2705. General Definitions and Short Form References.
Unless otherwise expressly indicated or compelled by the context in which used, words, phrases and short form
references appearing in this Chapter shall have meanings as ascribed herein.

(a) “Advertising.” Any written or printed communication, or oral communication made in accordance with a text or
outline that has been reduced to written form, which is published for the purpose of inducing persons to purchase or use
a product or service.
(b) “Applicant.” Any person applying to the Department of Real Estate for a license, permit, public report or other
entitlement.
(c) “Department,” “DRE,” “Bureau” or “CalBRE.” The Department of Real Estate of the State of California.
(d) “Code.” The Business and Professions Code.

(e) “Commissioner.” The Real Estate Commissioner of the State of California.
(f) “Examination.” Any examination to qualify for any license issued under authority of the Real Estate Law.
(g) “License.” Any license issued under authority of the Real Estate Law.

(h) “Permit.” Any authorization or entitlement issued by the commissioner to engage in a transaction or course of
conduct for which a permit is required under the Real Estate Law or Subdivided Lands Law.

(i) “Public Report.” A report issued by the Commissioner under authority of Section 11018 of the Code.
(j) “Real Estate Law.” Part 1 of Division 4 of the Code (Section 10000 et seq.).
(k) “Subdivision Interests.” Lots, parcels, units, undivided interest shares, time-share estates or time-share uses subject
to regulation under the provisions of Chapter 1, Part 2, Division 4 of the Code.
(l) “Subdivision Law” or “Subdivided Lands Law.” Chapter 1 of Part 2 of Division 4 of the Code (Section 11000 et
seq.).
(m) “Common Interests.” Property owned or controlled by, and/or services furnished to, owners, lessees or persons
having the exclusive right to the use of subdivision interests, by an association comprising the separate owners of said
interests in those subdivisions enumerated in Section 11004.5 of the Code.

(n) “Responsible broker.” The real estate broker responsible for the exercise of control and supervision of real estate
salespersons under Section 10159.2, or a licensee subject to discipline under subdivision (h) of Section 10177 for failure
to supervise activity requiring a real estate license. The supervision of a salesperson required under this part or any other
law is limited to regulatory compliance and consumer protection.

(o) “Retain” or “retention.” The relationship between a responsible broker and a licensee who is either an independent
contractor affiliated with, or an employee of, a broker to perform activities that require a license and are performed
under a broker’s supervision. However, the word “retain” will also have its common meaning when used outside the
context of the relationship between a broker and subsidiary licensee, as when referring to retention of records.

Article 3. License Applications, Fees and Changes

2780. Discriminatory Conduct as the Basis for Disciplinary Action.
Prohibited discriminatory conduct by a real estate licensee based upon race, color, religion, sex, gender, gender identity,
gender expression, sexual orientation, familial status, marital status, disability, genetic information, national origin,
source of income, veteran or military status, ancestry, citizenship, primary language, or immigration status, collectively
referred to below as the protected classes and individually as a protected class, includes, but is not limited to, the
following:
(a) Refusing to negotiate for the sale, rental or financing of the purchase of real property or otherwise making
unavailable or denying real property to any person because of that person’s protected class.
(b) Refusing or failing to show, rent, sell or finance the purchase of real property to any person or refusing or failing to
provide or volunteer information to any person about real property, or channeling or steering any person away from real



property, because of that person's protected class or because of the racial, religious, or ethnic composition of any
occupants of the area in which the real property is located.
(c) Discriminating against any person because of that person’s protected class in the sale or purchase or negotiation or
solicitation of the sale or purchase or the collection of payment or the performance of services in connection with
contracts for the sale of real property or in connection with loans secured directly or collaterally by liens on real property
or on a business opportunity.
Prohibited discriminatory conduct by a real estate licensee under this subdivision does not include acts based on a
person's marital status which are reasonably taken in recognition of the community property laws of this state as to the
acquiring, financing, holding or transferring of real property.
(d) Discriminating against any person because of that person’s protected class in the terms, conditions or privileges of
sale, rental or financing of the purchase of real property.
This subdivision does not prohibit the sale price, rent or terms of a housing accommodation providing facilities or
services for persons with physical disabilities to differ from a housing accommodation not containing such facilities, if
the difference in sale price, rent or terms is reasonably related to the cost or difficulty of providing those facilities or
services.

(e) Discriminating against any person because of that person’s protected class in providing services or facilities in
connection with the sale, rental or financing of the purchase of real property, including but not limited to: processing
applications differently, referring prospects to other licensees because of the prospective client’s protected class, using
with discriminatory intent or effect, codes or other means of identifying a prospective client’s protected class, or
assigning real estate licensees on the basis of a prospective client's protected class.
Prohibited discriminatory conduct by a real estate licensee under this subdivision does not include acts based on a
person's marital status which are reasonably taken in recognition of the community property laws of this state as to the
acquiring, financing, holding or transferring of real property.

(f) Representing to any person because of that person’s protected class that real property is not available for inspection,
sale or rental when such real property is in fact available for inspection, sale or rental.

(g) Processing an application more slowly or otherwise acting to delay, hinder or avoid the sale, rental or financing of
the purchase of real property on account of the protected class of a potential owner or occupant.
(h) Making any effort to encourage discrimination against any protected class, or against any person because of that
person’s protected class in the showing, sale, lease or financing of the purchase of real property.
(i) Refusing to cooperate with or refusing to assist another real estate licensee in negotiating the sale, rental or financing
of the purchase of real property because of the protected class of the prospective purchaser, occupant or tenant.
(j) Making any effort to obstruct, hinder or otherwise discourage the purchase, lease or financing of the purchase of real
property by persons whose protected class differs from that of persons presently residing in a structural improvement
to real property or in an area in which the real property is located.

(k) Performing any acts, making any notation, asking any questions or making or circulating any written or oral
statement which when taken in context, expresses or implies a limitation, preference or discrimination based upon a
person’s protected class.
Prohibited discriminatory conduct under this subdivision does not include the administering of forms or the making of
a notation required by a federal, state or local agency for data collection or civil rights enforcement purposes; or in the
case of a person with a physical disability, making notation, asking questions or circulating any written or oral statement
to the extent necessary to reasonably accommodate that person’s disability.
(l) Making any effort to coerce, intimidate, threaten or interfere with any person in the exercise or enjoyment of, or on
account of such person's having exercised or enjoyed, or on account of such person's having aided or encouraged any
other person in the exercise or enjoyment of any right granted or protected by a federal or state law, including but not
limited to:
(1) Making any effort to coerce a person to move from, or not move into, a particular property or area because of
that person’s protected class;



(2) Making any effort to coerce, intimidate, threaten or otherwise compel a real estate licensee to discriminate
against a person in the sale or rental of housing because of that person’s protected class.
(3) Withholding business from, or otherwise punishing or penalizing, a real estate licensee for the licensee’s refusal
to discriminate against a person in the sale or rental of housing because of that persons protected class.
(4) Evicting or otherwise retaliating against a person for engaging in legally protected activity, including without
limitation requesting accommodation for a disability, filing a fair housing complaint or undertaking lawful efforts
to promote fair housing.
(m) Soliciting of sales, rentals or listings of real estate from any person, but not from another person within the same
area because of differences in the protected class of such persons.
(n) Discriminating because of protected class in informing persons of the existence of waiting lists or other procedures
with respect to the future availability of real property for purchase or lease.
(o) Making any effort to discourage or prevent the rental, sale or financing of the purchase of real property because of
the presence or absence of occupants of a particular protected class, or on the basis of the future presence or absence of
occupants of a particular protected class, whether actual, alleged or implied.

(p) Making any effort to discourage or prevent any person from renting, purchasing or financing the purchase of real
property through any representations of actual or alleged community opposition based upon a protected class.
(q) Providing information or advice to any person concerning the desirability of particular real property or a particular
residential area(s) which is different from information or advice given to any other person with respect to the same
property or area because of differences in protected class of such persons.
This subdivision does not limit the giving of information to persons with physical disabilities for the purpose of calling
to the attention of such persons the existence or absence of housing accommodation services or housing
accommodations related to that person’s disability.

(r) Refusing to accept a rental or sales listing or application for financing of the purchase of real property because of the
owner's protected class or because of the protected class of any of the occupants in the area in which the real property
is located.
(s) Entering into an agreement, or carrying out any instructions of another, explicit or understood, not to show, lease,
sell or finance the purchase of real property from or to any person or group of persons because of that person or group’s
protected class.
(t) Making, printing or publishing, or causing to be made, printed or published, any notice, statement or advertisement
concerning the sale, rental or financing of the purchase of real property that indicates any preference, limitation or
discrimination because of protected class, or any intention to make such preference, limitation or discrimination.
This subdivision does not prohibit advertising of housing accommodation services or housing accommodations for
persons with physical disabilities.
(u) Using any words, phrases, sentences, descriptions or visual aids in any notice, statement or advertisement describing
real property or the area in which real property is located which indicates any preference, limitation or discrimination
because of protected class.
This subdivision does not prohibit advertising of housing accommodation services or housing accommodations for
persons with physical disabilities.
(v) Selectively using, placing or designing any notice, statement or advertisement having to do with the sale, rental or
financing of the purchase of real property in such a manner as to cause or increase discrimination by restricting or
enhancing the exposure or appeal to persons of a particular protected class.

This subdivision does not limit in any way the use of an affirmative marketing program designed to attract persons of a
particular protected class who would not otherwise be attracted to the real property or to the area.

(w) Quoting or charging a price, rent or cleaning or security deposit for a particular real property to any person which
is different from the price, rent or security deposit quoted or charged to any other person because of differences in the
protected class of such persons.



This subdivision does not prohibit the quoting or charging of a price, rent or cleaning or security deposit for a housing
accommodation providing facilities for persons with a disability to differ from a housing accommodation not containing
such facilities, if the difference in price, rent, cleaning or security deposit is reasonably related to the cost or difficulty
of providing those facilities or services.
(x) Discriminating against any person because of the persons’s protected class in performing any acts in connection
with the making of any determination of financial ability or in the processing of any application for the financing or
refinancing of real property.
Nothing herein shall limit the administering of forms or the making of a notation required by a federal, state or local
agency for data collection or civil rights enforcement purposes. In any evaluation or determination as to whether, and
under what terms and conditions, a particular lender or lenders would be likely to grant a loan, licensees shall proceed
as though the lender or lenders are in compliance with Sections 35800 through 35833 of the California Health and
Safety Code (The Housing Financial Discrimination Act of 1977).
Prohibited discriminatory conduct by a real estate licensee under this subdivision does not include acts based on a
person's marital status which are reasonably taken in recognition of the community property laws of this state as to the
acquiring, financing, holding or transferring of real property.

(y) Advising a person of the price or value of real property on the basis of factors related to the protected class of
residents of an area or of residents or potential residents of the area in which the property is located.

(z) Discriminating in the treatment of, or services provided to, occupants of any real property in the course of providing
management services for the real property because of the protected class of said occupants.
This subdivision does not prohibit differing treatment or services to a person with a disability as a reasonable
accommodation for that person’s disability in the course of providing management services for a housing
accommodation.
(aa) Discriminating against the owners or occupants of real property because of the protected class of the owner or
occupant’s guests, visitors, invitees, sublessees or caregivers.
(bb) Making any effort to instruct or encourage, expressly or impliedly, by either words or acts, licensees or their
retained salespersons, retained broker associates, employees or other agents to engage in any discriminatory act in
violation of a federal or state fair housing law.
(cc) Establishing or implementing rules that have the purpose or effect of limiting the opportunity for any person because
of the person’s protected class to secure real property through a multiple listing or other real estate service.
(dd) Assisting or aiding in any way, any person in the sale, rental or financing of the purchase of real property where
there are reasonable grounds to believe that such person intends to discriminate because of protected class.

2781. Panic Selling as the Basis for Disciplinary Action.
Prohibited discriminatory conduct includes, but is not limited to, soliciting sales or rental listings, making written or
oral statements creating fear or alarm, transmitting written or oral warnings or threats, or acting in any other manner so
as to induce or attempt to induce the sale or lease of real property through any representation, express or implied,
regarding the present or prospective entry of one or more persons of another race, color, sex, religion, ancestry, marital
status or national origin into an area or neighborhood.

Article 11. Licensee Ethics

2785. Improper Influence of Real Property Appraisers.
(a) In conformance with Civil Code section 1090.5, real estate licensees engaged in a real estate transaction involving
an appraisal shall not improperly influence or attempt to improperly influence the development, reporting, result, or
review of a real estate appraisal sought in connection with a mortgage loan. For the purposes of the Real Estate Law,
"improper influence" as the term is used in Civil Code section 1090.5, includes but is not limited to:

(1) withholding or threatening to withhold timely payment or partial payment for a completed appraisal report,
regardless of whether a sale or financing transaction closes;
(2) withholding or threatening to withhold future business from an appraiser, or demoting or terminating or
threatening to demote or terminate an appraiser;
(3) expressly or impliedly promising future business, promotions, or increased compensation for an appraiser;



(4) conditioning the ordering of an appraisal report or the payment of an appraisal fee or salary or bonus on the
opinion, conclusion, or valuation to be reached, or on a preliminary value estimate requested from an appraiser;
(5) requesting that an appraiser provide an estimated, predetermined, or desired valuation in an appraisal report
prior to the completion of the appraisal report, or requesting that an appraiser provide estimated values or
comparable sales at any time prior to the appraiser's completion of an appraisal report;
(6) providing to an appraiser an anticipated, estimated, encouraged, or desired value for a subject property or a
proposed or target amount to be loaned to the borrower, except that a copy of the sales contract for purchase
transactions may be provided;

(7) requesting the removal of language related to observed physical, functional or economic obsolescence, or
adverse property conditions noted in an appraisal report;

(8) providing to an appraiser, appraisal company, or appraisal management company, stock or other financial or
non-financial benefits.

(b) Subdivision (a) does not prohibit a person with an interest in a real estate transaction from asking an appraiser to do
any of the following:

(1) Consider additional, appropriate property information.
(2) Provide further detail, substantiation, or explanation for the appraiser's value conclusion.
(3) Correct errors in the appraisal report.

(c) Nothing in this section shall be construed to authorize communications that are otherwise prohibited under existing
law.

Article 12. Subdivisions

2790. Application For Public Report.
An application for a public report whether it includes a completed questionnaire or consists only of a notice of intention
shall be made on a form prescribed by the Bureau and shall be submitted to the Bureau with the applicable filing fee.
The application shall be executed by or on behalf of the person to whom the public report is to be issued. If executed
within California, the information in the application and the documents submitted therewith shall be certified to be true
under penalty of perjury or verified before a notary public or other person qualified to administer oaths. If executed
outside of California, the information in the application and accompanying documents shall be verified before a person
qualified to administer oaths within the jurisdiction where executed, or certified under penalty of perjury in accordance
with the provisions of subdivision (b) of Section 2015.5 of the Code of Civil Procedure.
2790.1.5. Filing Fees.
(a) The subdivision filing fees for an application for a public report shall be the following:

(1) A notice of intention without a completed questionnaire: One hundred fifty dollars ($150).
(2) An original public report for subdivision interests described in Section 11004.5: One thousand seven hundred
dollars ($1,700) plus ten dollars ($10) for each subdivision interest to be offered.
(3) An original public report for subdivision interests other than those described in Section 11004.5: Six hundred
dollars ($600) plus ten dollars ($10) for each subdivision interest to be offered.
(4) A conditional public report for subdivision interests described in Section 11004.5: Five hundred dollars ($500).
(5) A conditional public report for subdivision interests other than those described in Section 11004.5: Five hundred
dollars ($500).
(6) A preliminary public report for subdivision interests described in Section 11004.5: Five hundred dollars ($500).

(7) A preliminary public report for subdivision interests other than those described in Section 11004.5: Five hundred
dollars ($500).

(8) A renewal public report for subdivision interests described in Section 11004.5: Six hundred dollars ($600).
(9) A renewal public report for subdivision interests other than those described in Section 11004.5: Six hundred
dollars ($600).



(10) An amended public report for subdivision interests described in Section 11004.5: Five hundred dollars ($500)
plus ten dollars ($10) for each subdivision interest to be offered under the amended public report for which a fee
has not previously been paid.

(11) An amended public report to offer subdivision interests other than those described in Section 11004.5: Five
hundred dollars ($500) plus ten dollars ($10) for each subdivision interest to be offered under the amended public
report for which a fee has not previously been paid.
(b) The maximum fee under Section 11011(b)(2) and (b)(10) shall be $7,600 regardless of the number of interests
authorized to be offered for sale or lease.

