New York § 622 - 622Escrow required

§ 622. 622Escrow required

§ 622. Escrow required. All moneys received by a seller pursuant to a contract for services for use by a buyer of a health club prior to the full operation of such health club shall be placed in escrow. 1. Such funds shall be kept and maintained in an account separate and apart from any account maintained by or for the seller's personal use or for use in the construction or operation of the health club or for the payment or benefit of employees of the seller. 2. The escrow account shall be established in a bank or trust company doing business in this state. 3. The escrow account shall provide that the purpose of the account is to protect the consumer in the event that the seller fails to complete substantially and to open the facility within one year following establishment of the account. Any buyer who has advanced moneys on deposit in the escrow account may maintain a representative action pursuant to the provisions of the civil practice law and rules to close the account and to release such moneys pro-rata to all buyers similarly situated if such health club facility has not been substantially completed and opened within one year of establishment of the account or if the buyer has not had the full use of another similar facility during this period. 4. Within three business days of a request therefor, a monthly statement of the escrow account is to be furnished to consumers who have advanced funds or obligation until such account is no longer required by this article. 5. The escrow account shall provide that funds deposited therein may be withdrawn by the seller upon the completion of the proposed construction in the following manner: (i) one-third of the funds may be distributed to the seller upon completion of one-half of the proposed construction; (ii) not more than two-thirds of the funds which have been deposited in escrow may be released upon the completion of three-fourths of the proposed construction; (iii) the escrow agent may accept as evidence of partial completion certification of any architect or engineer licensed pursuant to the provisions of the education law that the proposed construction has been completed in accordance with the plans and specifications. 6. The escrow account shall be released by the escrow agent to the seller not more than thirty days following full operation of the facility and certification of completion from any architect or engineer licensed pursuant to the provisions of the education law. 7. In lieu of the escrow provisions required by this section, the health club may furnish information as required by the secretary, executed under penalty of perjury by an officer or owner of the health club which reasonably demonstrates financial responsibility that will enable the health club to satisfy the possible claims against the escrow required by this section. In the event the health club is controlled by, under common control, or controls another corporation and the other corporation agrees in writing to satisfy the claims against the escrow required by this section, then the financial responsibility of the other corporation shall be considered in determining the applicability of this section. In determining whether the health club has the requisite financial responsibility the secretary may consider the operating and business history and reputation of the health club and its management within and without the state as well as the operating and business history and reputation of any business controlled by, under common control with, or controlling the health club.