2021 New York Laws
MHY - Mental Hygiene
Title D - Alcoholism and Substance Abuse Act
Article 19 - Office of Alcoholism and Substance Abuse
19.41 - Facilities; Receivership.

§ 19.41 Facilities; receivership.
  a.  The  owner  or  owners of any facility may at any time request the
office to take over the operation of such facility by the appointment of
a receiver. Upon receiving such a request, the office may, if  it  deems
such action desirable, enter into an agreement with any such owners with
respect  to the appointment of a receiver to take charge of the facility
under conditions as  found  acceptable  by  both  parties.  Receivership
commenced  in  accordance  with the provisions of this subdivision shall
terminate at such time as may be provided in the receivership agreement,
or at such time as either party notifies the other in writing that he or
she wishes to terminate such receivership.
  b.  (1) Upon issuing a notice that the  commissioner  will  revoke  or
suspend  a  license  or  operating  certificate  in accordance with this
article and article thirty-two of this chapter, or that he or  she  will
disapprove  an  application  of  renewal  of such certificate or license
pursuant to this article and article  thirty-two  of  this  chapter  the
commissioner  may  apply  to  the  supreme court in the county where the
facility is located for an order to show cause why a receiver should not
be appointed to operate the facility. The court shall, upon  determining
that  the  notice  was  properly issued and that it would be in the best
interests of the  persons  served  by  the  facility  to  have  services
continued  after  the  effective  date  of the revocation or suspension,
appoint a receiver for the facility to take effect upon  the  revocation
or suspension of the operating certificate or license in accordance with
the provisions of this article.
  The  order  to  show cause shall be returnable not less than five days
after service is completed and shall provide for personal service  of  a
copy  thereof  and  the papers upon which it is based on the operator of
the facility and upon the owner or owners of the land and/or  owners  of
the land and/or structure on or in which the facility is located. If any
such  operator  or  owner cannot with due diligence be served personally
within the county where the property is  located  and  within  the  time
fixed  in such order, then service may be made on such person by posting
a copy thereof in a conspicuous place within the facility  in  question,
and  by  sending  a  copy  thereof  by  registered  mail, return receipt
requested, to such owner at the last address registered to  him  or  her
with  the office, or in the absence of such registration, to the address
set forth in the last recorded  deed  with  respect  to  such  facility.
Service  shall  be deemed complete on filing proof of service thereof in
the office of the county clerk, or the clerk of the city of New York, as
the case may be.

(2) The commissioner may, prior to suspending an operating certificate or license pursuant to this article and article thirty-two of this chapter, request a temporary restraining order appointing a receiver for a facility effective with the commissioner's issuance of the notice of the suspension. The court shall issue the temporary restraining order if it is satisfactorily shown by the commissioner that he or she has reasonable grounds for finding that continued operation of the facility by the current provider of services presents an imminent danger to the health and welfare of any of the public or any of the individuals served by the facility.

(3) The court shall appoint a receiver which should, where reasonably possible, be a voluntary association or other not-for-profit corporation recommended by the commissioner which holds a valid and current operating certificate or license for a similar type facility, or which shall satisfactorily demonstrate to the commissioner its qualifications for such operating certificate or license.

(4) On the return of said order to show cause, determination shall have precedence over every other business of the court unless the court shall find that some other pending proceeding, having similar statutory precedence, shall have priority. The court may conduct a hearing at which all interested parties shall have the opportunity to present evidence pertaining to the application. If the court shall find that the facts warrant the granting thereof, the court shall determine a fair monthly rental for the facility consistent with its usage as such facility, which amount shall, except in the case where the receiver is assuming an existing bona fide arm's length lease, not exceed the amount which would be reimbursable to the facility in accordance with current guidelines established by the office. Such rental shall be paid by the receiver to the owner or owners of the facility for each month that the receivership remains in effect, provided, however, that nothing contained herein shall be construed to alter and diminish any rental obligation the operator may have under any currently valid bona fide arm's length lease.

(5) If the operating certificate or license of the operator of the facility is revoked or suspended, then the receiver shall apply for the issuance of an appropriate operating certificate or license for the facility and shall for the duration of the receivership comply with all applicable statutes and regulations.

