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CALIFORNIA STATUTES AND CODES
SECTIONS 10237-10238.8
BUSINESS AND PROFESSIONS CODE
SECTION 10237-10238.8
10237. A real property securities dealer within the meaning of this article is any person, acting as principal or agent, who engages in the business of: (a) Selling real property securities as defined by subdivision (a) or (b) of Section 10237.1, to the public, or (b) Offering to accept or accepting funds for continual reinvestment in real property securities, or for placement in an account, plan or program whereby the dealer implies that a return will be derived from a specific real property sales contract or promissory note secured directly or collaterally by a lien on real property which is not specifically stated to be based upon the contractual payments thereon. 10237.1. The term real property security as used in this article means: (a) An agreement made in connection with the arranging of a loan evidenced by a promissory note secured directly or collaterally by a lien on real property or made in connection with the sale of a promissory note secured directly or collaterally by a lien on real property or a real property sales contract wherein the real property securities dealer or his principal expressly or impliedly agrees to do any of the following: 1. Guarantee the note or contract against loss at any time, or 2. Guarantee that payments of principal or interest will be paid in conformity with the terms of the note or contract, or 3. Assume any payments necessary to protect the security of the note or contract, or 4. Accept, from time to time, partial payments for funding the loan or purchasing the note or contract, or 5. Guarantee a specific yield or return on the note or contract, or 6. Pay with his own funds any interest or premium for a period prior to actual purchase and delivery of the note or contract, or 7. Repurchase the note or contract. (b) A promissory note secured directly or collaterally by a lien on real property or a real property sales contract on which the real estate broker who arranged the loan evidenced by the note, negotiated the sale of a note or contract or who is servicing the note or contract for the owner, knowingly causes any payment on the note or contract to be made to the owner, directly or indirectly, with funds other than funds of the obligor while the obligor is delinquent on the note or contract. Payments of principal or interest made in good faith to the owner by a broker, when made after receipt by the broker of the obligor's remittance, shall not be deemed a payment with funds other than the funds of the obligor. The provisions of this subdivision shall not be applicable in the case of a promissory note which the obligor as purchaser of the real property securing the note has given to the holder of the note as seller of the real property for purposes of financing the purchase nor shall the provisions of this subdivision be applicable in the case of a real property sales contract under the terms of which the obligor is making installment payments to acquire title to the real property from the vendor. (c) One of a series of promotional notes secured by liens on separate parcels of real property in one subdivision or in contiguous subdivisions. (d) One of a series of real property sales contracts pertaining to separate parcels of real property in one subdivision or in contiguous subdivisions, all of which are executed by one person or persons associated together as owners. Except as provided in subdivisions (a) or (b), performance of services in connection with loans or promissory notes secured directly or collaterally by a lien on real property or a real property sales contract, as agent for and at the direction of the lender, borrower, or purchaser, including but not limited to the payment of taxes, debt service on an obligation secured by the same real property having priority over any mortgage or deed of trust securing the promissory note serviced by the agent, insurance premiums or costs of foreclosure, if all such costs (excluding routine office expenses) of such services are paid by or payable by borrower, lender, or purchaser shall not be construed to be a real property security as defined in subdivision (a) of this section, or as a security for the purposes of the Corporate Securities Act. As used in subdivision (c) "promotional note" means a promissory note secured by a trust deed executed on unimproved real property, or executed after construction of an improvement of the property but before the first sale of the property as so improved, or executed as a means of financing the first purchase of the property as so improved, and which is subordinate or which by its terms may become subordinate to any other trust deed on the property; provided that the term "promotional note" does not include (i) a note which was executed in excess of three (3) years prior to being offered for sale or (ii) a note secured by a first trust deed on real property in a subdivision, which evidences a bona fide loan made in connection with the financing of the usual costs of the development of a residential, commercial, or industrial building or buildings on the property under a written agreement providing for the disbursement of the loan funds as costs are incurred or in relation to the progress of the work and providing for title insurance insuring the priority of the security as against mechanic's and materialmen's liens or for the final disbursement of at least 10 percent of the loan funds after the expiration of the period for the filing of mechanics' and materialmen's liens. As used in subdivision (d), the term "real property sales contract" does not include a contract executed more than three years prior to being offered for sale. The term real property security does not include any bond or debenture or note which is one of a series of notes of equal priority secured by an interest in the same real property. 