Escrow Accounts

Escrow Accounts and Resident Fund Protections

Where escrow is required by statute, providers and escrow agents must comply with all applicable restrictions on the establishment, modification, release, earnings, and use of escrowed funds.

Escrow Agreements and Escrow Agents

N.C. Gen. Stat. § 58-64A-110

The establishment of an escrow account for entrance fees or deposits, as well as any amendment or modification to an escrow agreement, requires prior approval from the Commissioner.

This requirement includes:

  • Initial escrow agreements
  • Amendments or revisions to escrow terms
  • Substitution or replacement of an escrow agent

Providers seeking to establish or modify an escrow arrangement must submit the proposed escrow agreement or amendment and any additional information required by the Commissioner. No escrow agreement or change to an escrow agent may become effective unless and until written approval is issued by the Commissioner.

Use of Escrowed Entrance Fees and Deposits as Collateral

N.C. Gen. Stat. § 58-64A-130

Escrowed entrance fees and deposits may not be pledged, encumbered, or used as collateral except as expressly permitted by statute and approved by the Commissioner.

Any proposed use of escrowed funds as collateral requires prior written approval from the Commissioner. Providers must submit sufficient information to allow the Commissioner to evaluate compliance with statutory requirements and the potential effect of the proposed transaction on resident protections and the provider’s financial condition.

Escrow agents may not permit any lien, pledge, or collateral use of escrowed funds unless and until written authorization is issued by the Commissioner.

Release of Earnings on Escrowed Entrance Fees and Deposits

N.C. Gen. Stat. § 58-64A-125

Interest or other earnings generated on escrowed entrance fees and deposits may be released only as permitted by statute and upon written authorization from the Commissioner.

Providers seeking release of escrow earnings must submit a written request to the Commissioner and provide any certifications or information required to demonstrate compliance with statutory conditions. Escrow agents may release earnings only upon written instruction from the Commissioner.

Release of Escrowed Entrance Fees and Deposits

N.C. Gen. Stat. § 58-64A-140

When required by statute, entrance fees and deposits collected prior to occupancy must be held in escrow and may be released only upon written authorization from the Commissioner.

Release of Initial 25 Percent of Escrowed Funds

To request release of the first 25 percent of escrowed entrance fees and deposits, a provider must petition the Commissioner and certify that statutory requirements have been met, including:

  • At least 50 percent of proposed independent living units have been presold, with a minimum 10 percent deposit placed in escrow
  • Long-term financing is in place, or an approved lease has been executed
  • Aggregate funding sources meet statutory thresholds for construction, furnishing, start-up losses, and assurance of continuing care obligations

Independent living units for which refunds are pending may not be counted toward presale thresholds.

Release of Remaining 75 Percent of Escrowed Funds

To request release of the remaining 75 percent of escrowed funds, a provider must certify compliance with statutory conditions, including:

  • Either:
    • At least 70 percent presales with required escrow retention, or
    • At least 70 percent independent living occupancy for a minimum period specified by statute
  • Completion of construction
  • Issuance of required occupancy permits
  • Availability of units for resident occupancy

Commissioner Authorization

Escrow agents may release escrowed entrance fees, deposits, or earnings only upon written instruction from the Commissioner after statutory requirements have been confirmed.

Important Note

Escrowed entrance fees and deposits are subject to statutory restrictions on release, earnings, collateral use, and escrow agent arrangements. Submission of a request related to escrowed funds does not constitute approval. Providers and escrow agents must comply with all applicable requirements unless and until written authorization is issued by the Commissioner.

Questions

Questions regarding escrow requirements and resident fund protections should be directed to the Department’s Financial Oversight and Special Entities Division.

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