(c) The maximum fee under Section 11011(b)(3) and (b)(11) shall be $4,100 regardless of the number of interests
authorized to be offered for sale or lease.

(d) The filing fee for an amended public report where the amendment consists only of a recurring and non-substantive
change including, but not limited to a change in the name of the subdivider shall be $125 and the filing fee for each
additional amended public report consisting only of the same recurring and non-substantive change including, but not
limited to a change in the name of the subdivider submitted by that subdivider at the same time shall be $60. The
subsection does not apply where there is a change in the ownership of the subdivision along with a change in the name
of the subdivider.
2790.2. Conditional Public Reports
(a) An applicant for an original, renewed or amended Final Public Report for a subdivision of the type not described in
Section 11000.1 of the Code may also apply for a Conditional Public Report for the subdivision.
(b) An applicant for a Conditional Public Report shall submit the following information and documents with the
applicable filing fee:
(1) A copy of the statement set forth in Section 11018.12(f) which the applicant proposes to use.

(2) An exemplar sales agreement or lease to be used in any transaction conducted under authority of the Conditional
Public Report. Such sales agreement or lease shall include the following provisions:

(A) As a condition of the sale or lease that no escrow will close, funds will not be released from escrow and the
interest contracted for will not be conveyed until a current Final Public Report for the subdivision is furnished
to the purchaser.
(B) The return of the entire sum of money paid or advanced by the purchaser if a Final Public Report for the
subdivision has not been issued within six months of the date of issuance of the Conditional Public Report or
the purchaser or lessee is dissatisfied with the Final Public Report because of a change pursuant to Section
11012.
(3) An exemplar of escrow instructions to be used in any transaction conducted under authority of the Conditional
Public Report which includes at least the following:
(A) The name and address of the escrow depository.

(B) A description of the nature of the transaction.
(C) Provisions ensuring compliance with Section 11013.2(a) or 11013.4(a) of the Code.
(D) Provisions ensuring that no escrow will close, funds will not be released from escrow and the interest
contracted for will not be conveyed until a current Final Public Report for the subdivision is furnished to the
purchaser or lessee.

(E) Provisions for the return of money as prescribed in subsection (2)(B) above.
(4) For a subdivision described in Section 11004.5 of the Code, in addition to the requirements set forth above:
(A) Information and documents demonstrating that reasonable arrangements have been made to assure
completion of the subdivision and all offsite improvements included in the offering.
(B) Information and documents demonstrating that the applicant has complied with Section 11018.5(a)(2) of
the Code for the subdivision.



(c) A Conditional Public Report will not be issued unless the applicant has met the requirements set forth in Section
11018.12 of the Code.
(d) Written notice of the decision to deny issuance of a Conditional Public Report will be mailed to the applicant,
pursuant to Section 11018.12(c) of the Code, within five business days after the Commissioner decides not to issue a
Conditional Public Report.
(e) The term of a Conditional Public Report will not exceed six months, but the Conditional Public Report may be
renewed for one additional six-month period if the Commissioner determines that the requirements for issuance of a
public report are likely to be satisfied during the renewal term.

(f) The Commissioner may issue a conditional permit for a subdivision as defined in Section 10250.1 in accordance
with the provisions of subsections (a) through (e), above.

2790.4. Questionnaire Waiver – Rural Housing Service.
The submission of a completed questionnaire shall be waived pursuant to subdivision (c) of Section 11010 of the Code
for a proposed subdivision offering that satisfies all of the following criteria:
(a) Except as provided in (d) below, the division of the land is not a subdivision as defined in Sections 11000.1 or
11004.5 of the Code.
(b) The financing of the purchase or lease of lots and parcels will be provided exclusively by the Rural Housing Service
pursuant to Section 502 of the Housing Act of 1949 (42 U.S.C. Section 1472) as amended.
(c) Lots and parcels will be developed and improved with residential structures exclusively through technical assistance
grants to nonprofit agencies pursuant to Section 523 of the Housing Act of 1949 (42 U.S.C. Section 1490(c)) as
amended.

(d) If the proposed offering is a planned development subdivision within the meaning of subdivision (a) of Section
11004.5 of the Code, the submission of a completed questionnaire shall be waived if the applicant, pursuant to
subdivision (b)(14) of Section 11010 of the Code, submits the following for the subdivision:
(1) Governing instruments for the subdivision and the association of owners.

(2) Detailed budget reflecting estimated costs of ownership, operation and maintenance expenses and reserves for
the subdivision.
(3) Evidence that common areas and facilities have been or will be conveyed free of liens and encumbrances, to the
association of owners or to the owners as tenants in common.

2790.5. Phased Senior Citizen Housing Developments.
(a) An applicant for a public report may qualify a proposed project as a senior citizen housing development, even though
there are an insufficient number of dwelling units in the initial phase of the project to satisfy the statutory definition of
the term as set forth in Section 51.3 of the Civil Code, by complying with the provisions of Section 11010.05 of the
Code.
(b) The submission of documentation of the following items shall be deemed to have satisfied the requirements of
subdivision (c) of Section 11010.05 of the Code.
(1) A preliminary title report or policy of title insurance showing that the applicant holds fee title, a long-term
leasehold interest, or other evidence of controlling interest in the property to be annexed to the first phase, and any
subsequent phase, of the subdivision, such as an irrevocable option, as being vested in the applicant.
(2) A covenant, recorded in the office of the appropriate county recorder, limiting use on the land proposed to be
annexed to a senior citizen housing development.
(3) A certification from the appropriate local authority that the land proposed to be annexed is sufficient in size to
construct the number of additional units necessary to qualify the project as a senior citizen housing development as
that term is defined in Section 51.3(b)(4) of the Civil Code.

2790.6. Separate Review of Declarations.
The filing fee to review a declaration as described in Section 11010.10 of the Code shall be the maximum fee set forth
in Section 11011 of the Code.



2790.7. General Housing Information – For Research and Statistical Purposes
As a part of any application required by Section 11010 of the Code (application), each applicant for a final subdivision
public report shall, prior to the issuance of the final subdivision public report, complete and submit general housing
information to be used solely for statistical and research purposes. Evidence of submission of the information shall be
included in the application file, but the information is not a part of the application or its file. A copy of the information
will not be included or retained in the application or its file. The information will not be used in any decision controlling
the issuance of any public report. Once submitted, the data provided will be incorporated into the statistical database,
and the original information provided will be permanently deleted. Unless otherwise established by an amendment to
this regulation, the applicant must provide only the following information: the city and/or county in which the
subdivision is located; the zip code; the total acreage; the estimated average number of lots, units or parcels proposed
for each phase; whether lots, units or parcels will be offered vacant or with completed residential structures; the
anticipated date of the first close of escrow; the estimated average lot/parcel size; the estimated average sale price of
the lots, units or parcels; the number of bedrooms, the estimated average square footage and parking arrangements for
the residential structures; the prior use of the property (improved or unimproved); and, if the applicant originally entitled
the project, the number of lots, units or parcels requested of local government and the total number of lots, units or
parcels approved by local government.

2790.8. Existing Subdivision Interest Disclosure.
(a) An applicant for a public report for the sale or lease of an existing subdivision interest shall include an Existing
Subdivision Interest Disclosure Statement with the public report application.

(b) The Existing Subdivision Interest Disclosure Statement shall be completed and provided by the Subdivider/Seller
(Seller) to each buyer as soon as practicable before the transfer of title.

(c) If any Existing Subdivision Interest Disclosure required by this Section is delivered after the execution of an offer
to purchase, the buyer shall have three days after delivery in person or five days after delivery by deposit in the mail, to
terminate the purchase agreement by delivery of a written notice of termination to the Seller.
(d) The Seller is obligated to disclose information in the Existing Subdivision Interest Disclosure based on Seller's actual
knowledge, after making a reasonable effort to obtain such information, whether derived from Seller's own investigation
and inspection of the Existing Subdivision Interest or from written reports prepared by third parties retained by Seller
to perform inspections.
(e) The Seller shall amend any information in an Existing Subdivision Interest Disclosure after the Disclosure is
provided to the buyer, if the information in the Disclosure is or becomes materially inaccurate and the Seller has actual
knowledge of the inaccuracy. The Seller is otherwise not required to amend the Disclosure once it has been provided to
the Buyer. A buyer shall have the right to terminate a purchase agreement based on an amended Disclosure if the
amended Disclosure shows that the original Disclosure was inaccurate or has become inaccurate in any material respect.
Buyer shall have three days after delivery in person or five days after delivery by deposit in the mail of the amended
Disclosure to terminate the purchase agreement by delivery of a written notice of termination to the Seller.
(f) The term “Existing Subdivision Interest” as used in this section is a subdivision interest described in Section 11004.5
of the Code where the dwelling comprising the subdivision interest has been completed (completion is normally the
date on which a Notice of Completion has been recorded evidencing completion of the improvement) or occupied (the
occupancy of the improvements is normally the date shown by the issuance of a Certificate of Occupancy or equivalent
issued by the local jurisdiction), whichever occurs first, three (3) years or more before the date that the public report
application is filed with the Bureau.

2790.9. Existing Subdivision Interest Disclosure Form.
The form approved by the Commissioner for the disclosure of Existing Subdivision Interest information is as follows:
EXISTING SUBDIVISION INTEREST DISCLOSURE STATEMENT

THIS EXISTING SUBDIVISION INTEREST DISCLOSURE STATEMENT (THIS “DISCLOSURE
STATEMENT”) CONCERNS THE REAL PROPERTY SITUATED IN THE CITY OF , COUNTY
OF , STATE OF CALIFORNIA, DESCRIBED AS (THE “EXISTING
SUBDIVISION INTEREST”). THIS STATEMENT IS A DISCLOSURE OF THE CONDITION OF THE
EXISTING SUBDIVISION INTEREST AS OF (date) , 20__, WITHIN THE SELLER’S ACTUAL
KNOWLEDGE. IT IS NOT A REPRESENTATION OR WARRANTY OF ANY KIND BY THE SELLER(S) OR



ANY AGENT(S) REPRESENTING ANY PRINCIPAL(S) IN THIS TRANSACTION, AND IS NOT A SUBSTITUTE
FOR ANY INSPECTIONS OR WARRANTIES THE BUYER(S) MAY WISH TO OBTAIN.
I. COORDINATION WITH OTHER DISCLOSURE FORMS
AND EXISTING REPORTS

All parties acknowledge that the real property being purchased is a lot, condominium unit or other interest in the Existing
Subdivision Interest (the “Property”) and the Seller hereby discloses to the Buyer in this transaction that the following
inspection reports, if any, regarding the Property were completed and are or have been in the possession of the Seller:
Description/type Vendor (by) Date on Report
1.
2.
3.
4.
5.
6.
7.
8.

Buyer may request a copy of any of the reports listed above in writing within 5 days after receipt of this Disclosure
Statement.

The following disclosures and other disclosures required by law, applicable to the condition of the Property, have or
will be made in connection with this real estate transfer, and shall satisfy the disclosure obligations on this form, where
the subject matter is the same.
Inspection reports completed pursuant to the contract of sale or receipt for deposit.

Additional inspection reports or disclosures:
_________________________________________________________________________________
_________________________________________________________________________________

The disclosures and reports identified in this Section are collectively called the “Existing Disclosures.”


II. SELLER’S INFORMATION

The Seller discloses the following information with the knowledge that this is not a representation or warranty. Seller
hereby authorizes any agent(s) representing any principal(s) in this transaction to provide a copy of this statement to
any person or entity in connection with any actual or anticipated sale of the Property.
The information disclosed in this Disclosure Statement is limited to information which Seller actually knows, based on
reasonable efforts to obtain such information. The phrases “Seller’s knowledge” and “Seller’s awareness” when used
herein, are limited accordingly.

THE FOLLOWING ARE DISCLOSURES MADE BY THE SELLER AND ARE NOT THE DISCLOSURES OF THE
AGENT(S), IF ANY. THIS INFORMATION IS A DISCLOSURE AND IS NOT PART OF ANY CONTRACT
BETWEEN THE BUYER AND SELLER.
Seller or Seller’s tenant is is not occupying the Property.

A. The Property has the items checked below (read across):
Range Oven Microwave
Dishwasher Trash Compactor Garbage Disposal
Washer/Dryer Hookups Rain Gutters Burglar Alarms
Smoke Detector(s) Fire Alarm TV Antenna



Satellite Dish Intercom Central Heating
Central Air Cndtng. Evaporator Cooler(s) Wall/Window Air
Cndtng.
Sprinklers Public Sewer System Septic Tank
Sump Pump Water Softener Patio/Decking
Built-in Barbecue Gazebo Sauna
Hot Tub Locking Pool Child Resistant Spa Locking Safety
Safety Cover* Barrier* Cover*
Security Gate(s) Automatic Garage Door Number Remote Controls
Opener(s)
Garage: Attached Not Attached Carport
Pool/Spa
Heater: Gas Solar Electric
Water Heater: Gas Water Heater: Anchored, Private Utility or Other
Braced, or Strapped*
Water Supply: City Well
Gas Supple: Utility Bottled
Window Screen Window Security Bars Quick Release
Mechanism on Bedroom
Windows*
Exhaust Fans(s) in
220 Volt Wiring in
Fireplace(s) in
Gas Starter Roof(s): Type:
Age: (approx.)
Other

To Seller’s actual knowledge, are any of the above not in operating condition?


Yes No. If yes, then describe.

(Attach additional sheets if necessary):




B. To Seller’s actual knowledge, are there any significant defects/malfunctions in any of the following?

Yes No. If yes, check appropriate space(s) below.

Interior Walls Ceilings Floors
Exterior Walls Insulation Roofs(s)
Windows Doors Foundation

Slab(s) Driveways Sidewalks
Walls/Fences Electrical Systems Plumbings/Sewers/
Septics
Other Structural components



(Describe:






If any of the above is checked, explain (attach additional sheets if necessary):







* The garage door opener or child resistant pool barrier may not be in compliance with the safety standards relating
to automatic reversing devices as set forth in Chapter 12.5 (commencing with Section 19890) of Part 3 of Division 13
of, or with the pool safety standards of Article 2.5 (commencing with Section 115920) of Chapter 5 of Part 10 of
Division 104 of, the Health and Safety Code. The water heater may not be anchored, braced, or strapped in accordance
with Section 19211 of the Health and Safety Code. Window security bars may not have quick-release mechanisms in
compliance with the 1995 edition of the California Building Standards Code.
C. Does Seller have actual knowledge of any of the following:

1. Substances, materials or products which may be an environmental hazard such as, but
not limited to, asbestos, formaldehyde, radon gas, lead-based paint, mold, fuel or Yes No
chemical storage tanks, and contaminated soil or water on the subject property
2. Features of the property shared in common with adjoining landowners, such as walls,
fences, and driveways, whose use or responsibility for maintenance may have an effect Yes No
on the subject property .........................................
3. Any encroachments, easements or similar matters that may affect your interest in the Yes No
subject property ....................................................
4. Room additions, structural modifications, or other alterations or repairs made without Yes No
necessary permits .................................................
5. Room additions, structural modifications, or other alterations or repairs not in Yes No
compliance with building codes ...........................
6. Fill (compacted or otherwise) on the property or any portion thereof Yes No
7. Any settling from any cause, or slippage, sliding, or other soil problems Yes No
8. Flooding, drainage or grading problems .............. Yes No
9. Major damage to the property or any of the structures from fire, earthquake, floods, or Yes No
landslides..............................................................
10. Any zoning violations, nonconforming uses, violations of “setback” requirements Yes No
11. Neighborhood noise problems or other nuisances Yes No
12. CC&Rs or other deed restrictions or obligations . Yes No
13. Homeowners’ Association which has any authority over the subject property Yes No
14. Any “common area” (facilities such as pools, tennis courts, walkways, or other areas Yes No
co-owned in undivided interest with others)
15. Any notices of abatement or citations against the property Yes No
16. Any lawsuits by or against the Seller threatening to or affecting this real property,
including any lawsuits alleging a defect or deficiency in this real property or “common Yes No
areas” (facilities such as pools, tennis courts, walkways, or other areas co-owned in
undivided interest with others) .............................
If the answer to any of these is yes and they are not included in the preliminary title report, explain. (Attach additional
sheets if necessary.)
______________________________________________________________________________________________
______________________________________________________________________________________________



______________________________________________________________________________________________
__________________________________________
The information herein is true and correct to the Seller’s actual knowledge, as of the date signed by the Seller or Seller’s
representative.
Seller ___________________________________________________________________________
Date ___________________________________________
BUYER(S) MAY WISH TO OBTAIN PROFESSIONAL ADVICE AND/OR INSPECTIONS OF THE PROPERTY
AND TO PROVIDE FOR APPROPRIATE PROVISIONS IN A CONTRACT BETWEEN BUYER(S) AND
SELLER(S) WITH RESPECT TO ANY ADVICE/INSPECTION/DEFECTS.
I/WE ACKNOWLEDGE RECEIPT OF A COPY OF THIS STATEMENT.


