§ 8004. Lien on behalf of residents; rehabilitation or liquidation

(a) Prior to the issuance of a certificate of authority under this chapter, or at such other time as the Commissioner may determine it is in the best interests of residents of a facility, the Commissioner may file 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 filed under this section shall be effective for a period of ten years following such filing and may be extended by the Commissioner upon a finding that such extension is advisable for the protection of residents of the facility. The lien may be foreclosed upon the liquidation of the facility or the insolvency of the provider and in such event the proceeds thereof shall be used in full or partial satisfaction of obligations of the provider pursuant to contracts for continuing care then in effect. The lien provided for in this section shall be subordinate to the lien of any mortgage on the property of the provider used to fund the costs of acquiring, developing, or constructing and funding the reserves thereof, and may be subordinated with the written consent of the Commissioner to the claims of other persons if the Commissioner shall determine such subordination to be advisable for the efficient operation of the facility. A lien filed by the Commissioner under this section does not displace any previously perfected lien.

(b) If, at any time, the Commissioner determines, after notice and an opportunity for the provider to be heard, that:

(1) a portion of a reserve fund escrow required under this chapter has been or is proposed to be released;

(2) a provider has been or will 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 most recent pro forma income or cash flow projections filed by the provider;

(3) a provider has failed to maintain the reserves required under this chapter; or

(4) a provider is insolvent, or in imminent danger of becoming subject to a delinquency proceeding under chapter 145 of this title or insolvent;

the Commissioner may apply to the appropriate court for an order directing or authorizing the Commissioner to seize the property of, to rehabilitate or to liquidate a provider under chapter 145 of this title.

(c) In furtherance of the welfare of the persons who have previously contracted with the provider for continuing care, the proceeds of any lien obtained by the Commissioner pursuant to this section shall be distributed in the following order of priority:

(1) used on behalf of residents of a facility being liquidated;

(2) used in full or partial refund of entrance fees;

(3) used to pay other creditors as provided by law. (Added 1987, No. 247 (Adj. Sess.), § 1; amended 1999, No. 38, § 21, eff. May 20, 1999.)