(a) Application may be made to the Superior Court of the District of Columbia or to the federal bankruptcy court that may have previously taken jurisdiction over the provider or facility for an order directing or authorizing the appointment of a trustee to rehabilitate or to liquidate a facility if, at any time, it is determined, after notice and an opportunity for the provider to be heard, that:

(1) A portion of an entrance fee escrow account required to be maintained under this chapter has been or is proposed to be released in violation of this chapter;

(2) A provider has been or shall be unable, in such a manner as may endanger the ability of the provider, to fully perform its obligations pursuant to contracts for continuing care, to meet the financial forecasts previously filed by the provider;

(3) A provider has failed to maintain the escrow account required under this title; or

(4) A facility is bankrupt or insolvent, or in imminent danger of becoming bankrupt or insolvent.

(b) An order to rehabilitate a facility shall direct a trustee to take possession of the property of the provider and to conduct the business thereof, including the employment of such managers or agents as may be considered necessary and to take such steps as the court may direct toward removal of the causes and conditions which have made rehabilitation necessary.

(c) If, at any time, the court finds, upon petition of the trustee or provider, or on its own motion, that the objectives of an order to rehabilitate a facility have been accomplished and that the facility can be returned to the provider’s management without further jeopardy to the residents of the facility, the court may, upon a full report and accounting of the conduct of the facility’s affairs during the rehabilitation and of the facility’s current financial condition, terminate the rehabilitation and, by order, return the facility and its assets and affairs to the provider’s management.

(d) If, at any time, it is determined that further efforts to rehabilitate the provider would be useless, application may be made to the court for an order of liquidation.

(e) An order to liquidate a facility:

(1) May be issued upon application of the Mayor whether or not there has been issued a prior order to rehabilitate the facility;

(2) Shall act as a revocation of the license of the facility under this chapter; and

(3) Shall include an order directing a trustee to marshal and liquidate all of the provider’s assets located within the District.

(f) Unless preempted by federal law, the first $500 of compensation or wages owed to an officer or employee of a continuing care provider for services rendered within 3 months before the commencement of a delinquency proceeding against the continuing care provider shall be paid before payment of any other debt or claim.

(g) Effective at the time a facility is first occupied by any resident, there shall exist a lien on the real and personal property of the provider or facility to secure the obligations of the provider pursuant to existing and future contracts for continuing care. A lien under this section shall be effective for a period of 10 years. The lien may be foreclosed upon the liquidation of the facility or the insolvency or bankruptcy of the provider and in that event the proceeds shall be used in full or partial satisfaction of obligations of the provider.

(h) If a provider is bankrupt or insolvent or has filed for protection from creditors under any federal bankruptcy or insolvency law, any resident or association of residents, or the legal representative of a resident or association of residents, may apply to the federal bankruptcy court for an order directing the appointment of a trustee to rehabilitate or liquidate a facility.

(i) In applying for an order to rehabilitate or liquidate a facility, in addition to the provisions of subsection (h) of this section, due consideration shall be given in the application to the manner in which the welfare of persons who have previously contracted with the provider for continuing care may be best served.

(j) An order for rehabilitation under this section shall be refused or vacated if the provider posts a bond, by recognized surety authorized to do business in the District and executed on behalf of persons who may be found to be entitled to a refund of entrance fees from the provider or other damages if the provider is unable to fulfill its contracts to provide continuing care at the facility, in an amount determined by the Court to be equal to the reserve funding that would otherwise need to be available to fulfill such obligations.

(Apr. 5, 2005, D.C. Law 15-270, § 111, 52 DCR 799.)