§2177.  Entrance fee escrow for new construction

A.  The department shall require, as a condition of registration for new construction, that the provider establish an escrow account with a bank, trust company, or savings and loan association located in this state and that any entrance fees received by the provider prior to the date the resident is permitted to occupy the living unit in the home be placed in that escrow account.

B.  When funds are received from a resident or prospective resident, the provider shall deliver to the resident a written receipt.  The receipt shall show the payor's name and address, the date, the price of the care agreement, and the amount of money paid.  A copy of each receipt, together with the funds, shall be deposited with the escrow agent.

C.  Checks, drafts, and money orders for deposit from prospective residents shall be made payable only to the escrow agent.  At the request of an individual resident or a prospective resident of a facility, the escrow agent shall issue a statement indicating the status of the resident's portion of the escrow account.

D.  All funds deposited in the escrow account shall remain the property of the resident until released to the provider in accordance with this Chapter.  Such funds shall not be subject to any liens or charges by the escrow agent or judgments, garnishments, or creditor's claims against the provider or facility, except where required by the terms and conditions of an existing agreement for permanent financing in force on the effective date of this Chapter.  At the request of either the provider or the department, the escrow agent shall issue a statement indicating the status of the escrow account.

E.  Escrowed funds shall be released to the provider at the time the department certifies that:

(1)  Aggregate entrance fees received or receivable by the provider pursuant to executed continuing care agreements plus anticipated proceeds of any first mortgage loan or other long term financing commitment plus funds from other sources in the actual possession of the provider are equal to not less than fifty percent of the aggregate cost of constructing or purchasing, equipping, and furnishing the home plus not less than fifty percent of the funds submitted by the provider as part of its application to be necessary to fund start up losses of the home.

(2)  A commitment is received by the provider for any permanent mortgage loan or other long term financing described in the statement of anticipated source and application of funds submitted as part of the application for registration and any conditions of the commitment prior to disbursement of funds thereunder, other than completion of the construction or closing of the purchase of the home, have been substantially satisfied.

F.  If the funds in an escrow account are not released within the time as provided by the continuing care agreement, then fees paid, less any escrow fees shall be returned by the escrow agent to the persons who made the payment to the provider.  An entrance fee held in escrow may be returned by the escrow agent at any time to the person or persons who paid the fee to the provider upon receipt by the escrow agent of notice from the provider that the person is entitled to a refund of the entrance fee.

G.  In lieu of any escrow which may be required by the department under this Section, a provider shall be entitled to post a letter of credit from a financial institution, negotiable securities, or a bond by a surety authorized to do business in this state and approved by the department in an amount not to exceed the amount required by R.S. 51:2177(E)(1).  The bond, letter of credit, or negotiable securities shall be executed in favor of the department on behalf of individuals who may be found entitled to a refund of entrance fees from the provider.

Acts 1987, No. 483, §1.