H.B. No. 2389
1-1 AN ACT
1-2 relating to continuing care facilities.
1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-4 SECTION 1. Section 246.002, Health and Safety Code, is
1-5 amended to read as follows:
1-6 Sec. 246.002. Definitions. In this chapter:
1-7 (1) "Board" means the State Board of Insurance.
1-8 (2) "Commissioner" means the commissioner of the State
1-9 Board of Insurance.
1-10 (3) "Continuing care" means the furnishing of a living
1-11 unit, together with personal care services, nursing services,
1-12 medical services, or other health-related services, regardless of
1-13 whether the services and the living unit are provided at the same
1-14 location:
1-15 (A) to an individual who is not related by
1-16 consanguinity or affinity, as determined under Article 5996h,
1-17 Revised Statutes, to the person furnishing the care; and
1-18 (B) under a continuing care contract.
1-19 (4) "Continuing care contract" means an agreement that
1-20 requires the payment of an entrance fee by or on behalf of a
1-21 resident in exchange for the furnishing of continuing care by a
1-22 provider and that is effective <either> for:
1-23 (A) the life of the resident; <individual> or
1-24 (B) <for> more than one year.
2-1 (5) <(4)> "Entrance fee" means an initial or deferred
2-2 transfer of money or other property valued at an amount exceeding
2-3 three months' rent, made, or promised to be made, as full or
2-4 partial consideration for acceptance by a provider of a specified
2-5 individual as a resident. The term does not include a deposit made
2-6 under a reservation agreement.
2-7 (6) <(5)> "Facility" means a place in which a person
2-8 provides continuing care to an individual.
2-9 (7) <(6)> "Living unit" means a room, apartment,
2-10 cottage, or other area that is in a facility and that is set aside
2-11 for the exclusive use or control of one or more specified
2-12 individuals.
2-13 (8) "Long-term nursing care" means nursing care
2-14 provided for a period longer than 365 consecutive days.
2-15 (9) <(7)> "Person" means an individual, corporation,
2-16 association, or partnership, and includes a fraternal or benevolent
2-17 order or society.
2-18 (10) <(8)> "Provider" means a person who undertakes to
2-19 provide continuing care in a facility.
2-20 (11) "Reservation agreement" means an agreement that
2-21 requires the payment of a deposit to reserve a living unit for a
2-22 prospective resident.
2-23 (12) <(9)> "Resident" means an individual entitled to
2-24 receive continuing care in a facility.
2-25 SECTION 2. Section 246.021, Health and Safety Code, is
2-26 amended to read as follows:
2-27 Sec. 246.021. Certificate of Authority Required. Unless a
3-1 provider holds <A provider may not construct or acquire a facility
3-2 or offer to the public a contract for continuing care without> a
3-3 certificate of authority issued under this subchapter, the provider
3-4 may not:
3-5 (1) acquire a facility;
3-6 (2) enter into a continuing care contract; or
3-7 (3) enter into a reservation agreement unless the
3-8 agreement provides for the full refund, for any reason, of a
3-9 deposit paid in connection with the agreement.
3-10 SECTION 3. Section 246.042, Health and Safety Code, is
3-11 amended to read as follows:
3-12 Sec. 246.042. Delivery of Disclosure Statement. (a) A
3-13 provider who has not been issued a certificate of authority under
3-14 Subchapter B must deliver a disclosure statement to any <a> person
3-15 from whom the provider accepts a deposit in connection with a
3-16 reservation agreement before the provider accepts the deposit.
3-17 (b) A provider who has been issued a certificate of
3-18 authority under Subchapter B must deliver a disclosure statement to
3-19 a person with whom a continuing care contract is to be made before
3-20 the earlier of:
3-21 (1) the execution of the continuing care contract; or
3-22 (2) the transfer of any <the> entrance fee or
3-23 nonrefundable deposit to the provider by or on behalf of the
3-24 person.