BUYER ______________________________________ DATE ___________________

BUYER ______________________________________ DATE ___________________

2791. Purchase Money Disbursements.
(a) The Contract proposed to be used by an applicant for a public report (Subdivider) for the sale or lease of subdivision
interests shall provide that if the escrow for sale or lease of a subdivision interest does not close on or before the date
set forth in the contract, or a later closing date mutually agreed to by subdivider and the prospective buyer or lessee
(Buyer), within 15 days after the closing date set forth in the contract or an extended closing date mutually agreed to by
Subdivider and Buyer, Subdivider shall, except as provided in subdivision (c), order all of the money remitted by Buyer
under the terms of the Contract for acquisition of the subdivision interest (Purchase Money) to be refunded to Buyer.
(b) The Contract may provide for disbursements or charges to be made against Purchase Money for payments to third
parties for credit reports, escrow services, preliminary title reports, appraisals and loan processing services by such
parties provided that the Contract includes:
(1) specific enumeration of all of the disbursements or charges that may be made against Purchase Money, and

(2) the Subdivider's estimate of the total amount of such disbursements and charges.
(c)(1) Any contractual provision which calls for disbursement or a charge against Purchase Money based upon Buyer's
alleged failure to complete the purchase of the subdivision interest must conform with Civil Code Sections 1675
(including either subsection (c) or subsection (d) thereof), 1676, 1677 and 1678.
(2) Except for a disbursement made following substantial compliance with the procedures set forth in paragraph (4)
below or pursuant to a written agreement of the parties which either cancels the Contract or is executed after the
final closing date specified by the parties, a disbursement or charge against Purchase Money as liquidated damages
may be done only pursuant to a determination by a court of law, or by an arbitrator if the parties have so provided
by contract, that Subdivider is entitled to a disbursement or charge against Purchase Money as liquidated damages.
(3) A contractual provision for a determination by arbitration that Subdivider is entitled to a disbursement or charge
against Purchase Money as liquidated damages shall require that the arbitration be conducted in accordance with
procedures that are equivalent in substance to the commercial arbitration rules of the American Arbitration
Association, that any arbitration include every cause of action that has arisen between Buyer and Subdivider under
the Contract, and that the Subdivider remit the fee to initiate arbitration with the costs of the arbitration ultimately
to be borne as determined by the arbitrator.
(4) The contract of sale may include a procedure under which Purchase Money may be disbursed by the escrow
holder to the Subdivider as liquidated damages upon Buyer's failure to timely give the escrow holder Buyer's written
objection to disbursement of Purchase Money as liquidated damages. This procedure shall contain at least the
following elements:



(A) The Subdivider shall give written notice, in the manner prescribed by Section 116.340 of the Code of Civil
Procedure for service in a small claims action, to escrow holder and to Buyer that Buyer is in default under the
Contract and that Subdivider is demanding that escrow holder remit $_______ from the Purchase Money to
Subdivider as liquidated damages unless, within 20 days, Buyer gives escrow holder Buyer's written objection
to disbursement of Purchase Money as liquidated damages.

(B) Buyer shall have a period of 20 days from the date of receipt of the Subdivider's 20-day notice and demand
in which to give escrow holder Buyer's written objection to disbursement of Purchase Money as liquidated
damages.
(5) The Contract may not make Buyer's failure to timely give the escrow holder the aforesaid written objection a
waiver of any cause of action, other than a waiver of the right to specific performance of the contract, that the Buyer
may have against the Subdivider under the Contract unless the waiver is conditioned upon service of the
Subdivider's 20-day notice and demand in a manner prescribed by Section 116.340 of the Code of Civil Procedure
for service in a small claims action.

(6) If the Subdivider has had the use of Purchase Money pending consummation of the sale or lease transaction
under authorization by the Bureau pursuant to subdivision (c) or (d) of Section 11013.2 of the Code or subdivision
(b) or (c) of Section 11013.4 of the Code, Subdivider shall immediately upon alleging the default of Buyer, transmit
to the escrow holder, funds equal to all of the Purchase Money paid by Buyer.

2791.1. Purchase Money Impounds.
(a) The amount of the money paid or advanced by a prospective buyer or lessee toward the purchase or lease of a
subdivision interest (Purchase Money) that must be deposited and retained in an escrow depository or trust account
pursuant to Section 11013.2(a) or 11013.4(a) of the Code shall ordinarily be the entire amount of the Purchase Money
less disbursements made to third parties for services enumerated in subdivision (b) of Regulation 2791.
(b) For purposes of compliance with Section 11013.2(a) of the Code:

(l) A proper release has not been obtained from a deed of trust encumbering subdivision lots or parcels unless an
instrument has been duly recorded unconditionally reconveying and releasing the lot or lots being sold or leased
from the lien or charge of such deed of trust.
(2) As an alternative to obtaining a proper release from the lien or charge of such deed of trust, it shall be deemed
acceptable by the commissioner, pursuant to the provisions of Section 11013.2(d) of the Code, if:
(A) the holder of the deed of trust has duly executed an agreement or demand (“release agreement”) wherein
the holder has agreed, notwithstanding any provision to the contrary in the deed of trust, to promptly perform
any act reasonably necessary to record an instrument unconditionally reconveying and releasing the subdivision
lots or parcels being sold from the lien or charge of the deed of trust upon payment to the holder of an amount
or amounts specified in the release agreement as the release price for the affected subdivision lots or parcels,
and the holder has further agreed that specific performance of the terms and provisions of the release agreement
shall be compelled in favor of the purchaser or lessee of the lot or lots;
(B) the release agreement has been deposited with the escrow holder for the transaction(s);
(C) the subdivider has notified each purchaser or lessee that the release agreement is available upon request
from the escrow holder; and
(D) each purchaser or lessee has been provided a policy of title insurance insuring the purchaser or lessee against
loss by reason of the deed of trust.

2791.2. Bond Alternative to Purchase Money Impound.
The penal sum of a bond or bonds furnished by or on behalf of a subdivider pursuant to Section 11013.2(c) or Section
11013.4(b) or (c) of the Code shall ordinarily be not less than the aggregate amount of the money paid or advanced
toward the purchase or lease of subdivision interests for which the subdivider is accountable to prospective purchasers
or lessees less the sum of the amount held in escrow depositories or trust accounts pursuant to Section 11013.2(a) or
Section 11013.4(a) of the Code and the disbursements made to third parties for services enumerated in subdivision (b)
of Regulation 2791.

2791.3. Lien and Completion Bonds for Onsite Construction Work.
The penal sum of a bond or bonds furnished by or on behalf of a subdivider pursuant to Section 11013.4(d)(2) of the
Code shall ordinarily be not less than 120 percent of the estimate of the total cost of the onsite construction work to be
completed on the subdivision interest being offered for sale or lease.

2791.4. Acceptable Escrow Depositories.
(a) The following entities which are qualified to do business in the State of California are escrow depositories acceptable
to the Commissioner under Section 11013.2 and 11013.4 of the Code: escrow agents licensed by the Corporations
Commissioner, banks, trust companies, savings and loan associations, title insurers and underwritten title companies.
(b) In exceptional circumstances the Commissioner may approve an escrow depository other than an entity enumerated
in subdivision (a).

2791.6. Acceptable Trustees.
A trust company as defined in Section 107 of the Financial Code which is qualified to do business in California is a
trustee acceptable to the Commissioner to hold title to a subdivision under Section 11013.2(b) and other applicable
provisions of the Subdivided Lands Law. In exceptional circumstances the Commissioner may approve a trustee other
than a trust company as defined in Section 107 of the Financial Code.

2791.8. Dispute Resolution.
(a) A contractual provision setting forth terms, conditions and procedures for resolution of a dispute or claim between
a homeowner and a subdivider, or a provision in the covenants, conditions and restrictions setting forth terms, conditions
and procedures for resolution of a dispute of claim between a homeowners association and a subdivider shall, at a
minimum, provide that the dispute or claim resolution process, proceeding, hearing or trial to be conducted in
accordance with the following rules:
(1) For the subdivider to advance the fees necessary to initiate the dispute or claim resolution process, with the costs
and fees, including ongoing costs and fees, if any, to be paid as agreed by the parties and if they can't agree then the
costs and fees are to be paid as determined by the person or persons presiding at the dispute or claim resolution
proceeding or hearing.
(2) For a neutral or impartial person(s) to administer and preside over the claim or dispute resolution process.
(3) For the appointment, or selection, as designation, or assignment of the person(s) to administer and preside over
the claim or dispute resolution process within a specific period of time, which in no event shall be more than sixty
(60) days from initiation of the claim or dispute resolution process or hearing. The person(s) appointed, selected,
designated or assigned to preside may be challenged for bias.
(4) For the venue of the claim or dispute resolution process to be in the county where the subdivision is located
unless the parties agree to some other location.
(5) For the prompt and timely commencement of the claim or dispute resolution process. When the contract
provisions provide for a specific type of claim or dispute resolution process, the process shall be deemed to be
promptly and timely commenced if it is to be commenced in accordance with the rules applicable to that process,
or if the rules don't specify a date by which the proceeding or hearing must commence, then to a date agreed upon
by the parties, and if they cannot agree, a date determined by the person(s) presiding over the dispute resolution
process.

(6) For the claim or dispute resolution process to be conducted in accordance with rules and procedures that are
reasonable and fair to the parties.

(7) For the prompt and timely conclusion of the claim or dispute resolution process, including the issuance of any
decision or ruling following the proceeding or hearing.
(8) For the person(s) presiding at the claim or dispute resolution process to be authorized to provide all recognized
remedies available in law or equity for any cause of action that is the basis of the proceeding or hearing. The parties
may authorize the limitation or prohibition of punitive damages.

(b) A copy of the rules applicable to the claim or dispute resolution process shall be submitted as part of the application
for a public report.

(c) If the claim or dispute resolution process provides or allows for a judicial remedy in accordance with the laws of
this state, it shall be presumed that the proceeding or hearing satisfies the provisions of paragraph (a).

2791.9. Use of Real Property Sales Contracts.
If a subdivider proposes to sell subdivision interests using real property sales contracts (hereafter sales contracts) as
defined in Section 10029 of the Code, a plan under which the subdivider conveys the subdivision interests in trust and
records the conveyance prior to the execution of a sales contract by a prospective purchaser (hereafter vendee) and
which includes all of the following elements shall be an acceptable alternative method under Section 11013.2(d) and
Section 11013.4(f) of the Code:
(a) The original trustee and any successor trustee are expressly subject to the approval of the commissioner.
(b) An express prohibition against any amendment of the trust instrument directly or indirectly affecting the interests of
a vendee without the prior written approval of the commissioner.
(c) An agreement by the trustee to continue in that capacity until a successor trustee acceptable to the commissioner has
assumed the position.
(d) Vendees are expressly designated in the trust instrument as beneficiaries.

(e) If the subdivision interests in the trust are not subject to a blanket encumbrance, provisions for the vendee to make
payments under the contract (hereafter purchase money) to the trustee and for the trustee to make disbursements from
purchase money as follows:
(1) Debt service, taxes, assessments, insurance premiums and any other periodic payments related to the ownership
and use of the subdivision interest that the vendee is obligated to make under terms of the sales contract.
(2) Payment to the subdivider from the balance of purchase money remaining after the trustee has paid or set aside
funds to make payments under (1) above.
(f) If a subdivision interest is subject to a blanket encumbrance as defined in Section 11013 of the Code:
(1) Unless there has been an independent determination that the vendee is in default under the terms of the sales
contract, all of the purchase money of a vendee will be held by the trustee in an interest-bearing account for the
benefit of the vendee until the subdivision interest that the vendee has contracted to purchase is released from the
blanket encumbrance.

(2) Unless there has been an independent determination that the vendee is in default under the terms of the sales
contract, the refund on demand by the vendee of the entire sum of purchase money paid if the subdivision interest
has not been released from the blanket encumbrance within a specified period of time determined by the
commissioner to be reasonable in the circumstances.
(3) If the subdivider proposes a disbursement of purchase money to himself or for his account based upon vendee’s
default under the sales contract, a procedure for a determination of default by a court of law or arbitrator and for the
disbursement by the trustee of funds as liquidated damages on the basis of the determination that the vendee has
defaulted.

2792. Substantially Complete Application – Standard Subdivision.
An application for a final subdivision public report is "substantially complete" within the meaning of Section 11010.2
of the Code if it contains the documents and information enumerated below:
(a) For a subdivision (standard subdivision) of a type not listed or referred to in Section 11000.1 or 11004.5 of the Code:
(1) Subdivision filing fee including fee for a preliminary public report if applicable.

(2) Completed subdivision questionnaire.
(3) Approved tentative subdivision map unless the Commissioner has made a finding that because of processing
delays, a tentative subdivision map has not been approved but will be approved within a reasonable amount of time.
(4) Certificate of qualification from Secretary of State if applicant is a foreign corporation.
(5) Consent to service of process upon Secretary of State if applicant is a nonresident of California.

(6) Current preliminary title report covering all subdivision interests for which a public report is sought including:
(A) Legal description of the subdivided property.
(B) Nature of the interest or estate covered by the report.



(C) Record owner of the interest or estate covered by the report.
(D) All easements, liens, rights, interest and claims disclosed by an examination of the indices in the office of
the recorder of the county in which the property is located.
(E) Existence of any encroachment of improvements over lines of record title.

(F) All mechanics liens arising out of work completed or in progress.
(G) Existence of assessments or potential assessments for public improvements completed or under
construction.

(7) Proposed or existing covenants, conditions and restrictions for the subdivision.
(8) Coastal Commission permit or exemption if subdivision in coastal zone.

(9) Evidence of availability of domestic utilities and services to the subdivision.
(10) Information concerning hazards and other unusual conditions within or in the vicinity of the subdivision.
(11) Assessment and improvement bond information if applicable to the subdivision interests to be offered.
(12) Exemplars of all marketing, financing and conveyancing instruments to be used in the offering of subdivision
interests.
(13) Exemplar of escrow instructions including at least the following:

(A) A description of the nature of the transaction.
(B) Provision for the return to nondefaulting buyers of funds deposited toward the purchase of subdivision
interests if escrows are not closed on or before a date prescribed in the instructions.
(C) Name and address of the escrow depository to be used.
(14) Bond or other device to be used as a means of compliance with Sections 11013.2 and 11013.4 of the Code.

(15) Completed documents for reservations and reservation deposits if preliminary public report is requested.
(16) Evidence of financial arrangements to assure completion of all offsite improvements included in the offering.
(17) Evidence of financial arrangements for any guarantee or warranty included in the offering.

(18) Evidence of all arrangements to assure completion, maintenance and availability for any use of privately-owned
facility that will be offered as an inducement to the purchase of subdivision interests.
2792.1. Substantially Complete Application – Condominium, Planned Development, Community Apartment
Project and Undivided Interest Subdivision.
An application for a final subdivision public report is “substantially complete” within the meaning of Section 11010.2
of the Code if it contains the documents and information enumerated below:

(a) For a condominium project, community apartment project or planned development:
(1) All of the applicable documents and information listed under subdivision (a) of Section 2792.
(2) Proposed or existing governing instruments for the owners' association.

(3) Condominium plan if the subdivision is a condominium.
(4) Plot plan delineating all improvements including recreational amenities if the subdivision is not a condominium.
(5) Overall subdivision plan if the subdivision is part of a phased development.

(6) Evidence of financial arrangements for completion of the common areas and facilities in the offering.
(7) Copies of all contracts or proposed contracts obligating the owners' association.
(8) Agreement of subdivider to subsidize common area maintenance and owners' association operation where
applicable.
(9) Financial arrangements to assure performance of the subdivision agreement where applicable.



(10) Detailed pro forma budget reflecting estimated costs of ownership, operation and maintenance expenses and
reserves for the subdivision.
(11) Most recent balance sheet and annual operating statement for the owners' association if applicable.
(12) Duplicate budget package for the Bureau's analysis of proposed budget for common area maintenance and
owners' association operations.
(13) Subdivision trust agreement if applicable.
(14) Exemplar of deed for conveyance of common area to owners' association.

(15) Exemplar of escrow instructions including at least the following:
(A) A description of the nature of the transaction.

(B) Provision for the return to Buyers of funds deposited toward the purchase of subdivision interests if escrows
are not closed on or before a date prescribed in the instructions.
(C) Name and address of the escrow depository to be used.

