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This entry was published on 2014-09-22
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Facilities; receivership
Mental Hygiene (MHY) CHAPTER 27, TITLE E, ARTICLE 31
§ 31.28 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 notified the other in writing that he
wishes to terminate such receivership.

(b) (1) Upon issuing a notice that he will revoke or suspend an
operating certificate in accordance with subdivision (a) of section
31.16 of this article, or that he will disapprove an application for
renewal of such certificate pursuant to section 31.05 of this article
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 person 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 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 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

(2) The commissioner may, prior to suspending an operating certificate
for up to sixty days pursuant to subdivision (b) of section 31.16 of
this article, 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 has reasonable grounds for finding that continued operating of the
facility presents an immediate 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 not-for-profit corporation
recommended by the commissioner which holds a valid and current
operating certificate for a similar type facility, or which shall
satisfactorily demonstrate to the commissioner its qualifications for
such operating certificate.

(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, taking into account all relevant factors, including the
condition of 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 under the
medical assistance program for real property costs if each patient in
the facility were a recipient of medical assistance. 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 lease.

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

(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 facilities or make
other provisions for their continued safety and 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. He shall, during this period operate the
facility in such a manner as to guarantee safety and adequate care for
such clients. He shall have the power to let contracts therefor or incur
expenses in accordance with the provisions of local laws, ordinances,
rules and regulations applicable to contracts for public works except
that advertisement shall not be required for each such contract.
Notwithstanding any such laws, ordinances, rules or regulations, the
receiver may let contracts or incur expenses for individual items of
repairs, improvements or supplies without the procurement of competitive
bids where the total amount of any such individual item does not exceed
five hundred dollars. Any receiver who is an official or employee of the
state of New York shall not be required to file any bond. He shall
collect incoming payments from all sources and apply them to the costs
incurred in the performance of his functions as 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
residing within such facility. No security interest in any real or
personal property comprising the facility or contained within the
facility, or in any fixture of 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
he uses or causes to be used in reimbursing the costs of such goods,
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 his 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 he operates such facility in
compliance with the terms of his appointment he shall not have any
liability in his 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 was 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 owner's 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 for the
continued operation of the facility; or

(iii) at such time 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 him. The receipt of the receiver for any sum paid to him 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 persons 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 of 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 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 therefor 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 finance 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.

(d) This section shall apply only to the facilities under the
jurisdiction of the office of mental health. Reference to the
commissioner in this section shall mean the commissioner of mental