1-1 By: Hirschi (Senate Sponsor - Haley) H.B. No. 2389
1-2 (In the Senate - Received from the House May 10, 1993;
1-3 May 12, 1993, read first time and referred to Committee on Economic
1-4 Development; May 20, 1993, reported adversely, with favorable
1-5 Committee Substitute by the following vote: Yeas 7, Nays 0;
1-6 May 20, 1993, sent to printer.)
1-7 COMMITTEE VOTE
1-8 Yea Nay PNV Absent
1-9 Parker x
1-10 Lucio x
1-11 Ellis x
1-12 Haley x
1-13 Harris of Dallas x
1-14 Harris of Tarrant x
1-15 Leedom x
1-16 Madla x
1-17 Rosson x
1-18 Shapiro x
1-19 Wentworth x
1-20 COMMITTEE SUBSTITUTE FOR H.B. No. 2389 By: Haley
1-21 A BILL TO BE ENTITLED
1-22 AN ACT
1-23 relating to continuing care facilities.
1-24 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-25 SECTION 1. Section 246.002, Health and Safety Code, is
1-26 amended to read as follows:
1-27 Sec. 246.002. Definitions. In this chapter:
1-28 (1) "Board" means the State Board of Insurance.
1-29 (2) "Commissioner" means the commissioner of the State
1-30 Board of Insurance.
1-31 (3) "Continuing care" means the furnishing of a living
1-32 unit, together with personal care services, nursing services,
1-33 medical services, or other health-related services, regardless of
1-34 whether the services and the living unit are provided at the same
1-35 location:
1-36 (A) to an individual who is not related by
1-37 consanguinity or affinity, as determined under Article 5996h,
1-38 Revised Statutes, to the person furnishing the care; and
1-39 (B) under a continuing care contract.
1-40 (4) "Continuing care contract" means an agreement that
1-41 requires the payment of an entrance fee by or on behalf of a
1-42 resident in exchange for the furnishing of continuing care by a
1-43 provider and that is effective <either> for:
1-44 (A) the life of the resident; <individual> or
1-45 (B) <for> more than one year.
1-46 (5) <(4)> "Entrance fee" means an initial or deferred
1-47 transfer of money or other property valued at an amount exceeding
1-48 three months' rent, made, or promised to be made, as full or
1-49 partial consideration for acceptance by a provider of a specified
1-50 individual as a resident. The term does not include a deposit made
1-51 under a reservation agreement.
1-52 (6) <(5)> "Facility" means a place in which a person
1-53 provides continuing care to an individual.
1-54 (7) <(6)> "Living unit" means a room, apartment,
1-55 cottage, or other area that is in a facility and that is set aside
1-56 for the exclusive use or control of one or more specified
1-57 individuals.
1-58 (8) "Long-term nursing care" means nursing care
1-59 provided for a period longer than 365 consecutive days.
1-60 (9) <(7)> "Person" means an individual, corporation,
1-61 association, or partnership, and includes a fraternal or benevolent
1-62 order or society.
1-63 (10) <(8)> "Provider" means a person who undertakes to
1-64 provide continuing care in a facility.
1-65 (11) "Reservation agreement" means an agreement that
1-66 requires the payment of a deposit to reserve a living unit for a
1-67 prospective resident.
1-68 (12) <(9)> "Resident" means an individual entitled to
2-1 receive continuing care in a facility.
2-2 SECTION 2. Section 246.021, Health and Safety Code, is
2-3 amended to read as follows:
2-4 Sec. 246.021. Certificate of Authority Required. Unless a
2-5 provider holds <A provider may not construct or acquire a facility
2-6 or offer to the public a contract for continuing care without> a
2-7 certificate of authority issued under this subchapter, the provider
2-8 may not:
2-9 (1) acquire a facility;
2-10 (2) enter into a continuing care contract; or
2-11 (3) enter into a reservation agreement unless the
2-12 agreement provides for the full refund, for any reason, of a
2-13 deposit paid in connection with the agreement.
2-14 SECTION 3. Section 246.042, Health and Safety Code, is
2-15 amended to read as follows:
2-16 Sec. 246.042. Delivery of Disclosure Statement. (a) A
2-17 provider who has not been issued a certificate of authority under
2-18 Subchapter B must deliver a disclosure statement to any <a> person
2-19 from whom the provider accepts a deposit in connection with a
2-20 reservation agreement before the provider accepts the deposit.