(D) Provision to assure compliance with subdivision (c) of Section 11018.5 of the Code if applicable.
(E) Provision for conveyance of common area to owners' association if applicable.
(16) A completed supplemental questionnaire if the project is a conversion of an existing structure to a condominium
or community apartment project.
(17) A permit issued by the Department of Business Oversight if applicable to the offering.

(b) For an undivided interest subdivision:
(1) All of the applicable documents and information listed in subdivision (a) above.
(2) A proposed schedule of undivided interests in the subdivision sufficient to identify the undivided interest
acquired by each purchaser.
(3) Statement from the appropriate authority of the county in which the real property is located setting forth the
proposed method to be used in assessing and collecting real property taxes for the subdivision.

2792.10. Subsidization by Subdivider.
(a) When the subdivider undertakes to provide goods and/or services to the Association or to pay a portion of a
purchaser’s share of the Association’s financial obligations, the subdivider shall:
(1) Enter into a contract with the Association acceptable in form and content to the Commissioner which shall
specify in detail the obligations which the subdivider will undertake to fulfill and, if applicable, the methods to be
employed in valuing the goods and services furnished under the program, and cover the release and enforcement of
the security referred to in (a) (4), below.

(2) Furnish the Association with an executed copy of the contract, the security referred to in (a) (4), below, and the
escrow instructions referred to in (c), below, within ten days after the closing of the first sale (or lease) of subdivision
interests.
(3) Submit a monthly accounting to the Association and if the subsidy is other than cash, it shall also contain a
description and valuation of the goods and services for the common areas furnished directly by the subdivider or
contracted and paid for by him.



(4) Furnish a bond to the Association as obligee or other device to secure the subdivider’s undertaking to the
Association and the owners under the program. The bond or other device shall be in an amount and subject to terms
and conditions which will assure prompt and faithful performance of the contract. The penal sum of a bond shall
not ordinarily be reduced by reason of the fact that the subdivider has posted a bond or other security device pursuant
to Section 2792.9 of these regulations.

(b) The Commissioner will not ordinarily approve any program in which the subdivider undertakes to provide goods
and/or services to the Association or promises to pay a portion of a purchaser’s share of the Association’s financial
obligations unless it provides for the accumulation by the Association of reserves for replacement and major
maintenance in accordance with accepted property management practices.

(c) The security device referred to in (a) (4) above shall be delivered to a neutral escrow depository acceptable to the
Commissioner along with an executed copy of the contract and instructions to the depositary signed by the subdivider
and the Association covering handling of the security, return of the security to the subdivider, and remittance of the
security to the Association, including the following:

(1) The escrow instructions shall include a procedure under which the security shall be returned to the subdivider
upon the Association’s failure to give the escrow depository within 40 days the Association’s written objection to
return of the security, but only if the subdivider’s demand for return of the security is accompanied by the
subdivider’s written statement that the subdivider has faithfully performed all of the subdivider’s obligations under
the contract.

(2) The escrow instructions shall include a procedure under which all or some specified portion of the security shall
be paid to the Association upon the subdivider’s failure to give the escrow depository within 40 days the
subdivider’s written objection to payment of the security, but only if the Association’s demand for payment of the
security is accompanied by the Association’s written statement that the subdivider has failed to perform the
subdivider’s obligations under the contract.
(3) The escrow instructions shall provide that, in the event the escrow holder receives conflicting instructions from
the subdivider and the Association, the escrow holder is authorized, in its sole discretion, to (1) interplead the
security or (2) retain the security until the security is disposed of in accordance with (i) the joint or mutual
instructions of the subdivider and the Association, (ii) the order of a court of competent jurisdiction or (iii) in
accordance with the final binding decision rendered in an alternative dispute resolution proceeding.

(4) If the security is a letter of credit, the escrow instructions shall include a procedure under which the escrow
depository shall draw upon the letter of credit prior to the expiration of the time for drawing thereupon, or upon the
subdivider’s failure to give the escrow depository within 40 days the subdivider’s written objection to remittance
of the security to the Association.

2792.13. Undivided Interests Subdivisions – Impound of Funds.
All funds received from prospective buyers to be applied to the purchase of undivided subdivision interests, including
community apartment projects, stock cooperatives and limited equity housing cooperatives, shall be deposited and held
intact in an escrow depository acceptable to the Real Estate Commissioner until bona fide offers have been obtained for
the purchase of a prescribed percentage of all of the interests being offered for sale.
In the event that the prescribed percentage of offers have not been obtained within two years from the date of the
issuance of the public report, or such other period as the Commissioner may approve, all funds theretofore collected
shall be promptly returned by the escrow depository to owners without deduction.
The prescribed percentage shall be determined by the Commissioner based upon the facts and circumstances of each
such offering. Ordinarily this percentage shall be not less than 60% of the interests being offered for sale provided,
however, that the Commissioner may prescribe a lesser percentage if the plan of the offering includes other financial
arrangements to lessen the possibility of foreclosure of a nondelinquent interest on account of the delinquencies of other
owners.

2792.14. Undivided Interests Subdivisions – Blanket Encumbrances.
(a) Except as provided in subdivision (b) hereof, if the real property to be owned by the stock cooperative corporation
will be subject to a mortgage or deed of trust affecting the interest of more than one member or shareholder of the stock
cooperative (hereafter blanket encumbrance), a public report will not be issued unless legal or financial arrangements
satisfactory to the Real Estate Commissioner have been made to:



(1) Provide assurance that the ownership and possessory rights of a member of the stock cooperative will not be
adversely affected by foreclosure or acceleration of the blanket encumbrance by or on behalf of the beneficiary
unless the affected member or shareholder is delinquent in payments allocated by the stock cooperative to debt
service on the blanket encumbrance.
(2) Provide assurance for the payment of said blanket encumbrance.
(b) The provisions of subdivision (a) shall not apply in the case of a stock cooperative which is (1) insured under Section
213 or Section 221 of the National Housing Act, as amended and involves a regulatory agreement between stock
cooperative and the Secretary of Housing and Urban Development with the provision for the establishment and
maintenance of a general operating reserve or (2) assisted under Section 8 of the U. S. Housing Act of 1937 as amended
and involves a housing assistance payment contract between the stock cooperative and the Secretary of Housing and
Urban Development with a special provision for the establishment and maintenance of a general operating reserve as
the Secretary of Housing and Urban Development may approve.

2792.15. Reasonable Arrangements – Transfer of Common Areas and Facilities to Association.
(a) In subdivisions in which all or a portion of the common areas and facilities are to be transferred to the Association,
those areas and facilities shall be transferred to the Association or to a corporate trustee under a trust agreement
acceptable to the Commissioner prior to or coincident with the first transfer or conveyance of a subdivision interest by
the subdivider.
(b) The subdivider may create a contractual right in himself or may reserve easements of limited duration, for common
driveway purposes, for drainage and encroachment purposes and for ingress to and egress from the common areas for
the purpose of completing improvements thereon or for the performance of necessary repair work and, in the case of
phased subdivision projects, for entry onto adjacent property in connection with the development of additional phases
of the overall project.

2792.16. Reasonable Arrangements – Assessments and Liens.
(a) Regular assessments to defray expenses attributable to the ownership, operation and furnishing of common interests
by the Association shall ordinarily be levied against each owner according to the ratio of the number of subdivision
interests owned by the owner assessed to the total number of interests subject to assessments.

(b) In the case of a subdivision offering in which it is reasonable to anticipate that any owner will derive as much as
10% more than any other owner in the value of common services supplied by the Association, the assessment against
each owner may be determined according to a formula or schedule under which the assessments against the various
subdivision interests bear a relationship which is equitably proportionate to the value of the common services furnished
to the respective interests.
(c) The subdividerand his successor in interest, if anyis an owner subject to the payment of regular and special
assessments against subdivision interests which he owns provided, however, that the subdivider and any other owner of
a subdivision interest which does not include a structural improvement for human occupancy may be exempted by the
governing instruments from the payment of that portion of any assessment which is for the purpose of defraying
expenses and reserves directly attributable to the existence and the use of the structural improvements. The exemption
may include, but shall not necessarily be limited to:

Roof replacement;
Exterior maintenance;
Walkway and carport lighting;
Refuse disposal;
Cable television; and
Domestic water supplied to living units.

(1) Any exemption from the payment of assessments attributed to dwelling units shall be in effect only until the
earliest of the following events.

(A) A notice of completion of the structural improvements has been recorded.
(B) Occupation or use of the dwelling unit.
(C) Completion of all elements of the residential structures which the Association is obliged to maintain.



(2) The subdivider and any other owner of a subdivision interest may be exempted by the governing instruments
from the payment of that portion of any assessment which is for the purpose of defraying expenses and reserves
directly attributable to the existence and use of a common facility that is not complete at the time assessments
commence. Any exemption from the payment of assessments attributed to common facilities shall be in effect only
until the earliest of the following events.

(A) A notice of completion of the common facility has been recorded.
(B) The common facility has been placed into use.
(d) The governing body of the Association must comply with the provisions of Section 1366 of the Civil Code prior to
any increase in assessments.
(e) The governing body of the Association may not levy special assessments without complying with the provisions of
Section 1366 of the Civil Code.
(f) (1) Regular assessments against the subdivision interests in a phase of a multi-phase subdivision or against all
subdivision interests in a single-phase subdivision shall commence on the date of the first conveyance of a
subdivision interest in that phase under authority of a public report or on the first day of the month following the
first conveyance of a subdivision interest in the phase.
(2) Except in those subdivision offerings where there is an approved subsidization plan which otherwise provides,
voting rights attributable to subdivision interests shall not vest until assessments against those interests have been
levied by the Association.

(g) (1) A lien for regular or special assessments against an owner may be made subordinate by the CC&R’s to the lien
of any first mortgage or first deed of trust (hereafter collectively first encumbrance) against subdivision interests of
the owner.
(2) In the case of a subordination of a lien for assessments to a first encumbrance, the transfer of a subdivision
interest as the result of the exercise of a power of sale or a judicial foreclosure involving a default under the first
encumbrance shall extinguish the lien of assessments which were due and payable prior to the transfer of the
subdivision interest.
(3) No transfer of the subdivision interest as the result of a foreclosure or exercise of a power of sale shall relieve
the new owner, whether it be the former beneficiary of the first encumbrance or another person, from liability for
any assessments thereafter becoming due or from the lien thereof.

(h) (1) For the purposes of subdivision (d) and subdivision (e), a quorum means more than 50% of the members of the
Association.

(2) Any meeting or election of the Association for purposes of complying with subdivision (d) and subdivision (e)
shall be conducted in accordance with Chapter 5 (commencing with Section 7510) of Part 3, Division 2 of Title 1
of the Corporations Code and Section 7613 of the Corporations Code.
(i) Notwithstanding any other provision contained in this section, the governing body may increase assessments
necessary for emergency situations pursuant to Section 1366 of the Civil Code.
(j) The governing body shall not expend funds designated as reserve funds for any purpose other than those purposes
set forth in Section 1365.5 of the Civil Code.

2792.17. Reasonable Arrangements – Members’ Meetings.
(a) Regular meetings of members of the Association shall be held not less frequently than once each calendar year at a
time and place prescribed by the Bylaws. The first meeting of the Association, whether a regular or special meeting,
shall be held within 45 days after the closing of the sale of the subdivision interest which represents the 51st percentile
interest authorized for sale under the first public report for the subdivision, provided that public report authorizes the
sale of 50 subdivision interests or more in the subdivision. However, in no event shall the meeting be held later than six
months after the closing of the sale of the first subdivision interest without regard to the number of subdivision interests
authorized for sale in the first public report.
(b) Meetings of Association members shall be conducted in accordance with the provisions of Section 1363 of the Civil
Code.



(c) A special meeting of the members of the Association shall be promptly scheduled by the governing body in response
to:
(1) The vote of the governing body itself.
(2) Written request for a special meeting signed by members representing at least 5% of the total voting power of
the Association.
(d) Written notice of regular and special meetings shall be given to members by the governing body by any means which
is appropriate given the physical setup of the subdivision. This notice shall be given not less than 10 nor more than 90
days before the date of any meeting at which members are required or permitted to take any action. The notice shall
specify the place, day and hour of the meeting and the matters the governing body intends to present for action by the
members. Except as otherwise provided by law, any proper matter may be presented at the meeting for action.

(e) (1) Except as provided in Sections 2792.16(d) and (e)(1), a quorum for the transaction of business at a meeting of
members of the Association through presence in person or by proxy shall be established at a percentage of not less
than 25% and not more than 66 2/3% of the total voting power of the Association. Within these percentage limits,
the quorum requirements for members’ meetings shall be suited to such factors as the proposed physical layout of
the subdivision, the contemplated number of owners of subdivision interests and the nature and extent of the
common areas, facilities and services.
(2) In the absence of a quorum at a members’ meeting, a majority of those present in person or by proxy may
adjourn the meeting to another time, but may not transact any other business. An adjournment for lack of a quorum
by those in attendance shall be to a date not less than five days and not more than 30 days from the original meeting
date. The quorum for an adjourned meeting may be set by the governing instruments at a percentage less than that
prescribed for the regular meeting, but it shall not be less than 25 percent of the total voting power of the Association.
If a time and place for the adjourned meeting is not fixed by those in attendance at the original meeting or if for any
reason a new date is fixed for the adjourned meeting after adjournment, notice of the time and place of the adjourned
meeting shall be given to members in the manner prescribed for regular meetings.
(f) Any action which may be taken by the vote of members at a regular or special meeting, except the election of
governing body members where cumulative voting is a requirement, may be taken without a meeting if done in
compliance with the provisions of Section 7513 of the Corporations Code.
(g) Any form of proxy or written ballot distributed by any person to the membership of the Association shall afford the
opportunity to specify a choice between approval and disapproval of each matter or group of matters to be acted upon,
except it shall not be mandatory that a candidate for election to the governing body be named in the proxy or written
ballot. The proxy or written ballot shall provide that, where the member specifies a choice, the vote shall be cast in
accordance with that choice. The proxy shall also identify the person or persons authorized to exercise the proxy and
the length of time it will be valid.

2792.18. Reasonable Arrangements – Members’ Voting Rights.
(a) With the exception of those Associations which have two classes of voting membership, a member of an Association,
including an Association which provides for unequal assessments against the subdivision interests, shall be entitled to
one vote for each subdivision interest owned. If a subdivision interest is owned by more than one person, each such
person shall be a member of the Association, but there shall be no more than one vote for each subdivision interest.

(b) An Association may have two classes of voting membership according to the following provisions:
(1) Each owner of a subdivision interest other than a subdivider is a Class A member. Class A membership entitles
the holder to one vote for each subdivision interest owned.
(2) The subdivider is a Class B member. Class B membership entitles the holder to not more than three votes for
each subdivision interest owned.
(3) In a single-phase subdivision development, Class B membership shall be irreversibly converted to Class A
membership on the first to occur of the following:

(A) The total outstanding votes held by Class A members equal the total outstanding votes held by the Class B
member.

(B) A prescribed date which is not later than the second anniversary of the first conveyance of a subdivision
interest in the development.



(4) In a multi-phase development for which the subdivider has submitted a plan for phased development through
annexation which satisfies the requirements of Section 2792.27, the Class B membership shall be irreversibly
converted to Class A membership on the first to occur of the following:

(A) A prescribed date certain which is not later than the second anniversary of the first conveyance of a
subdivision interest in the most recent phase of the development.
(B) A prescribed date certain which is not later than the fourth anniversary of the first conveyance of a
subdivision interest in the first phase of the development.
(c) With the exception of Section 2792.4, no regulation which requires the approval of a prescribed majority of the
voting power of members of the Association other than the subdivider for action to be taken by the Association is
intended to preclude the subdivider from casting votes attributable to subdivision interest which he or she owns.
Governing instruments may specify either or both of the following for approval of action for which a regulation of the
Bureau - -other than Section 2792.4 - - -requires the approval of a prescribed majority of the voting power of members
of the Association other than the subdivider:

(1) In those Associations in which Class A and Class B voting memberships have been prescribed in accordance
with this regulation, the vote or written assent of a bare majority of the Class B voting power as well as the vote or
written assent of a prescribed majority of the Class A voting power.
(2) In those Associations in which a single class of voting membership exists, either as originally established or
after the conversion of Class B to Class A shares, the vote or written assent of a bare majority of the total voting
power of the Association as well as the vote or written assent of a prescribed majority of the total voting power of
members other than the subdivider.