10237.2. As used in this article "sale" or "sell" includes every issuance, creation for resale, disposition or attempt to dispose of any interest in a real property security for value and includes all of the following, whether done directly or by circular letter, advertisement, radio or television broadcast or otherwise: an offer to sell, an attempt to sell, a solicitation of a sale, a contract of sale or an exchange. A sale shall be complete upon delivery of the promissory note evidencing a transaction arranged pursuant to a permit issued under this article to the purchaser or an agent designated by the purchaser. In connection with a completed sale made pursuant to this article the purchaser shall be the owner of the note, irrespective of other potential characterizations of the purchaser's interest in the transaction. 10237.25. (a) Except as provided in subdivision (b), sale to pension, retirement or similar trust funds, to corporations, to institutional lending agencies, to real estate broker licensees, to general building contractor licensees, or to attorneys shall not be deemed a sale to the public for the purpose of this article. (b) The sale to a self-employed individual retirement plan or individual retirement account shall be deemed not to be a sale to the public for the purpose of this article only if the plan or account is for the exclusive benefit of an individual who is a real estate broker licensee, general building contractor licensee, or attorney. 10237.3. It is unlawful for any person to act as a real property securities dealer in this state without first having obtained a real estate broker's license. 10237.4. Every person selling a real property security shall personally sign and deliver to the purchaser a statement in writing, containing all the information required by Section 10232.5, before the purchaser shall be obligated to complete the transaction. No seller shall permit the purchaser to sign the statement if any information required by Section 10232.5 is omitted. The seller shall retain an executed copy of the statement for four years. 10237.6. An appraisal of each parcel of real property which relates to a transaction subject to this article shall be made by the real property securities dealer or by an independent appraiser unless the purchaser of the obligation to which the parcel relates states in writing to the broker that he will obtain his or her own appraisal. An appraisal by the dealer or his or her agent made pursuant to this section shall be kept on file for four years and a copy of the appraisal shall be delivered to the purchaser prior to the time the purchase becomes obligated. 10237.7. Every real property securities dealer shall file, ten (10) days prior to use, true copies of all material subject to Section 10235 which pertains to activities subject to this article with the commissioner. No dealer shall use any such material in any way after the commissioner gives notice in writing that such material contains any statement that is false or misleading or omits to state material information that is necessary to make the statement therein complete and accurate. Failure to give notice within the ten (10) days shall be deemed to indicate the material is not disapproved. 10237.8. Every real property securities dealer shall file and maintain with the commissioner a cash deposit, cash equivalent, or bond in the penal sum of ten thousand dollars ($10,000), executed by an admitted surety insurer approved by the commissioner, and running to the people of the State of California, for the use and benefit of interested persons. The bond shall be conditioned upon the dealer complying with all the provisions of this article, performing and complying with all obligations assumed by the dealer, and honest and faithful application of all funds received. 10237.9. When an action is commenced on the bond of a real property securities dealer the commissioner may require the filing of a new bond. Immediately upon the recovery in any action on the bond the dealer shall file a new bond. Failure to file a new bond within seven (7) days after notification that a new bond is required or after recovery on a bond constitutes failure to comply with Section 10237.8. 10238.1. (a) Every real property securities dealer shall file with the commissioner, annually, a report containing financial statements in accordance with generally accepted accounting principles, accompanied by an opinion thereon by a certified public accountant or a public accountant, based upon an audit of the dealer's business subject to this article which is not materially restricted in scope. The report shall include, but not be limited to the receipt and disposition of all funds handled in connection with transactions subject to this article. The report shall be filed with the commissioner within sixty (60) days after the close of the period of the report unless, for good cause shown, the commissioner, in writing, extends the time therefor. The report shall contain at least the following: 1. Total number of sales, as principal or agent, subject to this article during the period, and 2. Total dollar volume of such sales. (b) The commissioner may, by rule or regulation adopted pursuant to Chapter 4.5 (commencing with Section 11371) of Part 1, Division 3, Title 2 of the Government Code, require such additional information as he deems necessary. (c) In the event that a real property securities dealer fails to file a report pursuant to this section the commissioner may cause an audit to be made and shall charge and collect the cost of the audit from the dealer. 