3-25 (c) <(b)> The most recently filed disclosure statement is
3-26 the only statement that:
3-27 (1) is current for purposes of this chapter; and
4-1 (2) may be delivered under this section.
4-2 SECTION 4. Section 246.043, Health and Safety Code, is
4-3 amended to read as follows:
4-4 Sec. 246.043. Cover Page of Disclosure Statement. The cover
4-5 page of a disclosure statement must state:
4-6 (1) the date of the statement <state,> in a prominent
4-7 location and in type that is boldfaced, capitalized, underlined, or
4-8 otherwise set out from the surrounding written material so as to be
4-9 conspicuous<, the date of the statement>; <and>
4-10 (2) <include a statement> that if the provider has not
4-11 been issued a certificate of authority under Subchapter B, this
4-12 chapter requires the delivery of a disclosure statement to a
4-13 prospective resident before the payment of any deposit to reserve a
4-14 living unit;
4-15 (3) that this chapter requires the delivery of a
4-16 disclosure statement to a contracting party before the execution of
4-17 a continuing care contract or the payment of an entrance fee or
4-18 nonrefundable deposit; and
4-19 (4)<, but> that the disclosure statement has not been
4-20 approved by a governmental agency or representative to ensure the
4-21 accuracy of its information.
4-22 SECTION 5. Sections 246.056(a) and (c), Health and Safety
4-23 Code, are amended to read as follows:
4-24 (a) A person who executes a continuing care contract with a
4-25 provider may rescind the contract at any time before the later of
4-26 midnight of the seventh day, or a later day if specified in the
4-27 contract:
5-1 (1) after the date on which the continuing care
5-2 contract is executed; or
5-3 (2) after the date on which the person receives a
5-4 disclosure statement that meets the requirements of this
5-5 subchapter.
5-6 (c) If a continuing care contract is rescinded under this
5-7 section, any money or property transferred to the provider, other
5-8 than periodic charges specified in the contract and applicable only
5-9 to the period a living unit was actually occupied by the resident,
5-10 shall be refunded not later than the 30th day after the date of
5-11 rescission.
5-12 SECTION 6. Section 246.057(b), Health and Safety Code, is
5-13 amended to read as follows:
5-14 (b) If a continuing care contract is canceled under this
5-15 section, the resident or the resident's legal representative is
5-16 entitled to a refund of all money or property transferred to the
5-17 provider, minus:
5-18 (1) any nonstandard costs specifically incurred by the
5-19 provider or facility at the request of the resident that are
5-20 described in the contract or in an addendum to the contract signed
5-21 by the resident; and
5-22 (2) a reasonable service charge, if set out in the
5-23 contract, that may not exceed the greater of $1,000 or two percent
5-24 of the entrance fee.
5-25 SECTION 7. Section 246.071, Health and Safety Code, is
5-26 amended to read as follows:
5-27 Sec. 246.071. Entrance Fee Escrow Account; Escrow Agent.
6-1 (a) Before a provider may accept the payment of a deposit made
6-2 under a reservation agreement or any portion of an entrance fee
6-3 <make a continuing care contract>, the provider must establish an
6-4 entrance fee escrow account with a bank or trust company, as escrow
6-5 agent, that is located in this state.
6-6 (b) The provider shall deposit with the escrow agent any
6-7 deposit or any <each entrance fee or> portion of an entrance fee
6-8 received by the provider <from or on behalf of a resident> not
6-9 later than 72 hours after the provider receives the deposit or fee.
6-10 SECTION 8. Section 246.072, Health and Safety Code, is
6-11 amended to read as follows:
6-12 Sec. 246.072. Return of Deposits; Release or Return of
6-13 Entrance Fee. (a) On <Unless the escrow agent receives> a written
6-14 request from or on behalf of the provider or a prospective
6-15 resident, the escrow agent shall return the amount on deposit to
6-16 the person who paid the deposit or shall maintain the deposit as an
6-17 entrance fee in the entrance fee escrow account.