(6) Any receiver appointed pursuant to this subdivision shall have all of the powers and duties of a receiver appointed in an action to foreclose a mortgage on real property, together with such additional powers and duties as are herein granted and imposed. The receiver shall with all reasonable speed, but in any case, within eighteen months after the date on which the receivership was ordered, provide for the orderly transfer of all clients in the facility to other care or make other arrangements as authorized in subparagraph (a) of paragraph eight of this subdivision. During the interim period when such clients must remain in the facility, the receiver may correct or eliminate those deficiencies in the facility that seriously endanger the life, health, or safety of such clients; provided that such correction or elimination of deficiencies does not include major alterations of the physical structure of the facility. The receiver shall, during this period, operate the facility in such a manner as to guarantee safety and adequate care for such clients. The receiver shall have the power to let contracts therefor or incur expenses in accordance with the provisions of applicable statutes, rules and regulations, and applicable guidelines established by the office. Any receiver who is an official or employee of the state of New York shall not be required to file any bond. Such receiver shall collect incoming payments from all sources and apply them to the costs incurred in the performance of its functions as a receiver. The receiver shall honor all existing leases, mortgages, and chattel mortgages that had previously been undertaken as obligations of the owners or operators of the facility. However, such receiver may make application to the appointing court for recision, reformation, or such other relief as may be appropriate with respect to the executory covenants or provisions of any contractual obligations of such owners or operators as may be necessary or appropriate to protect the best interests of the clients served by such facility. No security interest in any real or personal property comprising the facility or contained within the facility shall be impaired or diminished in priority by the receiver. The receiver shall compensate the owner or owners of any goods held in inventory for those goods which it uses or causes to be used, except that no such compensation shall be made for any such goods for which the owner or operators of the facility have already been reimbursed. Neither the receiver nor the office shall engage in any activity that constitutes a confiscation of property without the payment of fair compensation.

(7) The appointing court, upon application of the receiver, may make such provision as justice may require for a reasonable compensation and reimbursement of the reasonable expenses of such receiver. The receiver shall be liable only in its official capacity for injury to person and property by reason of conditions of the facility in a case where an owner would have been liable; provided that it operates such facility in compliance with the terms of its appointment, it shall not have any liability in its personal capacity, except for gross negligence and intentional acts.

(8) (a) The court shall terminate the receivership only under any of the following circumstances:

(i) eighteen months after the date on which it is ordered;

(ii) when the receiver, or other voluntary agency or not-for-profit corporation satisfactory to the commissioner, has (A) agreed to continue the operation of the facility, (B) entered into a satisfactory long-term (not less than two years) arrangement reached on a bona fide arm's length basis with the owner or owners of land and/or structure on or in which the facility is or is to be located, and (C) applied for and received from the commissioner a new operating certificate or license, as appropriate, for the continued operation of the facility; or

(iii) at such times as all of the persons served by the facility have been provided alternative services.

(b) At the time of termination, the receiver shall render a full and complete accounting to the court and shall make disposition of surplus money at the direction of the court.

(9) (a) Any person who is served a copy of an order of the court appointing the receiver shall, upon being notified of the name and address of the receiver, make all payments for goods supplied by the facility, or services rendered by the facility, to the receiver. A receipt shall be given for each such payment, and copies of all such receipts shall be kept on file by the receiver. The amount so received shall be deposited by the receiver in a special account, which shall also be used for all disbursements made by the receiver.

(b) Any person refusing or omitting to make such a payment after such service and notice may be sued therefor by the receiver. Such person shall not in such suit dispute the authority of the receiver to incur or order such expenses, or the right of the receiver to have such payments made to it. The receipt of the receiver for any sum paid to it shall, in all suits and proceedings and for every purpose, be as effectual in favor of any person holding the same as actual payment of the amount thereof to the owner or other person or persons who would, but for the provisions of this subdivision, have been entitled to receive the sum to be paid. No person shall be discharged, nor shall any contract or rights be forfeited or impaired, nor any forfeiture or liability be incurred, by reason of any omission to pay any owner, contractor or other person any sum so paid to the receiver.

(10) (a) No provision contained herein shall be deemed to relieve the owner or operator of any civil or criminal liability incurred, or any duty imposed by law, by reason of acts or omissions of the owner or operator prior to the appointment of any receiver hereunder, nor shall anything contained herein be construed to suspend during the receivership any obligation of the owner or operator for the payment of mortgages or liens.

(b) The receiver shall not be responsible for any obligations incurred by the owner, operator, or prime lessor, if any, prior to the appointment of the receiver.

(c) The receiver shall be entitled to use for operating and maintenance expenses and the basic needs of persons served by the facility a portion of the revenues due the operator during the month in which the receiver is appointed, which portion shall be established on the basis of the amounts of the unpaid operating and maintenance expenses for such month.

(d) Any sums determined to be due and owing by the receiver to the owner, operator, or prime lessor shall be off-set by any charges determined to be the obligations of the owner, operator, or prime lessor. c. (1) Subject to paragraph two of this subdivision, and subject to the approval of the director of the budget, the commissioner is authorized to make payments to receivers appointed pursuant to the provisions of subdivision b of this section only if the receiver demonstrates to the satisfaction of the commissioner that the facility's funds which are available are insufficient to meet the operating and maintenance expenses of the facility and the basic needs of those served by the facility.

(2) Notwithstanding any inconsistent provisions of law, payments made pursuant to this section shall be made from funds appropriated therefor and such payments shall be made only if a certificate of allocation and a schedule of amounts to be available therefore shall have been issued by the director of the budget and a copy of such certificate filed with the comptroller, the chairman of the senate fiance committee, and the chairman of the assembly ways and means committee. Such certificate may be amended from time to time by the director of the budget, and a copy of each such amendment shall be filed with the comptroller, the chairman of the senate finance committee, and the chairman of the assembly ways and means committee.

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