10238.2. Whenever the commissioner finds that any person is violating the provisions of this article, that he is conducting his business in an unsafe or injurious manner, that the further sale of real property securities under the provisions of this article would be unfair, unjust or inequitable, or that the method used by him in such sales would work a fraud upon the purchasers, he may order the person to desist and refrain from violating the provisions of this article or from further sales in accordance with the procedures set forth in Section 10086. 10238.6. Any person who does any of the following acts is guilty of a public offense punishable by a fine not exceeding ten thousand dollars ($10,000) or by imprisonment in the state prison, or in a county jail not exceeding one (1) year or by both such fine and imprisonment. (a) In any application to the commissioner or in any proceeding before him, or in any examination, audit or investigation made by him or on his authority, knowingly makes any false statement or representation, or, with knowledge of its falsity, files or causes to be filed in the office of the commissioner any false statement or representation in a required report. (b) Issues, circulates or publishes, or causes to be issued, circulated or published any advertisement, pamphlet, prospectus or circular concerning any real property security which contains any statement that is false or misleading, or otherwise likely to deceive a reader thereof, with knowledge that it contains such false, misleading or deceptive statement. (c) In any respect willfully violates or fails to comply with any provision of this article, or willfully violates or fails, omits or neglects to obey, observe or comply with any order, decision, demand, requirement or permit, or any part or provisions thereof, of the commissioner under this article. (d) With one or more other persons, conspires to violate any permit or order issued by the commissioner of any provision of this article. 10238.7. Every person sustaining an injury resulting from a transaction subject to this article which was in violation of the provisions of the article may recover in a civil action the amount of the damages with interest, as awarded by the court, from the date of the injury, and shall be entitled to be awarded a reasonable attorney's fee. Any such action shall be brought within three years from the date of the transaction notwithstanding the date the injury was discovered. 10238.8. (a) This article shall remain operative as long as a conservatorship or liquidation proceeding pursuant to Article 6.5 (commencing with Section 10239) of Chapter 3 of Division 4, that was commenced prior to the effective date of the act enacting this section, remains active. (b) Notwithstanding any other provision of this article, no conservatorship or liquidation proceeding shall be commenced on or after the effective date of the act enacting this section. (c) The commissioner shall determine when the last pending proceeding described in subdivision (a) is terminated. The commissioner shall submit a notice of that determination to the Secretary of State, and this article shall be repealed upon the receipt of that notice by the Secretary of State.
SECTION 10237-10238.8
10237. A real property securities dealer within the meaning of this article is any person, acting as principal or agent, who engages in the business of: (a) Selling real property securities as defined by subdivision (a) or (b) of Section 10237.1, to the public, or (b) Offering to accept or accepting funds for continual reinvestment in real property securities, or for placement in an account, plan or program whereby the dealer implies that a return will be derived from a specific real property sales contract or promissory note secured directly or collaterally by a lien on real property which is not specifically stated to be based upon the contractual payments thereon. 10237.1. The term real property security as used in this article means: (a) An agreement made in connection with the arranging of a loan evidenced by a promissory note secured directly or collaterally by a lien on real property or made in connection with the sale of a promissory note secured directly or collaterally by a lien on real property or a real property sales contract wherein the real property securities dealer or his principal expressly or impliedly agrees to do any of the following: 1. Guarantee the note or contract against loss at any time, or 2. Guarantee that payments of principal or interest will be paid in conformity with the terms of the note or contract, or 3. Assume any payments necessary to protect the security of the note or contract, or 4. Accept, from time to time, partial payments for funding the loan or purchasing the note or contract, or 5. Guarantee a specific yield or return on the note or contract, or 6. Pay with his own funds any interest or premium for a period prior to actual purchase and delivery of the note or contract, or 7. Repurchase the note or contract. (b) A promissory note secured directly or collaterally by a lien on real property or a real property sales contract on which the real estate broker who arranged the loan evidenced by the note, negotiated the sale of a note or contract or who is servicing the note or contract for the owner, knowingly causes any payment on the note or contract to be made to the owner, directly or indirectly, with funds other than funds of the obligor while the obligor is delinquent on the note or contract. Payments of principal or interest made in good faith to the owner by a broker, when made after receipt by the broker of the obligor's remittance, shall not be deemed a payment with funds other than the funds of the obligor. The provisions of this subdivision shall not be applicable in the case of a promissory note which the obligor as purchaser of the real property securing the note has given to the holder of the note as seller of the real property for purposes of financing the purchase nor shall the provisions of this subdivision be applicable in the case of a real property sales contract under the terms of which the obligor