2-21 (b) A provider who has been issued a certificate of
2-22 authority under Subchapter B must deliver a disclosure statement to
2-23 a person with whom a continuing care contract is to be made before
2-24 the earlier of:
2-25 (1) the execution of the continuing care contract; or
2-26 (2) the transfer of any <the> entrance fee or
2-27 nonrefundable deposit to the provider by or on behalf of the
2-28 person.
2-29 (c) <(b)> The most recently filed disclosure statement is
2-30 the only statement that:
2-31 (1) is current for purposes of this chapter; and
2-32 (2) may be delivered under this section.
2-33 SECTION 4. Section 246.043, Health and Safety Code, is
2-34 amended to read as follows:
2-35 Sec. 246.043. Cover Page of Disclosure Statement. The cover
2-36 page of a disclosure statement must state:
2-37 (1) the date of the statement <state,> in a prominent
2-38 location and in type that is boldfaced, capitalized, underlined, or
2-39 otherwise set out from the surrounding written material so as to be
2-40 conspicuous<, the date of the statement>; <and>
2-41 (2) <include a statement> that if the provider has not
2-42 been issued a certificate of authority under Subchapter B, this
2-43 chapter requires the delivery of a disclosure statement to a
2-44 prospective resident before the payment of any deposit to reserve a
2-45 living unit;
2-46 (3) that this chapter requires the delivery of a
2-47 disclosure statement to a contracting party before the execution of
2-48 a continuing care contract or the payment of an entrance fee or
2-49 nonrefundable deposit; and
2-50 (4)<, but> that the disclosure statement has not been
2-51 approved by a governmental agency or representative to ensure the
2-52 accuracy of its information.
2-53 SECTION 5. Sections 246.056(a) and (c), Health and Safety
2-54 Code, are amended to read as follows:
2-55 (a) A person who executes a continuing care contract with a
2-56 provider may rescind the contract at any time before the later of
2-57 midnight of the seventh day, or a later day if specified in the
2-58 contract:
2-59 (1) after the date on which the continuing care
2-60 contract is executed; or
2-61 (2) after the date on which the person receives a
2-62 disclosure statement that meets the requirements of this
2-63 subchapter.
2-64 (c) If a continuing care contract is rescinded under this
2-65 section, any money or property transferred to the provider, other
2-66 than periodic charges specified in the contract and applicable only
2-67 to the period a living unit was actually occupied by the resident,
2-68 shall be refunded not later than the 30th day after the date of
2-69 rescission.
2-70 SECTION 6. Section 246.057(b), Health and Safety Code, is
3-1 amended to read as follows:
3-2 (b) If a continuing care contract is canceled under this
3-3 section, the resident or the resident's legal representative is
3-4 entitled to a refund of all money or property transferred to the
3-5 provider, minus:
3-6 (1) any nonstandard costs specifically incurred by the
3-7 provider or facility at the request of the resident that are
3-8 described in the contract or in an addendum to the contract signed
3-9 by the resident; and
3-10 (2) a reasonable service charge, if set out in the
3-11 contract, that may not exceed the greater of $1,000 or two percent
3-12 of the entrance fee.
3-13 SECTION 7. Section 246.071, Health and Safety Code, is
3-14 amended to read as follows:
3-15 Sec. 246.071. Entrance Fee Escrow Account; Escrow Agent.
3-16 (a) Before a provider may accept the payment of a deposit made
3-17 under a reservation agreement or any portion of an entrance fee
3-18 <make a continuing care contract>, the provider must establish an
3-19 entrance fee escrow account with a bank or trust company, as escrow
3-20 agent, that is located in this state.
3-21 (b) The provider shall deposit with the escrow agent any
3-22 deposit or any <each entrance fee or> portion of an entrance fee
3-23 received by the provider <from or on behalf of a resident> not
3-24 later than 72 hours after the provider receives the deposit or fee.
3-25 SECTION 8. Section 246.072, Health and Safety Code, is
3-26 amended to read as follows:
3-27 Sec. 246.072. Return of Deposits; Release or Return of
3-28 Entrance Fee. (a) On <Unless the escrow agent receives> a written
3-29 request from or on behalf of the provider or a prospective
3-30 resident, the escrow agent shall return the amount on deposit to
3-31 the person who paid the deposit or shall maintain the deposit as an
3-32 entrance fee in the entrance fee escrow account.