6-18 (b) Unless the escrow agent receives a written request from
6-19 or on behalf of a provider or <a provider, a resident, or the
6-20 personal representative of> a resident for the return of an
6-21 entrance fee under Section 246.056, the agent shall release the fee
6-22 to the provider or place the fee in a loan reserve fund escrow.
6-23 SECTION 9. Section 246.073(a), Health and Safety Code, is
6-24 amended to read as follows:
6-25 (a) Except as provided by Subsection (b), an escrow agent
6-26 shall release an entrance fee to the provider if:
6-27 (1) a minimum of 50 percent of the number of living
7-1 units in the facility have been reserved for residents, as
7-2 evidenced by:
7-3 (A) uncanceled executed continuing care
7-4 contracts with those residents; and
7-5 (B) the receipt by the agent of entrance fee
7-6 deposits of at least 10 percent of the entrance fee designated in
7-7 each continuing care contract;
7-8 (2) the total amount of aggregate entrance fees
7-9 received or receivable by the provider under binding continuing
7-10 care contracts, the anticipated proceeds of any first mortgage loan
7-11 or other long-term financing commitment described under Subdivision
7-12 (3), and funds from other sources in the actual possession of the
7-13 provider are equal to or more than the total amount of:
7-14 (A) 90 percent of the aggregate cost of
7-15 constructing or purchasing, equipping, and furnishing the facility;
7-16 (B) 90 percent of the funds estimated, in the
7-17 statement of anticipated source and application of funds included
7-18 in the disclosure statement, to be necessary to cover initial
7-19 losses of the facility; and
7-20 (C) 90 percent of the amount of any loan reserve
7-21 fund escrow required to be maintained by the provider under Section
7-22 246.077; and
7-23 (3) a commitment has been received by the provider for
7-24 any permanent mortgage loan or other long-term financing described
7-25 in the statement of anticipated source and application of funds
7-26 included in the current disclosure statement and any conditions of
7-27 the commitment before disbursement of funds have been substantially
8-1 satisfied, other than completion of the construction or closing on
8-2 the purchase of the facility; and:
8-3 (A) if construction of the facility has not been
8-4 substantially completed:
8-5 (i) all necessary government permits or
8-6 approvals have been obtained;
8-7 (ii) the provider and the general
8-8 contractor responsible for construction of the facility have
8-9 entered into a maximum price contract;
8-10 (iii) a recognized surety authorized to do
8-11 business in this state has executed in favor of the provider a bond
8-12 covering faithful performance of the construction contract by the
8-13 general contractor and the payment of all obligations under the
8-14 contract;
8-15 (iv) the provider has entered a loan
8-16 agreement for an interim construction loan in an amount that, when
8-17 combined with the amount of entrance fees in escrow plus the amount
8-18 of funds from other sources in the actual possession of the
8-19 provider, equals or exceeds the estimated cost of constructing,
8-20 equipping, and furnishing the facility;
8-21 (v) the lender has disbursed not less than
8-22 10 percent of the amount of the construction loan for physical
8-23 construction or completed site preparation work; and
8-24 (vi) the provider has placed orders at
8-25 firm prices for not less than 50 percent of the value of items
8-26 necessary for equipping and furnishing the facility in accordance
8-27 with the description in the disclosure statement, including any
9-1 installation charges; or
9-2 (B) if construction or purchase of the facility
9-3 has been substantially completed:
9-4 (i) an occupancy permit covering the
9-5 living unit has been issued by the local government that has
9-6 authority to issue the permit; and
9-7 (ii) if the entrance fee applies to a
9-8 living unit that has been previously occupied, the living unit is
9-9 available for occupancy by the new resident.
9-10 SECTION 10. Section 246.074, Health and Safety Code, is
9-11 amended to read as follows:
9-12 Sec. 246.074. Return of Entrance Fee. The escrow agent
9-13 shall return an entrance fee to the person who paid it if the fee
9-14 is not released to the provider or placed in the loan reserve fund
9-15 escrow required under Section 246.077 within:
9-16 (1) 36 months after the date on which any portion of
9-17 the entrance fee is received by the provider; or
9-18 (2) a longer time specified by the provider in the
9-19 disclosure statement delivered with the continuing care contract
9-20 under which the fee was paid <of the person who paid the fee>.