is making installment payments to acquire title to the real property from the vendor. (c) One of a series of promotional notes secured by liens on separate parcels of real property in one subdivision or in contiguous subdivisions. (d) One of a series of real property sales contracts pertaining to separate parcels of real property in one subdivision or in contiguous subdivisions, all of which are executed by one person or persons associated together as owners. Except as provided in subdivisions (a) or (b), performance of services in connection with loans or promissory notes secured directly or collaterally by a lien on real property or a real property sales contract, as agent for and at the direction of the lender, borrower, or purchaser, including but not limited to the payment of taxes, debt service on an obligation secured by the same real property having priority over any mortgage or deed of trust securing the promissory note serviced by the agent, insurance premiums or costs of foreclosure, if all such costs (excluding routine office expenses) of such services are paid by or payable by borrower, lender, or purchaser shall not be construed to be a real property security as defined in subdivision (a) of this section, or as a security for the purposes of the Corporate Securities Act. As used in subdivision (c) "promotional note" means a promissory note secured by a trust deed executed on unimproved real property, or executed after construction of an improvement of the property but before the first sale of the property as so improved, or executed as a means of financing the first purchase of the property as so improved, and which is subordinate or which by its terms may become subordinate to any other trust deed on the property; provided that the term "promotional note" does not include (i) a note which was executed in excess of three (3) years prior to being offered for sale or (ii) a note secured by a first trust deed on real property in a subdivision, which evidences a bona fide loan made in connection with the financing of the usual costs of the development of a residential, commercial, or industrial building or buildings on the property under a written agreement providing for the disbursement of the loan funds as costs are incurred or in relation to the progress of the work and providing for title insurance insuring the priority of the security as against mechanic's and materialmen's liens or for the final disbursement of at least 10 percent of the loan funds after the expiration of the period for the filing of mechanics' and materialmen's liens. As used in subdivision (d), the term "real property sales contract" does not include a contract executed more than three years prior to being offered for sale. The term real property security does not include any bond or debenture or note which is one of a series of notes of equal priority secured by an interest in the same real property. 10237.2. As used in this article "sale" or "sell" includes every issuance, creation for resale, disposition or attempt to dispose of any interest in a real property security for value and includes all of the following, whether done directly or by circular letter, advertisement, radio or television broadcast or otherwise: an offer to sell, an attempt to sell, a solicitation of a sale, a contract of sale or an exchange. A sale shall be complete upon delivery of the promissory note evidencing a transaction arranged pursuant to a permit issued under this article to the purchaser or an agent designated by the purchaser. In connection with a completed sale made pursuant to this article the purchaser shall be the owner of the note, irrespective of other potential characterizations of the purchaser's interest in the transaction. 10237.25. (a) Except as provided in subdivision (b), sale to pension, retirement or similar trust funds, to corporations, to institutional lending agencies, to real estate broker licensees, to general building contractor licensees, or to attorneys shall not be deemed a sale to the public for the purpose of this article. (b) The sale to a self-employed individual retirement plan or individual retirement account shall be deemed not to be a sale to the public for the purpose of this article only if the plan or account is for the exclusive benefit of an individual who is a real estate broker licensee, general building contractor licensee, or attorney. 10237.3. It is unlawful for any person to act as a real property securities dealer in this state without first having obtained a real estate broker's license. 10237.4. Every person selling a real property security shall personally sign and deliver to the purchaser a statement in writing, containing all the information required by Section 10232.5, before the purchaser shall be obligated to complete the transaction. No seller shall permit the purchaser to sign the statement if any information required by Section 10232.5 is omitted. The seller shall retain an executed copy of the statement for four years. 10237.6. An appraisal of each parcel of real property which relates to a transaction subject to this article shall be made by the real property securities dealer or by an independent appraiser unless the purchaser of the obligation to which the parcel relates states in writing to the broker that he will obtain his or her own appraisal. An appraisal by the dealer or his or her agent made pursuant to this section shall be kept on file for four years and a copy of the appraisal shall be delivered to the purchaser prior to the time the purchase becomes obligated. 10237.7. Every real property securities dealer shall file, ten (10) days prior to use, true copies of all material subject to Section 10235 which pertains to activities subject to this article with the commissioner. No dealer shall use any such material in any way after the commissioner gives notice in writing that such material contains any statement that is false or misleading or omits to state material information that is necessary to make the statement therein complete and accurate. Failure to give notice within the ten (10) days shall be deemed to indicate the material is not disapproved. 