3-33 (b) Unless the escrow agent receives a written request from
3-34 or on behalf of a provider or <a provider, a resident, or the
3-35 personal representative of> a resident for the return of an
3-36 entrance fee under Section 246.056, the agent shall release the fee
3-37 to the provider or place the fee in a loan reserve fund escrow.
3-38 SECTION 9. Section 246.073(a), Health and Safety Code, is
3-39 amended to read as follows:
3-40 (a) Except as provided by Subsection (b), an escrow agent
3-41 shall release an entrance fee to the provider if:
3-42 (1) a minimum of 50 percent of the number of living
3-43 units in the facility have been reserved for residents, as
3-44 evidenced by:
3-45 (A) uncanceled executed continuing care
3-46 contracts with those residents; and
3-47 (B) the receipt by the agent of entrance fee
3-48 deposits of at least 10 percent of the entrance fee designated in
3-49 each continuing care contract;
3-50 (2) the total amount of aggregate entrance fees
3-51 received or receivable by the provider under binding continuing
3-52 care contracts, the anticipated proceeds of any first mortgage loan
3-53 or other long-term financing commitment described under Subdivision
3-54 (3), and funds from other sources in the actual possession of the
3-55 provider are equal to or more than the total amount of:
3-56 (A) 90 percent of the aggregate cost of
3-57 constructing or purchasing, equipping, and furnishing the facility;
3-58 (B) 90 percent of the funds estimated, in the
3-59 statement of anticipated source and application of funds included
3-60 in the disclosure statement, to be necessary to cover initial
3-61 losses of the facility; and
3-62 (C) 90 percent of the amount of any loan reserve
3-63 fund escrow required to be maintained by the provider under Section
3-64 246.077; and
3-65 (3) a commitment has been received by the provider for
3-66 any permanent mortgage loan or other long-term financing described
3-67 in the statement of anticipated source and application of funds
3-68 included in the current disclosure statement and any conditions of
3-69 the commitment before disbursement of funds have been substantially
3-70 satisfied, other than completion of the construction or closing on
4-1 the purchase of the facility; and:
4-2 (A) if construction of the facility has not been
4-3 substantially completed:
4-4 (i) all necessary government permits or
4-5 approvals have been obtained;
4-6 (ii) the provider and the general
4-7 contractor responsible for construction of the facility have
4-8 entered into a maximum price contract;
4-9 (iii) a recognized surety authorized to do
4-10 business in this state has executed in favor of the provider a bond
4-11 covering faithful performance of the construction contract by the
4-12 general contractor and the payment of all obligations under the
4-13 contract;
4-14 (iv) the provider has entered a loan
4-15 agreement for an interim construction loan in an amount that, when
4-16 combined with the amount of entrance fees in escrow plus the amount
4-17 of funds from other sources in the actual possession of the
4-18 provider, equals or exceeds the estimated cost of constructing,
4-19 equipping, and furnishing the facility;
4-20 (v) the lender has disbursed not less than
4-21 10 percent of the amount of the construction loan for physical
4-22 construction or completed site preparation work; and
4-23 (vi) the provider has placed orders at
4-24 firm prices for not less than 50 percent of the value of items
4-25 necessary for equipping and furnishing the facility in accordance
4-26 with the description in the disclosure statement, including any
4-27 installation charges; or
4-28 (B) if construction or purchase of the facility
4-29 has been substantially completed:
4-30 (i) an occupancy permit covering the
4-31 living unit has been issued by the local government that has
4-32 authority to issue the permit; and
4-33 (ii) if the entrance fee applies to a
4-34 living unit that has been previously occupied, the living unit is
4-35 available for occupancy by the new resident.
4-36 SECTION 10. Section 246.074, Health and Safety Code, is
4-37 amended to read as follows:
4-38 Sec. 246.074. Return of Entrance Fee. The escrow agent
4-39 shall return an entrance fee to the person who paid it if the fee
4-40 is not released to the provider or placed in the loan reserve fund
4-41 escrow required under Section 246.077 within:
4-42 (1) 36 months after the date on which any portion of
4-43 the entrance fee is received by the provider; or
4-44 (2) a longer time specified by the provider in the
4-45 disclosure statement delivered with the continuing care contract
4-46 under which the fee was paid <of the person who paid the fee>.
