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A BILL TO BE ENTITLED
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AN ACT
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relating to escrow fees required for the construction and leasing |
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of certain health facilities. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Section 246.002, Health and Safety Code, is |
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amended by amending Subdivision (6) and adding Subdivision (8-a) to |
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read as follows: |
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(6) "Facility" means each separate, administratively |
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independent [a] place in which a person provides continuing care to |
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an individual. |
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(8-a) "Marketing activities" means activities |
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undertaken by a provider to secure continuing care contracts for |
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occupancy of a facility by residents. |
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SECTION 2. Section 246.073(a), Health and Safety Code, is |
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amended to read as follows: |
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(a) Except as provided by Subsection (b), an escrow agent |
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shall release an entrance fee to the provider if: |
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(1) a minimum of 50 percent of the number of living |
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units in the facility have been reserved for residents, as |
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evidenced by: |
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(A) uncanceled executed continuing care |
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contracts with those residents; and |
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(B) for each continuing care contract: |
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(i) the receipt by the agent of an entrance |
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fee deposit [deposits] of at least 10 percent of the entrance fee |
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designated in the [each continuing care] contract; or |
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(ii) a specific living unit assigned to a |
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resident and available for occupancy; |
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(2) the total amount of aggregate entrance fees |
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received or receivable by the provider under binding continuing |
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care contracts, the anticipated proceeds of any first mortgage loan |
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or other long-term financing commitment described under |
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Subdivision (3), and funds from other sources in the actual |
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possession of the provider are equal to or more than the total |
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amount of: |
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(A) 90 percent of the aggregate cost of |
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constructing or purchasing, equipping, and furnishing the |
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facility, or in the case of a leased facility, 90 percent of the |
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total first year lease; |
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(B) 90 percent of the funds estimated, in the |
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statement of anticipated source and application of funds included |
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in the disclosure statement, to be necessary to cover initial |
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losses of the facility; and |
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(C) 90 percent of the amount of any loan reserve |
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fund escrow required to be maintained by the provider under Section |
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246.077; and |
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(3) a commitment has been received by the provider for |
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any permanent mortgage loan or other long-term financing described |
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in the statement of anticipated source and application of funds |
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included in the current disclosure statement and any conditions of |
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the commitment before disbursement of funds have been substantially |
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satisfied, other than completion of the construction or closing on |
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the purchase of the facility, [;] and: |
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(A) if construction of the facility has not been |
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substantially completed: |
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(i) all necessary government permits or |
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approvals have been obtained; |
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(ii) the provider and the general |
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contractor responsible for construction of the facility have |
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entered into a maximum price contract; |
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(iii) a recognized surety authorized to do |
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business in this state has executed in favor of the provider a bond |
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covering faithful performance of the construction contract by the |
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general contractor and the payment of all obligations under the |
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contract; |
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(iv) the provider has entered a loan |
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agreement for an interim construction loan in an amount that, when |
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combined with the amount of entrance fees in escrow plus the amount |
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of funds from other sources in the actual possession of the |
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provider, equals or exceeds the estimated cost of constructing, |
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equipping, and furnishing the facility; |
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(v) the lender has disbursed not less than |
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10 percent of the amount of the construction loan for physical |
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construction or completed site preparation work; and |
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(vi) the provider has placed orders at firm |
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prices for not less than 50 percent of the value of items necessary |
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for equipping and furnishing the facility in accordance with the |
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description in the disclosure statement, including any |
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installation charges; or |
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(B) if construction or purchase of the facility |
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has been substantially completed: |
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(i) an occupancy permit covering the living |
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unit has been issued by the local government that has authority to |
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issue the permit; and |
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(ii) if the entrance fee applies to a living |
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unit that has been previously occupied, the living unit is |
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available for occupancy by the new resident. |
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SECTION 3. Subchapter D, Chapter 246, Health and Safety |
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Code, is amended by adding Section 246.0735 to read as follows: |
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Sec. 246.0735. CONTINUING RELEASE OF ESCROW. (a) After the |
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initial release of an entrance fee by an escrow agent for a specific |
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facility, the board shall authorize an escrow agent to continue to |
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release escrowed entrance fees for that facility to the provider |
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without further proof of satisfying the requirements of Section |
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246.073 if: |
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(1) the provider provides a monthly report to the |
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department on marketing activities for living units of the |
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facility; and |
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(2) the provider immediately informs the department of |
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any problems, issues, or irregularities encountered in its |
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marketing activities for the facility. |
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(b) If the provider fails to meet the requirements of |
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Subsection (a), the board may require the provider to satisfy the |
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requirements of Section 246.073 before the board authorizes the |
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escrow agent to continue releasing escrowed entrance fees to the |
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provider. |
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(c) The board shall adopt rules to implement this section. |
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SECTION 4. This Act takes effect immediately if it receives |
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a vote of two-thirds of all the members elected to each house, as |
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provided by Section 39, Article III, Texas Constitution. If this |
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Act does not receive the vote necessary for immediate effect, this |
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Act takes effect September 1, 2007. |