Texas Administrative Code › Title 28 - INSURANCE › Part 1 - TEXAS DEPARTMENT OF INSURANCE › Chapter 33 - CONTINUING CARE PROVIDERS › Subchapter E - ESCROW ACCOUNTS › Section 33.403 - Release of Funds from the Entrance Fee Escrow Account to Provider

Current through Reg. 49, No. 28; July 12, 2024
(a) The escrow agent shall notify the
				  department of a request for release of funds from the entrance fee escrow
				  account for a facility to the provider in writing within three banking days of
				  receipt of the request. The notice shall be sent to the department on CCRC Form
				  #9 (Notice of Request to Release Entrance Fee Escrow Funds).
(b) The conditions listed in paragraphs (1) -
				  (5) of this subsection must be met before funds in the entrance fee escrow
				  account may be released to the provider.
(1)
				  At least 50% of the living units in the facility must be reserved for residents
				  or prospective residents. In support of this, the provider must have sufficient
				  binding continuing care contracts and at least 10% of the entrance fees
				  designated in the binding continuing care contracts on deposit in the entrance
				  fee escrow account. For phase-in facilities, in lieu of the 10% deposit, the
				  provider shall deposit in the entrance fee escrow account an amount equal to
				  10% of the amount of entrance fees required for the facility and provide
				  evidence that the resident has full occupancy of the living unit.
(2) The sum of the entrance fees received or
				  receivable by the provider under binding continuing care contracts; the
				  anticipated proceeds of any first mortgage loan or other long-term financing
				  commitment described under paragraph (3) of this subsection; and funds from
				  other sources in the provider's actual possession must be equal to or more than
				  the sum of at least 90% of the aggregate cost of constructing, purchasing, or
				  leasing, equipping, and furnishing the facility; at least 90% of the funds
				  estimated as necessary to cover initial losses of the facility as stated in the
				  current disclosure statement on file with the department; and at least 90% of
				  the amount of the loan reserve fund escrow account required under §
											33.405
				  of this title (relating to Loan Reserve Fund Escrow Accounts).
(3) The provider must have commitments for
				  all permanent mortgage loans, other long-term financing, and lease payments
				  described in the statement of anticipated source and application of funds
				  included in the current disclosure statement on file with the
				  department.
(4) Except for the
				  conditions regarding the completion of construction or closing on the purchase
				  of the facility, the commitment for disbursement of funds must be
				  unconditional.
(5) Either
				  subparagraph (A) or (B) of this paragraph must be satisfied.
(A) If construction of the facility is not
				  substantially completed:
(i) the appropriate
				  party must have obtained all necessary governmental permits or approvals;
				  and
(ii) the provider and the
				  general contractor responsible for construction of the facility must have
				  entered into a maximum price contract; and
(iii) a recognized surety authorized to do
				  business in Texas must have executed a construction bond in favor of the
				  provider covering the general contractor's faithful performance and payment of
				  all obligations arising under the construction contract; and
(iv) the provider must have entered into a
				  loan agreement for an interim construction loan in an amount which, when
				  combined with the amount in the entrance fee escrow account plus the amount of
				  funds from other sources in the provider's actual possession equals or exceeds
				  the estimated cost of constructing, equipping, and furnishing the facility;
				  and
(v) the lender must have
				  disbursed at least 10% of the amount of the construction loan for physical
				  construction or site preparation work; and
(vi) the provider must have placed orders at
				  firm prices for at least 50% of the items necessary to equip and furnish the
				  facility in accordance with the current disclosure statement on file with the
				  department, including installation charges if applicable.
(B) If construction or purchase of the
				  facility is substantially completed, both clauses (i) and (ii) must be
				  satisfied, if appropriate:
(i) the
				  appropriate local government must have issued an occupancy permit covering the
				  living unit; and
(ii) if the
				  entrance fee applies to a living unit which has been previously occupied, the
				  living unit must be available for occupancy by the new resident.