves an application, the commissioner shall\nissue a written authorization to the applicant authorizing the applicant\nto enter into cancelable priority reservation agreements and collect\nrefundable priority reservation fees from prospective residents\nconcerning the proposed continuing care retirement community.\n c. The commissioner's authorization shall remain in effect for a\nperiod not to exceed eighteen months from the date of the commissioner's\nauthorization the commencement of said period to be specifically stated\nin such authorization subject to the following:\n (i) the commissioner may rescind the authorization, including any\nextension thereof, at any time for just cause, including any material\nmisstatement of fact or misrepresentation in any of the application\nmaterials or any materials subsequently disseminated;\n (ii) the authorization may be extended upon written application to and\napproval of the commissioner for the duration of time specified in the\ncommissioner's written approval;\n (iii) unless already expired, the authorization shall be extended\nautomatically if an application for a certificate of authority is\nsubmitted pursuant to this article, and such authorization shall remain\nin effect as long as the application for a certificate of authority\nremains active; and\n (iv) unless already expired, the authorization shall be extended\nautomatically if a certificate of authority is obtained by the applicant\npursuant to this article, and such authorization shall remain in effect\nas long as the certificate of authority remains in effect.\n d. The applicant shall provide written notice to all parties who have\nentered into cancelable priority reservation agreements of the\nfollowing:\n (i) notice of the commissioner's recision of authorization to enter\ninto cancelable priority reservation agreements;\n (ii) notice of the commissioner's extension of authorization to enter\ninto cancelable priority reservation agreements including the new\nexpiration date and the reason for such extension; and\n (iii) notice upon issuance of a certificate of authority pursuant to\nthis article that the party to the agreement has the option on a\npriority basis to apply the priority reservation fee to an actual\nentrance fee or a deposit on an entrance fee.\n e. The commissioner shall provide written notice to the escrow agent\nof the commissioner's recision of authorization to enter into cancelable\npriority reservation agreements, including instructions to release funds\nheld in escrow to the persons who have paid refundable priority\nreservation fees.\n