N.Y. MHY Law § 31.28 — New York Code / Act MHY / Title E / Article 31 / Section 31.28
Facilities; receivership
Status: in_force

§ 31.28 Facilities; receivership.\n  (a) The owner or owners of any facility may at any time request the\noffice to take over the operation of such facility by the appointment of\na receiver. Upon receiving such a request, the office may, if it deems\nsuch action desirable, enter into an agreement with any such owners with\nrespect to the appointment of a receiver to take charge of the facility\nunder conditions as found acceptable by both parties. Receivership\ncommenced in accordance with the provisions of this subdivision shall\nterminate at such time as may be provided in the receivership agreement,\nor at such time as either party notified the other in writing that he\nwishes to terminate such receivership.\n  (b) (1) Upon issuing a notice that he will revoke or suspend an\noperating certificate in accordance with subdivision (a) of section\n31.16 of this article, or that he will disapprove an application for\nrenewal of such certificate pursuant to section 31.05 of this article\nthe commissioner may apply to the supreme court in the county where the\nfacility is located for an order to show cause why a receiver should not\nbe appointed to operate the facility. The court shall, upon determining\nthat the notice was properly issued and that it would be in the best\ninterests of the person served by the facility to have services\ncontinued after the effective date of the revocation or suspension,\nappoint a receiver for the facility to take effect upon the revocation\nor suspension of the operating certificate in accordance with the\nprovisions of this article.\n  The order to show cause shall be returnable not less than five days\nafter service is completed and shall provide for personal service of a\ncopy thereof and the papers upon which it is based on the operator of\nthe facility and upon the owner or owners of the land and/or owners of\nthe land and/or structure on or in which the facility is located. If any\nsuch operator or owner cannot with due diligence be served personally\nwithin the county where the property is located and within the time\nfixed in such order, then service may be made on such person by posting\na copy thereof in a conspicuous place within the facility in question,\nand by sending a copy thereof by registered mail, return receipt\nrequested, to such owner at the last address registered to him with the\noffice, or in the absence of such registration, to the address set forth\nin the last recorded deed with respect to such facility. Service shall\nbe deemed complete on filing proof of service thereof in the office of\nthe county clerk, or the clerk of the city of New York, as the case may\nbe.\n  (2) The commissioner may, prior to suspending an operating certificate\nfor up to sixty days pursuant to subdivision (b) of section 31.16 of\nthis article, request a temporary restraining order appointing a\nreceiver for a facility effective with the commissioner's issuance of\nthe notice of the suspension. The court shall issue the temporary\nrestraining order if it is satisfactorily shown by the commissioner that\nhe has reasonable grounds for finding that continued operating of the\nfacility presents an immediate danger to the health and welfare of any\nof the public or any of the individuals served by the facility.\n  (3) The court shall appoint a receiver which should, where reasonably\npossible, be a voluntary association or not-for-profit corporation\nrecommended by the commissioner which holds a valid and current\noperating certificate for a similar type facility, or which shall\nsatisfactorily demonstrate to the commissioner its qualifications for\nsuch operating certificate.\n  (4) On the return of said order to show cause, determination shall\nhave precedence over every other business of the court unless the court\nshall find that some other pending proceeding, having similar statutory\nprecedence, shall have priority. The court may conduct a hearing at\nwhich all interested parties shall have the opportunity to present\nevidence pertaining to the application. If the court shall find that the\nfacts warrant the granting thereof, the court shall determine a fair\nmonthly rental for the facility consistent with its usage as such\nfacility, taking into account all relevant factors, including the\ncondition of such facility, which amount shall, except in the case where\nthe receiver is assuming an existing bona fide arm's length lease, not\nexceed the amount which would be reimbursable to the facility under the\nmedical assistance program for real property costs if each patient in\nthe facility were a recipient of medical assistance. Such rental shall\nbe paid by the receiver to the owner or owners of the facility for each\nmonth that the receivership remains in effect, provided, however, that\nnothing contained herein shall be construed to alter and diminish any\nrental obligation the operator may have under any currently valid lease.\n  (5) If the operating certificate of the operator of the facility is\nrevoked or suspended, then the receiver shall apply for the issuance of\nan operating certificate for the facility and shall for the duration of\nthe receivership comply with all applicable statute and regulations for\nsuch operating certificate.\n  (6) Any receiver appointed pursuant to this subdivision shall have all\nof the powers and duties of a receiver appointed in an action to\nforeclose a mortgage on real property, together with such additional\npowers and duties as are herein granted and imposed. The receiver shall\nwith all reasonable speed, but in any case, within eighteen months after\nthe date on which the receivership was ordered, provide for the orderly\ntransfer of all clients in the facility to other facilities or make\nother provisions for their continued safety and care or make other\narrangements as authorized in subparagraph (a) of paragraph eight of\nthis subdivision.  During the interim period when such clients must\nremain in the facility, the receiver may correct or eliminate those\ndeficiencies in the facility that seriously endanger the life, health or\nsafety of such clients provided that such correction or elimination of\ndeficiencies does not include major alterations of the physical\nstructure of the facility. He shall, during this period operate the\nfacility in such a manner as to guarantee safety and adequate care for\nsuch clients. He shall have the power to let contracts therefor or incur\nexpenses in accordance with the provisions of local laws, ordinances,\nrules and regulations applicable to contracts for public works except\nthat advertisement shall not be required for each such contract.