(a) At the time of receiving a State aid grant, the applicant must be able to demonstrate to the Office of Mental Health that the applicant will possess property rights over the facility that are of sufficient quality and are for the requisite duration.

1. (1) For the purposes of this subdivision, the following definitions shall apply:

   1. (i) Possession of property rights means that these rights are presently held by the applicant or that the applicant is under contract to acquire them.
   2. (ii) Property rights means the ability to possess and use the premises and includes a fee simple, a fee on limitation, a rental agreement, a contract, a contract coupled with possession or a cooperative interest.
   3. (iii) Sufficient quality means that the applicant will be able to utilize the property for the intended purpose without the risk of losing rights to the property. It is such an interest, when viewed in conjunction with recorded documents or secured contractual agreements, which provides for undisturbed use and possession for the purposes of the facility.
   4. (iv) Requisite duration means that the applicant can use the premises for the period of time required for program operation at the facility. This period of time is specified in section 521.10(a)(6) of this Part.
2. (2) The commissioner may, upon written application and in his sole discretion, pay a limited portion of the State aid grant prior to the time the applicant is able to demonstrate the presence of the title characteristics required by this subdivision. The applicant's prospective ability to demonstrate the required title characteristics must be established in such a manner as is required by the commissioner in each case. Payment may be made in whatever form the commissioner determines to be necessary to protect the interest of the OMH.

(b) Based upon the type of interest, the possession of property rights must be demonstrated to the Office of Mental Health as detailed below:

1. (1) A fee interest in real property, requires the submission to the Office of Mental Health of a copy of a title insurance policy and a counsel's opinion letter.

   1. (i) The title insurance may be a final policy or a marked title report. It must certify the applicant's interest in the property.
   2. (ii) A survey and a survey reading must be included in the policy. If the survey was last updated more than 90 days before the acquisition of the property, a current survey inspection is required, unless the property is located in a condominium.
   3. (iii) Counsel's opinion letter must certify that the applicable recorded documents, declaration of condominium, bylaws and protective covenants, as well as zoning ordinances and local regulations have been examined and that the interest held is of sufficient quality and for the requisite duration.

2. (2) A lease or a contract to acquire an interest in real property requires submission of documents and the applicant's counsel's opinion letter.

   1. (i) The documents required include copies of the recorded lease agreement and/or memorandum of lease or contract to purchase.
   2. (ii) Counsel's legal opinion letter must certify that the interest, in conjunction with any documents of record, including recorded mortgage instruments, is of sufficient quality and for the requisite duration.

3. (3) Cooperative interests and contracts to acquire them, such as a subscription agreement or a contract to purchase, require that the applicant investigate the rules governing the interest and submit the applicant's counsel's legal opinion letter.

   1. (i) The applicant should assure that the proprietary lease runs for a period greater than the period of time required for the operation of the facility; the proprietary lease permits subletting and/or transient subletting; default provisions based on occupant behavior; allow for removal of the occupant/subtenant rather than loss of the applicant's interest; and, these rights are stated in the certificate of incorporation of the cooperative corporation and its bylaws and are protected by appropriate supra-majority amendment provisions. These matters may be determined through investigation of the prospectus as currently amended, and confirmed in the documents listed above.
   2. (ii) Counsel's legal opinion letter must certify that the interest is of sufficient quality and for the requisite duration. It must contain specific citation of the portions of the relevant documentation upon which the legal opinion was based, in addition to copies of such supporting documentation (e.g., the certificate of incorporation, the bylaws, the proprietary lease and/or the prospectus).
4. (4) The applicant for a Housing Finance Agency mortgage loan must have or will have, at the time the Housing Finance Agency mortgage is executed and delivered, a fee simple including necessary easements and rights-of-way free and clear of all covenants, mortgages, easements and encumbrances, sufficient to assure undisturbed use and possession for the purposes of the facility.