9-21 SECTION 11. Section 246.075, Health and Safety Code, is
9-22 amended to read as follows:
9-23 Sec. 246.075. Escrow of Application Fee Not Required. This
9-24 subchapter does not require the escrow of any <a> nonrefundable
9-25 portion of a deposit or entrance <application> fee that:
9-26 (1) does not exceed an amount equal to two percent of
9-27 the entrance fee; and
10-1 (2) is clearly designated as nonrefundable in the
10-2 continuing care contract or reservation agreement.
10-3 SECTION 12. Section 246.076, Health and Safety Code, is
10-4 amended to read as follows:
10-5 Sec. 246.076. Interest Accrued on Entrance Fee Funds.
10-6 Unless otherwise provided in a continuing care contract, interest
10-7 that accrues on <entrance fee> funds held in an entrance fee escrow
10-8 account is the property of the provider.
10-9 SECTION 13. Section 246.111(c), Health and Safety Code, is
10-10 amended to read as follows:
10-11 (c) A lien under this section is subordinate to any liens
10-12 <the lien of a first mortgage> on the <real> property of the
10-13 facility if the proceeds of the loan secured by the liens <the
10-14 first mortgage> were used in whole or in part to:
10-15 (1) construct, <or> acquire, replace, or improve the
10-16 facility; or
10-17 (2) refinance an earlier loan used to construct, <or>
10-18 acquire, replace, or improve the facility.
10-19 SECTION 14. Sections 246.114(b) and (c), Health and Safety
10-20 Code, are amended to read as follows:
10-21 (b) A facility subject to this section that initially filed
10-22 with the commissioner an actuarial review performed on or after
10-23 September 1, 1982, and before September 1, 1987, shall file with
10-24 the commissioner subsequent actuarial reviews at five-year
10-25 intervals from the date of completion of the initial actuarial
10-26 review.
10-27 (c) A facility subject to this section that initially filed
11-1 with the commissioner an actuarial review performed on or after
11-2 September 1, 1987, shall file with the commissioner subsequent
11-3 actuarial reviews at five-year intervals from the date of the
11-4 filing of the initial actuarial review.
11-5 SECTION 15. Section 246.111(a), Health and Safety Code, is
11-6 amended to read as follows:
11-7 (a) To secure the obligations of the provider under any
11-8 continuing care contract, a lien attaches on the date a resident
11-9 first occupies a facility. The lien covers the real and personal
11-10 property of the provider located at the facility. The provider
11-11 shall prepare a written notice sworn to by an officer of the
11-12 provider for each county where the provider has a facility. The
11-13 notice must contain the name of the provider, the legal description
11-14 of each facility of the provider, and a statement that the facility
11-15 is subject to this chapter and the lien provided by this section.
11-16 The provider shall file for record the notice in the real property
11-17 records of each county where the provider has a facility on or
11-18 before the later of January 1, 1994, or the date of the execution
11-19 of the first continuing care contract relating to the facility.
11-20 SECTION 16. This Act takes effect September 1, 1993, and
11-21 applies only to a continuing care contract or reservation agreement
11-22 entered into on or after the effective date of this Act. A
11-23 continuing care contract entered into before the effective date of
11-24 this Act is governed by the law in effect at the time the fee was
11-25 paid, and that law is continued in effect for that purpose.
11-26 Section 15 of this Act applies to facilities existing before, on,
11-27 or after the effective date of this Act.
12-1 SECTION 17. The importance of this legislation and the
12-2 crowded condition of the calendars in both houses create an
12-3 emergency and an imperative public necessity that the
12-4 constitutional rule requiring bills to be read on three several
12-5 days in each house be suspended, and this rule is hereby suspended.