(a) Except as provided in section 17b-534, on and after the date any facility located in this state is first occupied by any resident, the provider shall establish and maintain on a current basis, in escrow with a bank, trust company, or other escrow agent having a place of business in this state, a portion of all entrance fees received by the provider in an aggregate amount sufficient to cover: (1) All principal and interest, rental or lease payments due during the next six months on account of any first mortgage loan or any other long-term financing of the facility; and (2) the total cost of operations of the facility for a one-month period, excluding debt service, rental or lease payments as described in subdivision (1) of this subsection and excluding capital expenditures. A provider may use funds in an account established by or pursuant to a mortgage loan, bond indenture or other long-term financing in its computation of the reserve amounts required to satisfy the provisions of this section, provided such funds are available to make payments when operating funds are insufficient for these purposes. To the extent that a provider is required pursuant to a mortgage loan, bond indenture or other long-term financing to maintain a certain number of days of cash on hand, cash amounts held pursuant to such a requirement may be applied toward the provider's computation of the operating reserve amount required to satisfy the provisions of this subsection. Notwithstanding any provision of this subsection, the commissioner may accept the terms or covenants regarding the establishment or maintenance of reserve or escrow funds or financial ratios associated with a mortgage loan, bond indenture or other long-term financing as an alternative to the reserve provisions set forth in this subsection. The escrow agent may release up to one-twelfth of the required principal balance of funds held in escrow pursuant to said subdivision not more than once during any calendar month, if the provider so requests in writing. The commissioner may authorize the escrow agent to release additional funds held in escrow pursuant to subdivisions (1) and (2) of this subsection, upon application by the provider setting forth the reasons for the requested release and a plan for replacing these funds within one year; the commissioner shall respond within fifteen business days. If any escrow funds so released are not replaced within one year the escrow agent shall so notify the commissioner. A provider shall promptly notify the commissioner in the event such provider uses funds held in escrow pursuant to subdivisions (1) and (2) of this subsection. Upon written application by a provider, the commissioner may authorize a facility to maintain a reserve escrow or escrows in an amount less than the amounts set forth in this section, if the commissioner finds that the contractual liabilities of the provider and the best interests of the residents may be adequately protected by a reserve escrow or escrows in a lesser amount.

(b) No entrance fee escrows established or maintained under section 17b-524 shall be subordinated to other loans or commitments of any kind. No reserve fund escrows established or maintained under this section shall be subordinated to other loans or commitments, other than first mortgage loans or other long-term financing obligations of the facility. No entrance fee escrow shall be pledged as collateral for any loan or commitment, provided that a reserve fund escrow may be pledged as collateral for a first mortgage loan or other long-term financing obligation of the facility. No entrance fee escrows or reserve fund escrows shall be (1) invested in any building or health care facility of any kind, (2) used for capital construction or improvements or for the purchase of real estate, or (3) removed from the state if required to be maintained within this state. Interest on the reserve fund required under this section shall be payable to the provider.

(c) Any affiliate of a provider that controls any part of the reserve escrow funds is liable for the debts of the provider up to the amount of the provider's contribution to the fund plus any prorated interest the fund may earn.

(P.A. 86-252, S. 6, 17; P.A. 90-159, S. 3; P.A. 98-250, S. 24, 39; P.A. 15-115, S. 9.)

History: P.A. 90-159 in Subsec. (b) prohibited entrance fee escrows from being subordinated to other loans or commitments of any kind; Sec. 17-540 transferred to Sec. 17a-365 in 1991; Sec. 17a-365 transferred to Sec. 17b-525 in 1995; P.A. 98-250 amended Subsec. (a) to require notification of use of escrow funds, effective July 1, 1998; P.A. 15-115 amended Subsec. (a) to delete provision re escrow agents having principal place of business in the state, change 12 months to 6 months re amount of time reserve fund must cover certain expenses, and add provisions re providers may use certain funds to compute required reserve amounts and commissioner may accept certain covenants as alternative to reserve fund requirements, and amended Subsec. (b) to add provision re reserve fund escrow may be pledged as collateral for first mortgage loan or other long-term financing obligation and make technical changes.