2792.19. Reasonable Arrangements – Election of Governing Body.
(a) The first election of a governing body for the Association shall be conducted at the first meeting of the Association.
All positions on the governing body shall be filled at that election.

(b) (1) Voting for the governing body shall be by secret written ballot. Cumulative voting in the election of governing
body members shall be prescribed for all elections in which more than two positions on the governing body are to
be filled subject only to the procedural prerequisites to cumulative voting prescribed in Section 7615(b) of the
Corporations Code.

(2) Unless the entire governing body is removed from office by the vote of members of the Association, no
individual governing body member shall be removed prior to the expiration of his term of office if the votes cast
against removal would be sufficient to elect the governing body member if voted cumulatively at an election at
which the same total number of votes were cast and the entire number of governing body members authorized at
the time of the most recent election of the governing body member were then being elected.
(c) (1) A special procedure shall be established by the governing instruments to assure that from the first election of
the governing body and thereafter for so long as a majority of the voting power of the Association resides in the
subdivider, or so long as there are two outstanding classes of membership in the Association, not less than 20% of
the incumbents on the governing body shall have been elected solely by the votes of owners other than the
subdivider.
(2) A governing body member who has been elected to office solely by the votes of members of the Association
other than the subdivider may be removed from office prior to the expiration of his term of office only by the vote
of at least a simple majority of the voting power residing in members other than the subdivider.

2792.2. Substantially Complete Application – Stock Cooperative and Limited Equity Housing Cooperative.
An application for a final subdivision public report is “substantially complete” within the meaning of Section 11010.2
of the Code if it contains the documents and information enumerated below:

(a) For a stock cooperative subdivision:
(1) Subdivision filing fee including fee for preliminary public report if applicable.
(2) Completed subdivision questionnaire.

(3) Approved tentative subdivision map if applicable.
(4) Plot plan delineating apartments within the subdivision.
(5) Certificate of qualification from Secretary of State if applicant is a foreign corporation.

(6) Consent to service of process upon Secretary of State if applicant is a nonresident of California.
(7) Current preliminary title report covering all subdivision interests for which a public report is sought including:
(A) Legal description of the subdivided property.

(B) Nature of the interest or estate covered by the report.
(C) Record owner of the interest or estate covered by the report.
(D) All easements, liens, rights, interests and claims disclosed by an examination of the indices in the office of
the recorder of the county in which the property is located.
(E) Existence of any encroachment of improvements over lines of record title.
(F) All mechanics liens arising out of work completed or in progress.



(G) Existence of assessments or potential assessments for public improvements completed or under
construction.
(8) Proposed or recorded covenants, conditions and restrictions for the subdivision, if applicable.
(9) Coastal Commission permit or exemption if subdivision is in coastal zone.

(10) Evidence of availability of domestic utilities and services to the subdivision.
(11) Information concerning hazards and other unusual conditions within or in the vicinity of the subdivision.
(12) Assessment and improvement bond information if applicable to the subdivision interests to be offered.

(13) Exemplars of all marketing, financing and conveyancing instruments to be used in the offering of subdivision
interests.

(14) Exemplar of escrow instructions for conveyance of the subdivision to the cooperative corporation.
(15) Exemplar of escrow instructions for issuance of memberships and exclusive occupancy rights to purchasers
including at least the following:

(A) A description of the nature of the transaction.
(B) Provision for the return to Buyers of funds deposited toward the purchase of memberships if escrows are
not closed on or before a date prescribed in the instructions.
(C) Name and address of the escrow depository to be used.
(D) Provision to assure compliance with subdivision (c) of Section 11018.5 of the Code if applicable.

(16) Bond or other device to be used as a means of compliance with Sections 11013.2 and 11013.4 of the Code.
(17) Narrative explanation of plan for financing sales of memberships in cooperative corporation.
(18) Subordination agreement or other instrument to assure compliance with subdivision (c) of Section 11018.5 of
the Code.
(19) Completed documents for reservations and reservation deposits if a preliminary public report is requested.

(20) Evidence of financial arrangements to assure completion or proposed renovation of offsite improvements
included in the offering.

(21) Evidence of financial arrangements for completion or renovation of common areas of the subdivision.
(22) Evidence of financial arrangements for any guarantee or warranty included in the offering.
(23) Proposed articles of incorporation for cooperative corporation.
(24) Proposed bylaws for cooperative corporation.

(25) Proposed proprietary lease (exclusive occupancy) agreement and proposed lease assignment instrument if
applicable.

(26) Copies of all contracts or proposed contracts obligating the cooperative corporation.
(27) Proposed preclosing rental agreements if applicable.
(28) Completed supplemental questionnaire if the subdivision is a conversion of an existing structure to a
subdivision.
(29) Detailed pro forma budget reflecting estimated costs of ownership, operation and maintenance expenses and
reserves for the subdivision.
(30) Most recent balance sheet and annual operating statement for the cooperative corporation if applicable.

(31) Agreement of subdivider to subsidize common-area maintenance and cooperative corporation operations if
applicable.
(32) Duplicate budget package for the Bureau's analysis of proposed budget for common area maintenance and
owners association operations.



(33) Proposed schedule for allocation of assessments for property taxes and corporate debt service (if applicable)
to members of the corporation.
(34) Exemplar of deed for conveyance of subdivision to cooperative corporation.
(35) Exemplar of membership certificate or stock certificate to be issued by cooperative corporation.

(36) A permit issued by the Department of Business Oversight if applicable to the offering.
(b) For a limited equity housing cooperative:
(1) All of the applicable documents and information listed in subdivision (a) above.

(2) Information concerning the selling prices and methods for determination of transfer value referred to in Section
33007.5 of the Health and Safety Code.

2792.20. Reasonable Arrangements – Governing Body Meetings.
(a) Regular meetings of the governing body of the Association shall be held as prescribed in the Bylaws. Ordinarily
such meetings shall be conducted at least monthly though the Bylaws may prescribe meetings as infrequently as every
six months if business to be transacted by the governing body does not justify more frequent meetings.
(b) (1) Regular meetings of the governing body shall be held at a time and at a meeting place fixed by the governing
body from time to time. The meeting place shall ordinarily be within the subdivision itself unless in the judgment
of the governing body a larger meeting room is required than exists within the subdivision in which case the meeting
room selected shall be as close as possible to the subdivision.



(2) Notice of the time and place of a regular meeting shall be posted at a prominent place or places within the
common area and shall be communicated to governing body members not less than four days prior to the meeting
unless the time and place of meeting is fixed by the Bylaws provided however that notice of a meeting need not be
given to any governing body member who has signed a waiver of notice or a written consent to holding of the
meeting. If the common area consists only of an easement or is otherwise unsuitable for posting of such notice, the
governing body shall communicate the notice of the time and place of such meeting by any means it deems
appropriate.
(c) (1) A special meeting of the governing body may be called by written notice signed by the President of the
Association or by any two members of the governing body other than the President.

(2) The Notice shall specify the time and place of the meeting and the nature of any special business to be
considered.

(3) Notice shall be posted or communicated in a manner prescribed for notice of regular meetings and shall be sent
to all governing body members not less than 72 hours prior to the scheduled time of the meeting provided however
that notice of the meeting need not be given to any governing body member who signed a waiver of notice or a
written consent to holding of the meeting.

(d) Regular and special meetings of the governing body shall be governed by the provisions of Section 1363.05 of the
Civil Code.

(e) (1) The governing body may take actions without a meeting if all of its members consent in writing to the action to
be taken.
(2) If the governing body resolves by unanimous written consent to take action, an explanation of the action taken
shall be posted at a prominent place or places within the common area within three days after the written consents
of all governing body members have been obtained. If the common area consists only of an easement or is otherwise
unsuitable for posting the explanation of the action taken, the governing body shall communicate said explanation
by any means it deems appropriate.

2792.21. Reasonable Arrangements – Governing Body Powers and Limitations.
(a) The powers and duties of the governing body of the Association shall normally include, but shall not be limited to,
the following:

(1) Enforcement of applicable provisions of the Covenants, Conditions and Restrictions, Articles, Bylaws and other
instruments for the ownership, management and control of the subdivision.

(2) Payment of taxes and assessments which are, or could become, a lien on the common area or a portion thereof.
(3) Contracting for casualty, liability and other insurance on behalf of the Association.
(4) Contracting for goods and/or services for the common areas, facilities and interests or for the Association subject
to the limitations set forth below.
(5) Delegation of its powers to committees, officers or employees of the Association as expressly authorized by the
governing instruments.
(6) Preparation of budgets and financial statements for the Association as prescribed in the governing instruments.
(7) Formulation of rules of operation of the common areas and facilities owned or controlled by the Association.

(8) Initiation and execution of disciplinary proceedings against members of the Association for violations of
provisions of the governing instruments in accordance with procedures set forth in the governing instruments.

(9) Entering upon any privately-owned subdivision interest as necessary in connection with construction,
maintenance or emergency repair for the benefit of the common area or the owners in common.

(10) Election of officers of the governing body.
(11) Filling of vacancies on the governing body except for a vacancy created by the removal of a governing body
member.
(b) The governing body of the Association shall ordinarily be prohibited from taking any of the following actions,
except with the assent, by vote at a meeting of the Association or by written ballot without a meeting pursuant to



Corporations Code Section 7513, of a simple majority of the members, other than the subdivider, constituting a quorum
consisting of more than 50 percent of the voting power of the Association residing in members other than the subdivider:
(1) Entering into a contract with a third person wherein the third person will furnish goods or services for the
common area or the owners’ Association for a term longer than one year with the following exceptions:
(A) A management contract, the terms of which have been approved by the Federal Housing Administration or
Veterans Administration.

(B) A contract with a public utility company if the rates charged for the materials or services are regulated by
the Public Utilities Commission provided, however, that the term of the contract shall not exceed the shortest
term for which the supplier will contract at the regulated rate.
(C) Prepaid casualty and/or liability insurance policies of not to exceed three years duration provided that the
policy permits short rate cancellation by the insured.
(D) Lease agreements for laundry room fixtures and equipment of not to exceed five years duration provided
that the lessor under the agreement is not an entity in which the subdivider has a direct or indirect ownership
interest of 10 percent or more.

(E) Agreements for cable television services and equipment or satellite dish television services and equipment
of not to exceed five years duration provided that the supplier is not an entity in which the subdivider has a
direct or indirect ownership interest of 10 percent or more.
(F) Agreements for sale or lease of burglar alarm and fire alarm equipment, installation and services of not to
exceed five years duration provided that the supplier or suppliers are not entities in which the subdivider has a
direct or indirect ownership interest of 10 percent or more.

(G) A contract for a term not to exceed three years that is terminable by the Association after no longer than
one year without cause, penalty or other obligation upon ninety (90) days written notice of termination to the
other party.
(2) Incurring aggregate expenditures for capital improvements to the common area in any fiscal year in excess of
5% of the budgeted gross expenses of the Association for that fiscal year.
(3) Selling during any fiscal year property of the Association having an aggregate fair market value greater than 5%
of the budgeted gross expenses of the Association for that fiscal year.
(4) Paying compensation to members of the governing body or to officers of the Association for services performed
in the conduct of the Association’s business provided, however, that the governing body may cause a member or
officer to be reimbursed for expenses incurred in carrying on the business of the Association.
(5) In the case of a limited equity housing cooperative, using the corporate equity for any purpose permitted under
Section 33007.5(d)(1) of the Health and Safety Code without the vote or written consent of a bare majority of the
stock or membership interests of resident owners.

2792.23. Reasonable Arrangements – Inspection of Association’s Books and Records.
(a) Commencing not later than 90 days after the close of escrow of the first interest in the subdivision, copies of the
documents listed below, as soon as readily obtainable, shall be delivered by the subdivider to the governing body of the
Association at the office of the Association, or at such other place as the governing body of the Association shall
prescribe. The obligation to deliver the documents listed below shall apply to any documents obtained by the subdivider
no matter when obtained, provided, however, such obligation shall terminate upon the earlier of (1) the conveyance of
the last subdivision interest covered by a subdivision public report or (2) three years after the expiration of the most
recent public report, on the subdivision:
(l) The recorded subdivision map or maps for the project.

(2) The recorded condominium plan, if any, and all amendments thereto.
(3) The deeds and easements executed by the subdivider conveying the common area or other interest to the
Association, to the extent applicable.
(4) The recorded covenants, conditions and restrictions for the subdivision, including all amendments and
annexations thereto.



(5) The Association’s filed articles of incorporation, if any, and all amendments thereto.
(6) The Association’s bylaws and all amendments thereto.

(7) All architectural guidelines and all other rules regulating the use of an owner’s interest in the subdivision or use
of the common area which have been promulgated by the Association.

(8) The plans approved by the local agency or county where the subdivision is located for the construction or
improvement of facilities that the Association is obligated to maintain or repair; provided, however, that the plans
need not be as-built plans and that the plans may bear appropriate restrictions on their commercial exploitation or
use and may contain appropriate disclaimers regarding their accuracy.

(9) All notice of completion certificates issued for common area improvements (other than residential structures).
(10) Any bond or other security device in which the Association is the beneficiary.
(11) Any written warranty being transferred to the Association for common area equipment, fixtures or
improvements.
(12) Any insurance policy procured for the benefit of the Association, its governing board or the common area.
(13) Any lease or contract to which the Association is a party.

(14) The membership register, including mailing addresses and telephone numbers, books of account and minutes
of meetings of the members, of the governing body and of committees of the governing body of the Association.

(15) Any instrument referred to in Section 11018.6(d) but not described above which establishes or defines the
common, mutual or reciprocal rights or responsibilities of members of the Association.

(b) Commencing not later than 90 days after the annexation of additional phases to the subdivision, copies of those
documents listed under subdivision (a) which are applicable to that phase, shall, as soon as readily obtainable, be
delivered by the subdivider to the governing body of the Association at the office of the Association, or at such other
place as the governing body of the Association shall prescribe. The obligation to deliver the documents listed in
subsection (a) shall apply to any documents obtained by the subdivider no matter when obtained, provided, however,
such obligation shall terminate upon the earlier of (1) the conveyance of the last subdivision interest covered by a
subdivision public report or (2) three years after the expiration of the most recent public report, on the subdivision.
(c) The membership register, including mailing addresses and telephone numbers, books of account and minutes of
meetings of the members, of the governing body and of committees of the governing body of the Association shall be
made available for inspection and copying by any member of the Association – or by his duly-appointed representative
– at any reasonable time and for a purpose reasonably related to his interest as a member, at the office of the Association
or at such other place within the subdivision as the governing body shall prescribe.
(d) (1) In the case of the minutes, minutes proposed for adoption that are marked to indicate draft status, or a summary
of the minutes, of any meeting of the governing body, other than an executive session, shall be available to members
within 30 days of the meeting and shall be distributed to only members upon request and payment of the fee
prescribed in (e)(3) below.
(2) At the time the pro forma operating budget is distributed or at the time of any general mailing, members of the
Association shall be notified in writing of their right to have copies of the minutes of meetings of the governing
body and as to how and where those minutes may be obtained and the cost of obtaining such copies.

(e) The governing body shall establish reasonable rules with respect to:
(1) Notice to be given to the custodian of the records by the member of the Association desiring to make the
inspection.
(2) Hours and days of the week when such an inspection may be made.
(3) Payment of the cost of reproducing copies of documents requested by a member of the Association.

(f) Every member of the governing body shall have the absolute right at any reasonable time to inspect all books, records
and documents of the Association and the physical properties owned or controlled by the Association. The right of
inspection by a member of the governing body includes the right to make extracts and copies of documents.

2792.24. Reasonable Arrangements – Governing Instruments – Amendments.
(a) In a single-class voting structure, amendments of the CC&R’s may be enacted by requiring the vote or written assent
of members representing both:

(1) A majority of the total voting power of the Association which is at least a bare majority and not more than 75%;
and
(2) At least a bare majority of the votes of members other than the subdivider.