10237.8. Every real property securities dealer shall file and maintain with the commissioner a cash deposit, cash equivalent, or bond in the penal sum of ten thousand dollars ($10,000), executed by an admitted surety insurer approved by the commissioner, and running to the people of the State of California, for the use and benefit of interested persons. The bond shall be conditioned upon the dealer complying with all the provisions of this article, performing and complying with all obligations assumed by the dealer, and honest and faithful application of all funds received. 10237.9. When an action is commenced on the bond of a real property securities dealer the commissioner may require the filing of a new bond. Immediately upon the recovery in any action on the bond the dealer shall file a new bond. Failure to file a new bond within seven (7) days after notification that a new bond is required or after recovery on a bond constitutes failure to comply with Section 10237.8. 10238.1. (a) Every real property securities dealer shall file with the commissioner, annually, a report containing financial statements in accordance with generally accepted accounting principles, accompanied by an opinion thereon by a certified public accountant or a public accountant, based upon an audit of the dealer's business subject to this article which is not materially restricted in scope. The report shall include, but not be limited to the receipt and disposition of all funds handled in connection with transactions subject to this article. The report shall be filed with the commissioner within sixty (60) days after the close of the period of the report unless, for good cause shown, the commissioner, in writing, extends the time therefor. The report shall contain at least the following: 1. Total number of sales, as principal or agent, subject to this article during the period, and 2. Total dollar volume of such sales. (b) The commissioner may, by rule or regulation adopted pursuant to Chapter 4.5 (commencing with Section 11371) of Part 1, Division 3, Title 2 of the Government Code, require such additional information as he deems necessary. (c) In the event that a real property securities dealer fails to file a report pursuant to this section the commissioner may cause an audit to be made and shall charge and collect the cost of the audit from the dealer. 10238.2. Whenever the commissioner finds that any person is violating the provisions of this article, that he is conducting his business in an unsafe or injurious manner, that the further sale of real property securities under the provisions of this article would be unfair, unjust or inequitable, or that the method used by him in such sales would work a fraud upon the purchasers, he may order the person to desist and refrain from violating the provisions of this article or from further sales in accordance with the procedures set forth in Section 10086. 10238.6. Any person who does any of the following acts is guilty of a public offense punishable by a fine not exceeding ten thousand dollars ($10,000) or by imprisonment in the state prison, or in a county jail not exceeding one (1) year or by both such fine and imprisonment. (a) In any application to the commissioner or in any proceeding before him, or in any examination, audit or investigation made by him or on his authority, knowingly makes any false statement or representation, or, with knowledge of its falsity, files or causes to be filed in the office of the commissioner any false statement or representation in a required report. (b) Issues, circulates or publishes, or causes to be issued, circulated or published any advertisement, pamphlet, prospectus or circular concerning any real property security which contains any statement that is false or misleading, or otherwise likely to deceive a reader thereof, with knowledge that it contains such false, misleading or deceptive statement. (c) In any respect willfully violates or fails to comply with any provision of this article, or willfully violates or fails, omits or neglects to obey, observe or comply with any order, decision, demand, requirement or permit, or any part or provisions thereof, of the commissioner under this article. (d) With one or more other persons, conspires to violate any permit or order issued by the commissioner of any provision of this article. 10238.7. Every person sustaining an injury resulting from a transaction subject to this article which was in violation of the provisions of the article may recover in a civil action the amount of the damages with interest, as awarded by the court, from the date of the injury, and shall be entitled to be awarded a reasonable attorney's fee. Any such action shall be brought within three years from the date of the transaction notwithstanding the date the injury was discovered. 10238.8. (a) This article shall remain operative as long as a conservatorship or liquidation proceeding pursuant to Article 6.5 (commencing with Section 10239) of Chapter 3 of Division 4, that was commenced prior to the effective date of the act enacting this section, remains active. (b) Notwithstanding any other provision of this article, no conservatorship or liquidation proceeding shall be commenced on or after the effective date of the act enacting this section. (c) The commissioner shall determine when the last pending proceeding described in subdivision (a) is terminated. The commissioner shall submit a notice of that determination to the Secretary of State, and this article shall be repealed upon the receipt of that notice by the Secretary of State.
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