4-47 SECTION 11. Section 246.075, Health and Safety Code, is
4-48 amended to read as follows:
4-49 Sec. 246.075. Escrow of Application Fee Not Required. This
4-50 subchapter does not require the escrow of any <a> nonrefundable
4-51 portion of a deposit or entrance <application> fee that:
4-52 (1) does not exceed an amount equal to two percent of
4-53 the entrance fee; and
4-54 (2) is clearly designated as nonrefundable in the
4-55 continuing care contract or reservation agreement.
4-56 SECTION 12. Section 246.076, Health and Safety Code, is
4-57 amended to read as follows:
4-58 Sec. 246.076. Interest Accrued on Entrance Fee Funds.
4-59 Unless otherwise provided in a continuing care contract, interest
4-60 that accrues on <entrance fee> funds held in an entrance fee escrow
4-61 account is the property of the provider.
4-62 SECTION 13. Section 246.111(c), Health and Safety Code, is
4-63 amended to read as follows:
4-64 (c) A lien under this section is subordinate to any liens
4-65 <the lien of a first mortgage> on the <real> property of the
4-66 facility if the proceeds of the loan secured by the liens <the
4-67 first mortgage> were used in whole or in part to:
4-68 (1) construct, <or> acquire, replace, or improve the
4-69 facility; or
4-70 (2) refinance an earlier loan used to construct, <or>
5-1 acquire, replace, or improve the facility.
5-2 SECTION 14. Sections 246.114(b) and (c), Health and Safety
5-3 Code, are amended to read as follows:
5-4 (b) A facility subject to this section that initially filed
5-5 with the commissioner an actuarial review performed on or after
5-6 September 1, 1982, and before September 1, 1987, shall file with
5-7 the commissioner subsequent actuarial reviews at five-year
5-8 intervals from the date of completion of the initial actuarial
5-9 review.
5-10 (c) A facility subject to this section that initially filed
5-11 with the commissioner an actuarial review performed on or after
5-12 September 1, 1987, shall file with the commissioner subsequent
5-13 actuarial reviews at five-year intervals from the date of the
5-14 filing of the initial actuarial review.
5-15 SECTION 15. Section 246.111(a), Health and Safety Code, is
5-16 amended to read as follows:
5-17 (a) To secure the obligations of the provider under any
5-18 continuing care contract, a lien attaches on the date a resident
5-19 first occupies a facility. The lien covers the real and personal
5-20 property of the provider located at the facility. The provider
5-21 shall prepare a written notice sworn to by an officer of the
5-22 provider for each county where the provider has a facility. The
5-23 notice must contain the name of the provider, the legal description
5-24 of each facility of the provider, and a statement that the facility
5-25 is subject to this chapter and the lien provided by this section.
5-26 The provider shall file for record the notice in the real property
5-27 records of each county where the provider has a facility on or
5-28 before the later of January 1, 1994, or the date of the execution
5-29 of the first continuing care contract relating to the facility.
5-30 SECTION 16. This Act takes effect September 1, 1993, and
5-31 applies only to a continuing care contract or reservation agreement
5-32 entered into on or after the effective date of this Act. A
5-33 continuing care contract entered into before the effective date of
5-34 this Act is governed by the law in effect at the time the fee was
5-35 paid, and that law is continued in effect for that purpose.
5-36 Section 15 of this Act applies to facilities existing before, on,
5-37 or after the effective date of this Act.
5-38 SECTION 17. The importance of this legislation and the
5-39 crowded condition of the calendars in both houses create an
5-40 emergency and an imperative public necessity that the
5-41 constitutional rule requiring bills to be read on three several
5-42 days in each house be suspended, and this rule is hereby suspended.
5-43 * * * * *
5-44 Austin,
5-45 Texas
5-46 May 20, 1993
5-47 Hon. Bob Bullock
5-48 President of the Senate
5-49 Sir:
5-50 We, your Committee on Economic Development to which was referred
5-51 H.B. No. 2389, have had the same under consideration, and I am
5-52 instructed to report it back to the Senate with the recommendation
5-53 that it do not pass, but that the Committee Substitute adopted in
5-54 lieu thereof do pass and be printed.
5-55 Parker,
5-56 Chairman
5-57 * * * * *
5-58 WITNESSES
5-59 FOR AGAINST ON
5-60 ___________________________________________________________________
5-61 Name: Rhonda Myron x
5-62 Representing: TDI
5-63 City: Austin
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5-65 Name: David Latimer x
5-66 Representing: Tx Assn. of Homes for Aging
5-67 City: Austin
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