The percentage of the voting power necessary to amend a specific clause or provision shall not be less than the
percentage of affirmative votes prescribed for action to be taken under that clause. For example, if the CC&R’s expressly
state that 75% of the voting power must agree to an increase in the maximum annual assessment, then 75% of the voting
power is necessary to amend this provision regardless of the percentage prescribed in the general provision pertaining
to amendments of the CC&R’s.
(b) Amendments of the Articles or Bylaws shall require the vote or written assent of the members as follows:

(1) An owners Association other than for a limited equity housing cooperative.
(A) Articles
(i) At least a bare majority of the governing body; and

(ii) At least a bare majority of the voting power of the Association; and
(iii) At least a bare majority of the votes of members other than the subdivider.
(B) Bylaws

(i) At least a bare majority of a quorum, but not more than a bare majority of the voting power of the
Association; and

(ii) At least a bare majority of the votes of members other than the subdivider.
(2) An owners Association for a limited equity housing cooperative.
(A) Articles

(i) At least a bare majority of the governing body; and
(ii) At least 66 2/3 percent of the resident-owner members or shareholders.
(B) Bylaws

(i) At least 66 2/3 percent of the resident-owner members or shareholders.
(c) Notwithstanding the provisions of (b) above, the percentage of a quorum or of the voting power of the Association
or of members other than the subdivider necessary to amend a specific clause or provision in the Articles or Bylaws
shall not be less than the prescribed percentage of affirmative votes required for action to be taken under that clause.
(d) If a two-class voting structure is provided and is still in effect in the Association, none of the governing instruments
may be amended without the vote or written assent of a prescribed percentage of the voting power of each class of
membership or a prescribed percentage of a quorum of members of each class.
(e) If a two-class voting structure was originally provided in the governing instruments, but is no longer in effect because
of the conversion of one class to the other, the provisions for amending the governing instruments set forth in
subdivisions (a) and (b) above shall be applicable.

2792.26. Reasonable Arrangements – Disciplining of Members by the Association.
(a) The Association cannot be empowered to cause a forfeiture or abridgement of an owner’s right to the full use and
enjoyment of his individually-owned subdivision interest on account of the failure by the owner to comply with
provisions of the governing instruments or of duly enacted rules of operation for common areas and facilities except by
judgment of a court or a decision arising out of arbitration or on account of a foreclosure or sale under a power of sale
for failure of the owner to pay assessments duly levied by the Association.

(b) The governing instruments shall include provisions which authorize the governing body to impose monetary
penalties, temporary suspensions of an owner’s rights as a member of the Association or other appropriate discipline



for failure to comply with the governing instruments provided that the procedures for notice and hearing, satisfying the
minimum requirements of subdivision (h) of Section 1363 of the Civil Code, are followed with respect to the accused
member before a decision to impose discipline is reached.

(c) A monetary penalty imposed by the Association as a disciplinary measure for failure of a member to comply with
the governing instruments or as a means of reimbursing the Association for costs incurred by the Association in the
repair of damage to common areas and facilities for which the member was allegedly responsible or in bringing the
member and his subdivision interest into compliance with the governing instruments may not be characterized nor
treated in the governing instruments as an assessment which may become a lien against the member’s subdivision
interest enforceable by a sale of the interest in accordance with the provisions of Sections 2924, 2924(b) and 2924(c) of
the Civil Code.
(d) The provisions of subdivision (c) do not apply to charges imposed against an owner consisting of reasonable late
payment penalties for delinquent assessments and/or charges to reimburse the Association for the loss of interest and
for costs reasonably incurred (including attorneys’ fees) in its efforts to collect delinquent assessments.

2792.27. Reasonable Arrangements – Annexation of Property to the Subdivision.
(a) Provisions in the CC&Rs to effect the annexation of real property to the existing subdivision shall require the vote
or written assent of not less than 66 2/3% of the total votes residing in Association members other than the subdivider
unless the proposed annexation is in substantial conformance with a detailed plan of phased development submitted to
the commissioner with the application for a public report for the first phase of the subdivision.

(b) The plan for phased development through annexation referred to in subdivision (a) must include, but need not be
limited to, the following:
(1) Proof satisfactory to the Commissioner that no proposed annexation will result in an overburdening of common
facilities.
(2) Proof satisfactory to the Commissioner that no proposed annexation will cause a substantial increase in
assessments against existing owners which was not disclosed in subdivision public reports under which pre-existing
owners purchased their interests.

(3) Identification of the land proposed to be annexed and the total number of residential units then contemplated by
the subdivider for the overall subdivision development.

(4) A written commitment by the subdivider to pay to the association, concurrently with the closing of the escrow
for the first sale of a subdivision interest in an annexed phase, appropriate amounts for reserves for replacement or
deferred maintenance of common area improvements in the annexed phase necessitated by or arising out of the use
and occupancy of residential units under a rental program conducted by the subdivider which has been in effect for
a period of at least one year as of the date of closing of the escrow for the first sale of a residential unit in the
annexed phase.

2792.28. Reasonable Arrangements – Architectural and Design Control.
(a) The committee for the control of structural and landscaping architecture and design (Architectural Control
Committee) within the subdivision shall consist of not less than three nor more than five members.
(b) The subdivider may appoint all of the original members of the Architectural Control Committee and all replacements
until the first anniversary of the issuance of the original public report for the first (or only) phase of the subdivision.
The subdivider may reserve to himself the power to appoint a majority of the members of the Committee until 90% of
all the subdivision interests in the overall development have been sold or until the fifth anniversary date of the original
issuance of the final public report for the first (or only) phase of the subdivision, whichever first occurs.
(c) After one year from the date of issuance of the original public report for the first (or only) phase of the subdivision,
the governing body of the Association shall have the power to appoint one member to the Architectural Control
Committee until 90% of all of the subdivision interests in the overall development have been sold or until the fifth
anniversary date of the original issuance of the final public report for the first (or only) phase of the subdivision,
whichever first occurs. Thereafter the governing body of the Association shall have the power to appoint all of the
members of the Architectural Control Committee.

2792.3. Approved Form of Bond for Completion of Common Facilities.
A bond posted pursuant to Section 11018.5(a)(2)(A) to secure the faithful performance of a commitment by the
subdivider to complete common facilities and common-area improvements shall be in substantially the following form:
COMPANY NAME
Bond No. ________________

Premium: $ _______________
KNOW ALL MEN BY THESE PRESENTS, that we ____________ (Name of subdivider), as PRINCIPAL, and
_____________(Name of surety), a corporation organized under the law of the State of __________________, and
authorized to transact the business of surety in the State of California, as SURETY, are firmly held and bound unto
_____________ (Name of homeowner association) (hereinafter referred to as OBLIGEE) in the penal sum of
___________Dollars ($___________) for which sum, well and truly to be paid, we bind ourselves, our heirs,
administrators, successors and assigns, jointly and severally, firmly by these presents.
This bond is given pursuant to Section 11018.5(a)(2)(A) of the California Business and Professions Code to assure lien-
free completion of the improvements described in PRINCIPAL’s “Planned Construction Statement,” a copy of which
is attached hereto and incorporated herein by reference, for the subdivision development known as ____________
(Name of subdivision), situated in the County of __________, State of __________.
SURETY, for value received, hereby agrees that the matters set forth in California Civil Code Section 3225, or similar
acts or omissions which might release the SURETY pursuant to law, shall not in any way release SURETY from the
obligation of this bond or reduce SURETY’s obligation thereunder.

SURETY, for value received, does hereby waive the right granted to SURETY under California Civil Code Section
2845 to require that OBLIGEE proceed independently against PRINCIPAL to enforce this obligation, but reserves to
itself any right under said Section 2845 to require that OBLIGEE proceed jointly against PRINCIPAL and SURETY in
any such action.
The condition of this obligation is such that if PRINCIPAL shall complete or cause to be completed said improvements
free of liens and claims on or before the latest completion date specified in said “Planned Construction Statement,” or
an extension thereof given in writing by OBLIGEE to PRINCIPAL and assented to in writing by SURETY, then this
obligation shall be null and void; otherwise, it shall remain in full force and effect.
A suit or action on this bond must be filed within two years after the latest completion date set forth in the “Planned
Construction Statement” or any extension thereof given in writing by OBLIGEE to PRINCIPAL and assented to in
writing by SURETY.
The terms, conditions and coverage of this bond have been approved by the Real Estate Commissioner of the State of
California.
IN WITNESS WHEREOF, PRINCIPAL and SURETY have caused these presents to be duly signed and sealed this __
day of ______________, 19___
_______________________________ _____________________________
(Principal) (Surety)
By ____________________________ By __________________________

2792.30. Rescission Rights.
A person who has made an offer to purchase an interest in an undivided interest subdivision may exercise the right of
rescission granted by Section 11000.2 of the Code by giving written notification of the election to rescind to the
subdivider at the place of business designated by the subdivider pursuant to Section 2792.31 of these regulations.
If the notice of election is by United States mail, it shall be considered given on the date that it is postmarked. If the
notice is sent by telegraph, it shall be considered as given when transmitted by telegraph from the place of origin. If
notification is by means of writing sent other than by United States mail or telegraph, it shall be considered as given at
the time of delivery at the place of business designated by the subdivider.

2792.31. Notice of Rescission Rights.
(a) To inform a person of his/her right of rescission under Section 11000.2 of the Code, the subdivider shall attach to
the face page of every copy of a subdivision public report given to a prospective purchaser, the notice set forth in
subdivision (b) hereof printed in not less than 12-point bold face capital letters and numerals.
(b) The form and content of the notice shall be as follows:

IF YOU MAKE AN OFFER TO PURCHASE AN UNDIVIDED INTEREST(S) IN THE UNDIVIDED
INTEREST SUBDIVISION IDENTIFIED BELOW, YOU HAVE A LEGAL RIGHT TO RESCIND (CANCEL)
THIS OFFER, AND ANY CONTRACT RESULTING FROM THE ACCEPTANCE OF YOUR OFFER, AND
THE RETURN OF ALL MONEY AND OTHER CONSIDERATION THAT YOU HAVE GIVEN TOWARD
THE PURCHASE UNTIL MIDNIGHT OF THE THIRD CALENDAR DAY AFTER THE DAY ON WHICH
YOU SIGN THE OFFER TO PURCHASE.
YOU MAY EXERCISE THIS RIGHT TO RESCIND WITHOUT GIVING ANY REASON AND WITHOUT
INCURRING ANY PENALTY OR OBLIGATION BY NOTIFYING
____________________________________________________________________________
(Name of Subdivider)
AT _________________________________________________________________________
____________________________________________________________________________
(Address)
OF YOUR ELECTION TO RESCIND BY TELEGRAPHIC COMMUNICATION, MAIL OR OTHER
WRITTEN NOTICE.
IF THE NOTICE OF RESCISSION IS SENT BY UNITED STATES MAIL, IT SHALL BE CONSIDERED
GIVEN ON THE DATE THAT IT IS POSTMARKED. IF THE NOTICE IS BY TELEGRAPHIC
COMMUNICATION, IT SHALL BE CONSIDERED GIVEN WHEN TRANSMITTED FROM THE PLACE
OF ORIGIN. IF NOTIFICATION IS BY MEANS OF A WRITING TRANSMITTED OTHER THAN BY
UNITED STATES MAIL OR TELEGRAPH, IT SHALL BE CONSIDERED GIVEN AT THE TIME OF
DELIVERY AT THE ABOVE PLACE OF BUSINESS.
YOU MAY USE THIS NOTICE FOR THE PURPOSE OF RESCINDING YOUR OFFER TO PURCHASE BY
COMPLETING THE BLANKS AND BY DATING AND SIGNING BELOW. THE USE OF REGISTERED OR
CERTIFIED MAIL WITH RETURN RECEIPT REQUESTED IS RECOMMENDED FOR TRANSMITTAL
OF THIS NOTICE BY MAIL.
_______________________________________________________________________________
(Name of Undivided Interest Subdivision) (DRE File Number)
I HEREBY RESCIND MY OFFER OF ____________________________________________
(Date)
TO PURCHASE AN UNDIVIDED INTEREST
______________________________________________________________________________
(Identification Number, If Known)
IN THE ABOVE-NAMED UNDIVIDED INTEREST SUBDIVISION.

_______________ , 19___. ________________________________________________________
(Date) (Signature)



________________________________________________________
(Signature)

2792.32. Alternative Arrangements for Master Planned Communities.
(a) A “Master Planned Development” is a development which ordinarily satisfies all of the following criteria:

(1) The development is or will be a planned development subdivision within the meaning of subdivision (k) of
Section 1351 of the Civil Code.
(2) The development consists of, will generally consist of, or is proposed to consist of both (a) approximately five
hundred (500) or more separate residential interests, and (b) one or more subdivisions, including planned
developments, community apartment projects, condominium projects, stock cooperatives, time-share projects, or
other residential, recreational, commercial, or mixed residential/non-residential projects.

(3) The Master Planned Development shall be managed by a community association ( “Master Association”) that
is responsible for the maintenance and operation of areas and/or facilities affecting the Master Planned Development
and enforcement of use restrictions pertaining to the Master Planned Development.
(4) The Master Planned Development is or will be developed in two or more phases.
Provided, however, the subdivider may demonstrate from specific facts and circumstances that a development that does
not satisfy the criteria set forth in this subsection (a) should nonetheless be treated as a Master Planned Development.
(b) Recognizing that control by the subdivider over the governing body serving a residential common interest
development and over the architectural control committee serving the development is ordinarily necessary until a
reasonable portion of the project has been completed, in order to fulfill the expectations of the subdivider and the
purchasers, the governing instruments for a Master Association shall substantially conform to the applicable standards
prescribed in subsections (c) through (g), inclusive, below.
(c) SUBDIVIDER'S MEMBERSHIP VOTING RIGHTS: The governing instruments for a Master Association may
include provisions for two classes of membership as defined in Section 2792.18(b). For such a Master Association,
Class B membership shall be automatically converted to Class A membership and Class B membership shall thereafter
cease to exist on the first to occur of the following:
(1) When seventy-five percent of the separate residential interests proposed for the overall Master Planned
Development have been conveyed to Class A members;
(2) On the fifth anniversary following the most recent conveyance to a Class A member of the first separate
residential interest in any phase of the overall Master Planned Development under the authority of a public report;
or
(3) On the twenty-fifth anniversary of the first conveyance of a separate residential interest to a Class A member in
the overall Master Planned Development under the authority of a public report.
(d) DELEGATE VOTING: The governing instruments for a Master Association may include provisions for establishing
a geographical area in the Master Planned Development for one or more delegates to represent the collective voting
power of the members residing in such residential or mixed residential/non-residential projects within the Master
Planned Development. Arrangements in the governing instruments for the exercise of the voting power of the Master
Association by delegates selected by each delegate district shall conform to the following criteria:
(1) The governing instruments must establish a procedure for the selection of delegates, for defining delegate
districts, and for determining the number of votes that may be cast by a delegate.
(2) There shall be at least one delegate and one alternate for each delegate district.
(3) In any meeting of the members of the Master Association, the votes of members residing in a delegate district
shall be cast by delegates selected to represent that delegate district.
(4) The duties of the delegates shall be prescribed in the governing instruments.

(e) QUORUM FOR MEMBERSHIP MEETINGS: The quorum for an adjourned meeting of the members of the Master
Association, as described in Section 2792.17(e)(2) of these Regulations, may be set by the governing instruments at a
percentage less than that prescribed for the regular meeting, but it shall not be less than 15 percent of the total voting
power of the Master Association.



(f) GOVERNING BODY MEMBERSHIP:
(1) The governing instruments may include provision for the election of a majority of the governing body of the
Master Association by the subdivider under a Class C vote or similar device. For such a Master Association, this
arrangement shall irreversibly terminate on the first to occur of the following:
(A) When seventy-five percent of the separate residential interest proposed for the overall Master Planned
Development have been conveyed to Class A members;

(B) On the fifth anniversary following the most recent conveyance to a Class A member of the first separate
residential interest in any phase of the overall Master Planned Development under the authority of a public
report; or
(C) On the twenty-fifth anniversary of the first conveyance of a separate residential interest to a Class A member
in the overall Master Planned Development under the authority of a public report.
(2) The governing instruments may include provision for the election of twenty percent of the members of the board
of directors of the Master Association by the subdivider until the first to occur of the following:
(A) When ninety percent of the subdivision interests in the overall development have been conveyed to Class
A members;
(B) On the fifth anniversary following the most recent conveyance to a Class A member of the first separate
residential interest in any phase of the overall Master Planned Development under the authority of a public
report.
(C) On the twenty-fifth anniversary of the first conveyance of a separate residential interest to a Class A member
in the overall Master Planned Development under the authority of a public report.
(g) ARCHITECTURAL CONTROL: Members appointed to the Architectural Control Committee by the governing
body or by the subdivider need not be members of the Master Association. The governing instruments may include
provision for the election of a majority of the Architectural Control Committee of the Master Association by the
subdivider. This arrangement shall irreversibly terminate on the first to occur of the following:

(1) When ninety percent of the subdivision interests proposed for the overall Master Planned Development have
been conveyed to Class A members; or
(2) On the fifth anniversary following the most recent conveyance to a Class A member of the first separate
residential interest in any phase of the overall Master Planned Development under the authority of a public report.
(h) ADDITIONAL ASSOCIATIONS: If any residential structure or other major special benefit facility or amenity will
be constructed or provided within the Master Planned Development and commonly maintained or operated for the use
or benefit of some but not all of the homeowners within the Master Planned Development, ordinarily one or more
separate homeowners associations shall be established under arrangements substantially satisfying the requirements of
Sections 2792.4, 2792.8(a), and 2792.15 to 2792.26, inclusive, of these Regulations to maintain the residential structure
or to maintain and operate the major special benefit facility or amenity and to enforce any obligation or commitment,
and any bond or other arrangement securing such obligation or commitment, relating to the residential structure or major
special benefit facility or amenity.