\nNotwithstanding any such laws, ordinances, rules or regulations, the\nreceiver may let contracts or incur expenses for individual items of\nrepairs, improvements or supplies without the procurement of competitive\nbids where the total amount of any such individual item does not exceed\nfive hundred dollars. Any receiver who is an official or employee of the\nstate of New York shall not be required to file any bond. He shall\ncollect incoming payments from all sources and apply them to the costs\nincurred in the performance of his functions as receiver. The receiver\nshall honor all existing leases, mortgages and chattel mortgages that\nhad previously been undertaken as obligations of the owners or operators\nof the facility. However, such receiver may make application to the\nappointing court for recision, reformation or such other relief as may\nbe appropriate with respect to the executory covenants or provisions of\nany contractual obligations of such owners or operators as may be\nnecessary or appropriate to protect the best interests of the clients\nresiding within such facility. No security interest in any real or\npersonal property comprising the facility or contained within the\nfacility, or in any fixture of the facility shall be impaired or\ndiminished in priority by the receiver. The receiver shall compensate\nthe owner or owners of any goods held in inventory for those goods which\nhe uses or causes to be used in reimbursing the costs of such goods,\nexcept that no such compensation shall be made for any such goods for\nwhich the owner or operators of the facility have already been\nreimbursed. Neither the receiver nor the office shall engage in any\nactivity that constitutes a confiscation of property without the payment\nof fair compensation.\n  (7) The appointing court, upon application of the receiver, may make\nsuch provision as justice may require for a reasonable compensation and\nreimbursement of the reasonable expenses of such receiver. The receiver\nshall be liable only in his official capacity for injury to person and\nproperty by reason of conditions of the facility in a case where an\nowner would have been liable; provided that he operates such facility in\ncompliance with the terms of his appointment he shall not have any\nliability in his personal capacity, except for gross negligence and\nintentional acts.\n  (8) (a) The court shall terminate the receivership only under any of\nthe following circumstances:\n  (i) eighteen months after the date on which it was ordered;\n  (ii) when the receiver, or other voluntary agency or not-for-profit\ncorporation satisfactory to the commissioner, has (A) agreed to continue\nthe operation of the facility, (B) entered into a satisfactory long-term\n(not less than two years) arrangement reached on a bona fide arm's\nlength basis with the owner or owner's of land and/or structure on or in\nwhich the facility is or is to be located, and (C) applied for and\nreceived from the commissioner a new operating certificate for the\ncontinued operation of the facility; or\n  (iii) at such time as all of the persons served by the facility have\nbeen provided alternative services.\n  (b) At the time of termination, the receiver shall render a full and\ncomplete accounting to the court and shall make disposition of surplus\nmoney at the direction of the court.\n  (9) (a) Any person who is served a copy of an order of the court\nappointing the receiver shall, upon being notified of the name and\naddress of the receiver, make all payments for goods supplied by the\nfacility, or services rendered by the facility, to the receiver. A\nreceipt shall be given for each such payment, and copies of all such\nreceipts shall be kept on file by the receiver. The amount so received\nshall be deposited by the receiver in a special account which shall also\nbe used for all disbursements made by the receiver.\n  (b) Any person refusing or omitting to make such a payment after such\nservice and notice may be sued therefor by the receiver. Such person\nshall not in such suit dispute the authority of the receiver to incur or\norder such expenses, or the right of the receiver to have such payments\nmade to him. The receipt of the receiver for any sum paid to him shall,\nin all suits and proceedings and for every purpose, be as effectual in\nfavor of any person holding the same as actual payment of the amount\nthereof to the owner or other persons or persons who would, but for the\nprovisions of this subdivision, have been entitled to receive the sum to\nbe paid. No person shall be discharged, nor shall any contract or rights\nbe forfeited or impaired, nor any forfeiture or liability be incurred,\nby reason of any omission to pay any owner, contractor or other person\nany sum so paid to the receiver.\n  (10) (a) No provision contained herein shall be deemed to relieve the\nowner or operator of any civil or criminal liability incurred, or any\nduty imposed by law, by reason of acts of omissions of the owner or\noperator prior to the appointment of any receiver hereunder, nor shall\nanything contained herein be construed to suspend during the\nreceivership any obligation of the owner or operator for the payment of\nmortgages or liens.\n  (b) The receiver shall not be responsible for any obligations incurred\nby the owner, operator or prime lessor, if any, prior to the appointment\nof the receiver.\n  (c) The receiver shall be entitled to use for operating and\nmaintenance expenses and the basic needs of persons served by the\nfacility a portion of the revenues due the operator during the month in\nwhich the receiver is appointed which portion shall be established on\nthe basis of the amounts of the unpaid operating and maintenance\nexpenses for such month.\n  (d) Any sums determined to be due and owing by the receiver to the\nowner, operator or prime lessor shall be off-set by any charges,\ndetermined to be the obligations of the owner, operator or prime lessor.\n  (c) (1) Subject to paragraph two of this subdivision, and subject to\nthe approval of the director of the budget, the commissioner is\nauthorized to make payments to receivers appointed pursuant to the\nprovisions of subdivision (b) of this section, only if the receiver\ndemonstrates to the satisfaction of the commissioner that the facility's\nfunds which are available are insufficient to meet operating and\nmaintenance expenses of the facility and the basic needs of those served\nby the facility.\n  (2) Notwithstanding any inconsistent provisions of law, payments made\npursuant to this section shall be made from funds appropriated therefor\nand such payments shall be made only if a certificate of allocation and\na schedule of amounts to be available therefor shall have been issued by\nthe director of the budget and a copy of such certificate filed with the\ncomptroller, the chairman of the senate finance committee and the\nchairman of the assembly ways and means committee. Such certificate may\nbe amended from time to time by the director of the budget and a copy of\neach such amendment shall be filed with the comptroller, the chairman of\nthe senate finance committee and the chairman of the assembly ways and\nmeans committee.\n  (d) This section shall apply only to the facilities under the\njurisdiction of the office of mental health. Reference to the\ncommissioner in this section shall mean the commissioner of mental\nhealth.\n