(i) Notwithstanding the foregoing, the subdivider may present to the Commissioner specific facts an circumstances
relating to a Master Planned Development that demonstrate the need for alternative arrangements, satisfactory to the
Commissioner, from those provisions set forth in subsections (c) through (h) above.
(j) The subdivider of a Master Planned Development may enter into an arrangement with the Master Association to sell
or to convey under a lease purchase arrangement common area amenities to the Master Association. The provisions of
this subsection are not available to anyone other than the subdivider of a Master Planned Development. The sale or
lease purchase arrangement shall include:
(1) All common area amenities subject to this arrangement shall be specifically identified and defined as “common
area” or “future common areas” in the CC&Rs. The common area amenity must be a part of the proposed Master
Planned Development, accessible to all homeowners who will be charged an assessment to pay for the amenity and
must be located on a separate lot or parcel. The term common area shall not include any element or amenity within
a separate interest or unit.



(2) All common area amenities subject to this arrangement that have not been completed shall be covered by a bond
or other arrangement to secure completion of the amenities.
(3) The Master Association shall not be obligated to make any payments nor shall any homeowner be required to
pay any assessment for common area amenities subject to this arrangement until those amenities have been
completed and a Notice of Completion as defined in Civil Code Section 3093 has been recorded.
(4) The CC&Rs must obligate the Master Association to maintain and control the common area amenities subject
to this arrangement after the sale or lease purchase and to act on those amenities, as appropriate, during the term of
the sale or lease purchase.

(5) Title to the common area amenities shall be delivered free and clear of any liens or blanket encumbrances to the
Master Association upon completion of the sale or lease purchase. All encumbrances affecting the common area
amenities shall include assurances that the ownership or use by the Master Association shall not be adversely
affected.
(6) The purchase price of the common area amenities shall not exceed the cost of construction of those amenities.
The master subdivider shall provide a bond to secure completion of construction. The Bureau may, in its discretion,
determine whether the purchase price of the common area amenities exceeds the cost of construction of those
amenities. In order to make that determination, the Bureau may review construction bids, records or analyses
submitted by the subdivider and, if deemed necessary, may request an independent third party evaluation. The costs
of any independent third party evaluation shall be paid by the subdivider.
(7) The term of the sale or lease purchase arrangement shall not exceed ten (10) years and shall provide for
substantially equal monthly payments by the Master Association sufficient to fully amortize the sale or lease
purchase. The terms of the sale or lease purchase agreement shall be fair, just and equitable and may not provide
for a prepayment penalty, negative amortization or balloon payments. Payments on the sale or lease purchase
arrangement shall begin not later than three years from the date a Notice of Completion as defined in Civil Code
Section 3093 has been recorded unless the Bureau has approved a longer time period.
(8) The master subdivider shall submit to the Bureau, prior to use or execution all sale or lease purchase agreements,
covenants and documents relating to the sale or lease purchase agreement.
(9) The sale or lease purchase arrangement shall specify who is responsible for maintenance, insurance, reserves
and operation of the common area amenities. In a lease purchase arrangement, the subdivider shall pay the property
taxes attributable to the common area amenities. The subdivider shall post a bond or other form of acceptable
security to insure performance if the master subdivider is responsible for any task requiring such security.
(10) The sale or lease purchase arrangement shall provide for the distribution of proceeds and the action to be taken
in the event of condemnation or destruction.
(11) The Master Association CC&Rs and budget shall provide for: specific language binding the Association to
fund the common area amenities prior to, during and after acquisition of the amenities; the ability of the Association
to address issues related to the operation of the common area amenities while they are subject to a sale or lease
purchase arrangement; sufficient funds to meet the monthly obligations of the sale or lease purchase arrangement,
including a minimum 5% sinking fund to cover defaulting individual homeowner payments until such time as the
sinking fund equals the outstanding balance; reserve payments for the common area amenities commencing upon
recordation of a notice of completion; and, the right of the Master Association to file liens against the interests of
homeowners who have failed to pay their respective portion of the sale or lease purchase costs. Individual
homeowner assessments to create the sinking fund shall begin upon the commencement of payments by the Master
Association under the sale or lease purchase arrangement. The sinking fund may only be used to cover defaulting
individual homeowner payments on the common area amenities covered by the sale or lease purchase arrangement.

(12) The sale or lease purchase arrangement and agreements shall not be modified without the assent of a simple
majority of the owners other than a subdivider.

2792.33 Continuing Care Subdivisions.
(a) A “Continuing Care Subdivision” is a subdivision described in Section 11004.5 of the Code that includes all of the
following:

(1) The subdivision qualifies as housing for older persons pursuant to 42 USC 3607(b)(2)(c) and Section 51.3 of
the California Civil Code.



(2) The subdivision offers or provides to its members continuing care services or assisted living services as
described in Section 1771 of the Health and Safety Code.
(3) The continuing care provider is a person or entity responsible for providing such continuing care services or
assisted living services.
(b) Notwithstanding the provisions of Sections 2792.17, 2792.18, 2792.19 and 2792.21, the governing instruments of a
continuing care subdivision may provide for the following:

(1) A quorum for an adjourned meeting of the members of the Association as set forth in Section 2792.17(e)(2) of
not less than 15 percent of the total voting power of the Association.

(2) Two classes of membership as defined in 2792.18.
(A) The continuing care provider may be a Class B member. Class B membership entitles the holder to not
more than three votes for each subdivision interest owned.
(B) The continuing care provider or its successor may hold at least one Class B membership for as long as the
provider or successor provides continuing care services or assisted living services for the subdivision.
(C) The governing instruments shall contain provisions for the resolution of impasses or disputes between Class
A and Class B memberships.

(3) The election by Class B membership of 20 percent of the members of the governing body of the Association.
(4) The governing body of the Association may enter into an agreement with a continuing care provider to provide
for members of the Association continuing care services or assisted living services as described in Section 1771 of
the Health and safety Code. Such agreements shall ordinarily include at least the following provisions:

(A) A term of not more than five years with automatic renewals for a two year period after expiration of the
first term unless the Association by the vote or written assent of a majority of the voting power residing in
members other than the subdivider or continuing care provider determines not to renew the agreement and gives
notice of that determination. Notice of a determination not to renew shall be given not less than six months prior
to expiration of the first term or of a subsequent renewal.
(B) Termination for cause at any time by the governing body.
(C) Review by the governing body not less than every two years of the performance of the continuing care
provider.
(D) No agreement to provide continuing care services or assisted living services shall be terminated unless the
governing body has entered into an agreement with another continuing care provider so that there will be no
lapse in services provided to members.
(c) The provisions of this section and Section 2792.21 do not apply to continuing care services or assisted living services
agreements between a continuing care provider and individual members.
(d) If the State Department of Social Services determines in writing that a conflict exists under Section 1775 of the
Health and Safety Code, the Commissioner may vary some of the requirements of the following regulations in order to
remove such conflict: 2792.8, 2792.9, 2792.15, 2792.16, 2792.17, 2792.18, 2792.19, 2792.20, 2792.21, 2792.23,
2792.24, 2792.26, 2792.27 and 2792.28.

2792.4. Special Provision for Enforcement of Bonded Obligations.
When common-area improvements which are included in the subdivision offering have not been completed prior to the
issuance of the public report and the subdivision owners’ association (hereafter Association) is obligee under a bond or
other arrangement (hereafter Bond) to secure performance of the commitment of the subdivider to complete the
improvements, the covenants, conditions and restrictions for the subdivision shall include at least the following
substantive and procedural provisions relative to the initiation of action to enforce the obligations of the subdivider and
the surety under the Bond:
(1) The governing body of the Association shall be directed to consider and vote on the question of action by the
Association to enforce the obligations under the Bond with respect to any improvement for which a Notice of
Completion has not been filed within 60 days after the completion date specified for that improvement in the
Planned Construction Statement appended to the Bond. If the Association has given an extension in writing for the
completion of any common-area improvement, the governing body shall be directed to consider and vote on the
aforesaid question if a Notice of Completion has not been filed within 30 days after the expiration of the extension.
(2) A special meeting of members for the purpose of voting to override a decision by the governing body not to
initiate action to enforce the obligations under the Bond or on the failure of the governing body to consider and vote
on the question. The meeting shall be required to be held not less than 35 days nor more than 45 days after receipt
by the governing body of a petition for such a meeting signed by members representing 5% or more of the total
voting power of the Association.

(3) A vote by members of the Association other than the subdivider at the special meeting called for the purpose set
forth in (2) above.

(4) A vote of a majority of the voting power of the Association residing in members other than the subdivider to
take action to enforce the obligations under the Bond shall be deemed to be the decision of the Association and the
governing body shall thereafter implement this decision by initiating and pursuing appropriate action in the name
of the Association.

2792.8. Governing Instruments for Common Interest Subdivisions.
(a) Governing instruments for the ownership and management of subdivisions enumerated in Section 11004.5 of the
Code (common-interest subdivisions) including the Covenants, Conditions and Restrictions (CC&R’s), Articles of
Incorporation (Articles) and Bylaws shall ordinarily provide for, but need not be limited to, the following:

(1) Creation of an organization (hereafter Association) of subdivision interest owners;
(2) A description of the common interests of the subdivision owners or lessees;
(3) Transfer of title and/or control of common interests or of mutual and reciprocal rights of use to the owners in
common or the Association;
(4) Procedures for calculating and collecting regular assessments from owners to defray expenses attributable to the
ownership, operation or furnishing of common interests or to the enjoyment of mutual and reciprocal rights of use;
(5) Procedures for establishing and collecting special assessments for capital improvements or for other purposes;

(6) Liens upon privately-owned subdivision interests for assessments levied pursuant to the CC&R’s and
foreclosure thereof for nonpayment;

(7) Policies and Procedures relating to the disciplining of members for failure to comply with provisions of the
governing instruments;
(8) Creation of a governing body for the Association;

(9) Procedures for the election and removal of governing body members and officers of the Association;
(10) Enumeration of the powers and duties of the governing body and the officers and of the limitations upon the
authority of the governing body to act without the prior approval of members representing a majority of the voting
power of the Association;

(11) Allocation of voting rights to Association members;
(12) Preparation of the budgets and financial statements of the Association and for distribution to the Association
members;



(13) Regular and special meetings of Association members with notice requirements;
(14) Regular meetings of the governing body with provision for notice to Association members;

(15) Quorum requirements for meetings of members of the Association and of the governing body;
(16) Procedures for proxy voting at members’ meetings;
(17) Policies and procedures governing the inspection of books and records of the Association by members;

(18) Amendment procedures for those provisions of the governing instruments which relate to the ownership,
management and control of the Association and/or the common interests;

(19) Prohibitions against or restrictions upon the severability of a separately-owned portion from the common
interest portion of a subdivision interest;

(20) Conditions upon which a partition of a condominium project may be had pursuant to Section 1359 of the Civil
Code;
(21) Action to be taken and procedures to be followed in the event of condemnation, destruction or extensive
damage to the subdivision interests, including provisions respecting the use and disposition of insurance proceeds
or damages payable to the Association or to a trustee on behalf of owners on account of condemnation, destruction
or damage;
(22) Annexation of additional land to the existing development where appropriate;

(23) Architectural and/or design control;
(24) Special provisions for enforcement of financial arrangements by the subdivider to secure performance of his
commitment to complete common-area improvements;
(25) Granting of easements or use rights affecting the common areas;
(26) Special provisions authorizing the governing body, subject to compliance with Section 1354 of the Civil Code,
to institute, defend, settle or intervene on behalf of the Association in litigation, arbitration, mediation, or
administrative proceedings in matters pertaining to (A) enforcement of the governing instruments, (B) damage to
the common areas, (C) damage to the separate interests which the Association is obligated to maintain or repair, or
(D) damage to the separate interests which arises out of, or is integrally related to, damage to the common areas or
separate interests that the association is obligated to maintain or repair.

(b) The Commissioner will ordinarily consider provisions of the governing instruments proposed for a common-interest
subdivision to constitute “reasonable arrangements” under Section 11018.5 of the Code if the provisions are in
substantial conformance to the applicable standards prescribed in Sections 2792.4, 2792.15 through 2792.21, 2792.23,
2792.24 and 2792.26 through 2792.28 of these Regulations and if they do not otherwise arbitrarily deny, limit or abridge
the right of owners with respect to management, maintenance, preservation, operation or control of their subdivision
interests.

2792.9. Assuring Operating and Maintenance Fund for Common Facilities and Services.
(a) To assure the availability of funds, or sources of funds, to defray the costs of common facilities and services during
the early stages of ownership and operation by the Association and to assure the fulfillment of the subdivider’s
obligation to pay assessments as an owner of subdivision interests, the Commissioner will ordinarily require that:
(1) No sale of a subdivision interest be closed until 80% of all subdivision interests covered by the final subdivision
public report have been conveyed (or leased if that is the marketing plan) and are simultaneously closed; or

(2) The subdivider furnish funds, a surety bond to the Association as obligee, or other security convertible to cash
by the escrow depository to assure the fulfillment of the subdivider’s obligations as an owner of separate interests
covered by the final subdivision public report to pay regular and special assessments; or
(3) The subdivider present an alternative arrangement satisfactory to the Commissioner to secure the fulfillment of
the subdivider’s obligations to the Association as an owner of separate interests covered by the final subdivision
public report.
(b) The security referred to in (a)(2) or (a)(3) above shall ordinarily:



(1) Be in an amount which is equal to six (6) months’ regular assessments for the separate interests covered by the
final subdivision public report.
(2) Be subject to terms and conditions which will assure that the subdivider pays, as and when due, all regular and
special assessments which are levied by the Association against separate interests owned by the subdivider in the
subdivision until title to 80% of the separate interests which are covered by the final subdivision public report have
been conveyed (or leased if that is the marketing plan).
(3) Be the subject of a contract signed on behalf of the subdivider and the Association covering release and
enforcement of the security.

(4) Be delivered to a neutral escrow depository acceptable to the Commissioner along with instructions to the
depository signed on behalf of the subdivider and the Association covering handling of the security, return of the
security to the subdivider, and remittance of the security to the Association, including the following:
(A) The escrow instructions shall include a procedure under which the security shall be returned to the
subdivider upon the Association’s failure to give the escrow depository within 40 days the Association’s written
objection to return of the security. The return of the security shall be made but only if the subdivider’s demand
for return of the security is accompanied by the subdivider’s written statement that the subdivider has paid, as
and when due, all regular and special assessments which have been levied by the Association against separate
interests which are covered by the final subdivision public report owned by the subdivider. Before the security
shall be returned, the subdivider shall certify that title to 80% of the separate interests which are covered by the
final subdivision public report have been conveyed (or leased if that is the marketing plan).
(B) The escrow instructions shall include a procedure under which all or some specified portion of the security
shall be remitted to the Association upon the subdivider’s failure to give the escrow depository within 40 days
the subdivider’s written objection to remittance of the security, but only if the Association’s demand for
remittance of all or some specified portion of the security is accompanied by a written statement signed by an
officer of the Association that the subdivider is delinquent in the payment of regular or special assessments
which have been levied by the Association against separate interests covered by the final subdivision public
report owned by the subdivider.

(C) The escrow instructions shall provide that, in the event the escrow depository receives conflicting
instructions from the subdivider and the Association, the escrow holder is authorized, in its sole discretion, to
(1) interplead the security or (2) retain the security until the security is disposed of in accordance with (i) the
joint or mutual instructions of the subdivider and the Association, (ii) the order of a court of competent
jurisdiction or (iii) in accordance with the final binding decision rendered in an alternative dispute resolution
proceeding.
(D) If the security is a letter of credit, the escrow instructions shall include a procedure under which the escrow
depository shall draw upon the letter of credit prior to the expiration of the time for drawing thereupon, or upon
the subdivider’s failure to give the escrow depository within 40 days the subdivider’s written objection to
remittance of the security to the Association.

2793. Applications for Consent Under Section 11018.7.
(a) Application for consent of the Real Estate Commissioner under Section 11018.7 of the Business and Professions
Code shall be made on a form provided by the Bureau.
(b) The application shall consist of at least the following:

(1) A statement signed by or on behalf of the applicant containing the following:
(A) A narrative explanation of the proposed change and the anticipated effects thereof.
(B) The reasons why the amendment is being proposed.



(C) The means whereby persons eligible to vote on the proposed change will be informed concerning the
substance of the change, and the voting procedure to be employed if the consent of the commissioner is
obtained.

(D) Identification of the subdivisions which will be affected by the proposed change by reference to the file
numbers of the public reports for the subdivisions.
(2) A copy of the instrument to be amended in its present form.

(3) A copy of the instrument incorporating the changes proposed in the application with suitable marking to indicate
proposed amendments.

(4) A copy of the resolution or other authority for submission of the application if made on behalf of a corporation
or association.

(5) A copy of the letter or notice to be given to all persons eligible to vote on the proposed change.
(6) An application fee of twenty dollars ($20.00) in the form of a check or money order.
(c) If the commissioner finds that the proposed change will not materially change the rights of any owner to ownership,
possession or use of interests in the subdivision, the commissioner shall consent to the submission of the proposed
change to a vote of the owners or members. If the commissioner finds that the proposed change will materially change
such rights, the commissioner shall require, as a condition of the commissioner's consent, that a notice approved by the
commissioner describing the substance of the proposed change be given to those persons eligible to vote at least fifteen
days prior to the vote.
(d) If the commissioner determines that the change as proposed would create a new condition or circumstance that
would be the basis for denial of a public report under Section 11018 or 11018.5, the commissioner shall issue a formal
order denying consent to the submission of the proposal to persons eligible to vote thereon.
(e) If an applicant fails to take the steps necessary to obtaining the consent of the commissioner within ninety days after
the application is filed, the commissioner may deem the application to be abandoned in which case a new application
must be filed if the application is to be thereafter pursued.

2795. Preliminary Public Report.
(a) If a subdivider makes application and pays the appropriate fee, a preliminary subdivision public report may be issued
by the Bureau in advance of satisfaction of all requirements for issuance of a final public report when in the judgment
of the Commissioner it is reasonable to expect that all of the requirements for the issuance of a final public report will
be satisfied in due course.
(b) A subdivider and persons acting on his behalf may solicit and accept reservations to purchase or lease subdivision
interests under authority of a preliminary public report if there is compliance with each of the following:
(1) The person making the reservation (potential buyer) has been given a copy of the preliminary public report and
has executed a receipt for a copy before any money or other thing of value has been accepted by or on behalf of the
subdivider in connection with the reservation.

(2) A copy of the reservation instrument signed by the potential buyer and by or on behalf of the subdivider, along
with any deposit taken from the potential buyer, is placed into a neutral escrow depository acceptable to the
Commissioner.
(3) The reservation instrument used is a form previously approved by the Bureau with at least the following
provisions:
(A) The right of either subdivider or potential buyer to unilaterally cancel the reservation at any time.
(B) The payment to the potential buyer of his total deposit on cancellation of the reservation by either party.

(C) The placing of the deposit into an interest bearing account for the benefit of the prospective buyer at the
prospective buyer's request and upon the prospective buyer's agreement to pay any charges of the escrow
depository for this service.
(c) The initial term of a preliminary public report shall not exceed one year from the date of issuance. The authority to
use a preliminary public report shall automatically terminate with respect to those subdivision interests covered by a
final public report which is issued before the scheduled termination date of the preliminary report.

2795.1. Receipt for Final or Preliminary Public Report.
(a) A receipt on the form specified herein shall be taken by or on behalf of the subdivider from each person executing
a reservation agreement under authority of a preliminary public report and each person who has made a written offer to
purchase or lease a subdivision interest under authority of a final subdivision public report.
(b) The subdivider or his agent shall retain each receipt for a public report for a period of three years from the date of
the receipt and shall make the receipts available for inspection by the Commissioner or his designated representative
during regular business hours.
(c) The form approved by the Commissioner for the acknowledgment of receipt of a final or preliminary public report
as follows:
RECEIPT FOR PUBLIC REPORT

The Law and Regulations of the Real Estate Commissioner require that you as a prospective purchaser or lessee be
afforded an opportunity to read the public report for this subdivision before you make any written offer to purchase or
lease a subdivision interest or before any money or other consideration toward purchase or lease of a subdivision interest
is accepted from you.
In the case of a preliminary or interim subdivision public report, you must be afforded an opportunity to read the report
before a written reservation or any deposit in connection therewith is accepted from you.
In the case of a conditional subdivision public report, delivery of legal title or any other interest contracted for will not
take place until issuance of a final public report. Provision has been made in the sales agreement and escrow instructions
for the return to you of the entire sum of money paid or advanced by you if you are dissatisfied with the final public
report because of a material change. (See California Business and Professions Code Section 11012.)

DO NOT SIGN THIS RECEIPT UNTIL YOU HAVE RECEIVED A COPY OF THE REPORT AND HAVE READ
IT.

I have read the commissioner’s public report on
___________________________ _____________________________
(File No.) (Tract No. or Name)
I understand the report is not a recommendation or endorsement of the subdivision, but is for information only.
The date of the public report which I received and read is:

___________________________ _____________________________
(Date Issued) (Date Amended)

Name _________________________________
Address _______________________________
(Date) _________________________________

Subdivider is Required to Retain this Receipt for Three Years.

2795.3. Term of Public Report and Extension Thereof.
The term of any Final Subdivision Public Report issued pursuant to Section 11018 of the Business and Professions
Code shall be limited to five (5) years. A renewal shall be issued if the subdivider, owner or agent makes application
for renewal of any report and has submitted such additional information as the commissioner may require.

2797. Common Interest Development - Individual Homeowner Maintenance.
A subdivision that is a common interest development as defined by Civil Code 1351(c) consisting of three (3) or more
attached residential dwellings may have individual homeowner maintenance for their own dwelling if all of the
following exist:
(a) The individual dwellings will be independent structurally from the other dwellings.
(b) All utility lines, except for the fire service line as described below, serving the individual dwellings will consist of
separate lines which run through easements located in accessible areas capable of maintenance by each owner of a
dwelling. Such easements will be established in the CC&R's. A fire service main will run through the easement and will
branch off from the main to each dwelling.



(c) The individual homeowners will be responsible for exterior maintenance of their dwelling. The exterior stucco will
contain architectural enhancements, which will indicate the boundaries between the dwellings.
(d) The homeowners association will maintain, repair and replace the roof. The association budget will include a reserve
item for roof replacement.
(e) The association will also have other limited maintenance responsibilities, such as, fire extinguisher cabinets, fire
extinguishers, electrical panels, gas meters and telephone panels, gutters and downspouts, address numbers and common
exterior lighting. These responsibilities will be described in the CC&Rs or in an exhibit to the CC&Rs specifically
allocating responsibility to the association.

(f) Maintenance Manuals and warranty manuals will be prepared to be consistent with this allocation of responsibility
and will further elaborate as necessary on the maintenance obligations.

(g) The association is responsible for obtaining property insurance for each residential dwelling, excluding items
typically covered by dwelling owners such as personal property, floor and wall surface materials, upgrades installed by
the homeowners and liability insurance for injury or damage caused inside the dwelling. The insurance should cover all
components of the dwelling including the roof, foundation and other exterior elements.
(h) In the event of damage or destruction, the association is responsible for the reconstruction of the dwellings.
(i) The dwelling owners will receive a separate disclosure to be signed or initialed describing in detail their maintenance,
repair, replacement and insurance obligations. That information will also be included in the subdivision's CCR's. In
addition, the subdivision public report will include a special note that there is a separate disclosure, which must be
signed by all homebuyers and describing the building configuration, association assessment structure, maintenance
responsibilities and financing issues. The report will indicate that the lower than usual association assessment will be
offset by higher owner maintenance costs.

2798. Phased Subdivision Development.
If a subdivider, for the purpose of developing and marketing subdivided land in increments or phases, requests and
obtains a public report that covers less than all of the contiguous subdivision interests or land which the subdivider
intends ultimately to develop as part of an overall project, a new notice of intention, questionnaire and original filing
fee must be submitted in connection with each subsequent application for a public report covering subdivision interests
to be annexed to the subdivision interests for which a final public report has previously been issued.

2799.1. Subdivision Advertising Criteria.
Standards which will be applied by the Real Estate Commissioner in determining whether advertising for sale or lease
of subdivision interests is false, untrue or misleading within the meaning of those terms in Sections 10140, 10177(c),
11022 and 17500 of the Business and Professions Code shall include, but shall not be limited to the following:

(1) Advertising shall not imply a use of a subdivision interest that is not set forth in the Notice of Intention and
Questionnaire comprising the application for a public report or permit.

(2) A subdivision shall not be advertised under a name, designation or appellation that is not set forth in a Notice
of Intention and Questionnaire.

(3) A subdivision shall not be advertised by a name or trade style which implies, contrary to fact, that the subdivider
or his agent is a bona fide research organization, public agency, nonprofit organization or similar entity.

(4) No improvement, facility or utility service may be advertised unless it has been completed or installed and is
available for use, or unless completion and availability for use are assured through bonding or other arrangements
approved by the commissioner. If not completed, the estimated date of completion shall be set forth in the
advertising.

(5) There shall be no reference to the prospective availability of private facilities outside of the subdivision for the
use and enjoyment of purchasers of subdivision interests if the facilities are to be constructed or installed by the
subdivider or an affiliated entity unless financial arrangements for completion or installation have been approved
by the commissioner.

(6) There shall be no reference to proposed or uncompleted private facilities over which the subdivider has no
control unless the estimated date of completion is set forth and unless evidence has been presented to the
commissioner that the completion and operation of the facilities are reasonably assured within the time represented
in the advertisement.



(7) Unless the facilities and improvements listed below have been completed, or unless financial and other
arrangements for completion have been made, subdivided land offered for residential use shall not be described as
“improved”, “developed”, or by similar terms without disclosure of any facility or improvement listed below that
is not included in the offering:
(A) Paved roads within the subdivision.
(B) A potable water system.

(C) A sewage system.
(D) A source of electricity at the building site.
(8) Reference shall not be made to a proposed public facility or project which purports to affect the value and utility
of subdivided lands without a disclosure of the existing status of the proposed facility based upon information
supplied or verified by the authority responsible for the public facility or project.
(9) A subdivider shall not advertise the availability of financing for on-site construction unless he has a bona fide
written expression of an intention to finance such construction by a recognized lender or unless the subdivider has
established to the satisfaction of the commissioner that financing of on-site construction will be provided by a source
other than a recognized lender.
(10) Pictorial or illustrative depictions of the subdivision and surrounding lands must accurately portray the land as
it exists and proposed improvements as they will be constructed.

(11) Pictorial or illustrative depictions other than unmodified photographs shall bear a prominent disclosure
identifying the nature of the depiction, e.g., ARTISTS CONCEPTION and a legend identifying those improvements
which are not then in existence.
(12) If a map or diagram is used to show the location of the subdivision in relation to other places, actual road miles
from each other place to the subdivision shall be shown or the map or diagram shall be prepared to scale and shall
include a scale of miles.
(13) If there is advertising of streets, roads, sewers, storm drains or other utilities which have not been accepted for
maintenance by a public entity, that fact must be disclosed in the advertising. Rights-of-way for passenger vehicles
to a subdivision or to lots within a subdivision which have not been accepted for maintenance by a public entity
shall be adequately described in terms of roadbed and surfacing.
(14) If the existence of a lake, river, canal or other body of water, which is subject to a fluctuating water level other
than through natural causes, is advertised as a feature of the subdivision, any significant effect of the fluctuation
upon the use of the water facility and upon the subdivision interests shall be described.
(15) No advertisement shall imply that a facility is available for the exclusive use of purchasers of subdivision
interests if a public right of access or of use of the facility exists.
(16) There shall be no reference to the availability for use by owners of subdivision interests of private clubs or
facilities in which an owner will not acquire a proprietary interest through purchase of a subdivision interest without
an accompanying disclosure that the existence of the facilities and their availability for use by subdivision interest
owners are at the pleasure of the owner of the facility.
(17) An advertisement of any facility in which a purchaser will acquire a proprietary interest with his purchase of a
subdivision interest must set forth the estimated costs and other obligations of the purchaser with respect to the
facility or shall refer the purchaser to a fact sheet or similar source of this information.
(18) No representation may be made that subdivision interests being offered for sale can be further divided unless
a full disclosure is included as to the legal requirements for further division of the interests.

(19) Subdivision interests may not be advertised as available at a particular minimum price if the number of
subdivision interests available at that price comprise less than 10% of the unsold inventory of the subdivider, unless
the number of lots then for sale at the minimum price is set forth in the advertisement.
(20) Advertising of a discounted purchase price shall not be made unless the subdivider has established base prices
for application of the discount through a substantial number of sales at base prices.



(21) A prospective increase in the price of a subdivision interest other than an interest offered with an on-site
residential, commercial or industrial structure may not be implied nor shall a price increase of such a subdivision
interest be announced more than sixty days prior to the date that the increase will be placed into effect.

(22) If the phrase “closing costs only” or similar terminology is used to describe the price of a subdivision interest,
the estimated dollar amount of the costs must be set forth in the advertisement.
(23) The total amount of any special bonded indebtedness, or the range of such bonded indebtedness, against the
subdivision interests shall be set forth in any advertisement which states or implies that off-site improvements for
the subdivision have been completed and paid for in connection with the development of the project. If the selling
price of a subdivision interest is advertised, the special bonded indebtedness against that subdivision interest shall
be given equal prominence with the selling price unless the bonded indebtedness is included in the advertised selling
price.

(24) No representation shall be made as to the availability of a resale program offered by or on behalf of the
subdivider unless the resale program has been made a part of the offering as submitted to the commissioner.

(25) An asterisk or other reference symbol may be used to explain, but not to contradict or to change the ordinary
meaning of the material in the body of the advertisement.

(26) Unless an offer made in connection with a sales promotion is unequivocally without conditions, the terms
“free”, “no obligation” or terms of similar import may not be used to describe that which is offered.
(27) Offers of travel, accommodations, meals or entertainment at no cost or reduced cost, the purpose of which is
to promote sales, shall not be described as “awards”, “prizes” or by words of similar import.
(28) Offers or solicitations of trip reservations to visit subdivided property or any other place where a sales
presentation for subdivided property is to be made shall set forth all conditions, limitations or qualifications that
will be applied before the recipient will be allowed to make the trip.

(29) The approximate retail value of any gift, prize or premium offered through an advertisement to prospective
purchasers shall be set forth in the advertisement.

(30) Complete rules and procedures for any contest or drawing advertised in connection with the marketing of
subdivision interests shall be included in the advertisement, or the advertisement shall state the means by which a
person can secure full information concerning said rules and procedures prior to his participation in the contest or
drawing.

(31) Advertising shall not include testimonials or endorsements which contain matters which the subdivider would
be precluded by law or regulation from making in his own behalf.

(32) An offer or inducement to purchase which purports to be limited as to quantity or restricted as to time shall set
forth the numerical quantity and/or time applicable to the offer or inducement.

(33) An advertisement or an offering of undivided or fractional interests in a subdivision, which does not include a
right of exclusive ownership or occupancy of a particular lot, parcel or unit by the purchaser, shall disclose the total
number of undivided or fractional interests to be offered for sale in the subdivision.
(34) If the subdivision offering involves something less than a fee interest with an exclusive and perpetual right to
occupy a lot, parcel or unit, e.g., a leasehold or time-sharing-ownership interest, the limitations and restrictions on
occupancy rights shall be included in the advertisement or the advertisement shall refer the purchaser to a fact sheet
or similar source of this information.
(35) No direct mail advertisement purporting to have resulted through a referral shall be used unless the solicitation
includes the name of the person making said referral.
(36) Investment merit or profit potential of a subdivision interest other than an interest which is offered with an on-
site residential, commercial or industrial structure shall not be expressed or implied unless the commissioner has
determined from evidence submitted by or on behalf of the subdivider that the representation is neither false nor
misleading.
(37) Statements appearing in the public report for a subdivision shall not be quoted, paraphrased or cited out of
context nor shall any part of the public report be underscored, italicized, bold faced or otherwise highlighted except
in strict conformance with highlighting in the public report itself.

2799.2. Advertising Review Fee.
A submission of each advertisement to the Bureau for approval pursuant to Section 11022 of the Code shall be
accompanied by a fee of seventy-five dollars ($75).

2800. Notification of Material Change.
The owner of a subdivision which is the subject of an outstanding public report shall immediately report in writing to
the Real Estate Commissioner relevant details concerning any material change in the subdivision itself or in the program
for marketing the subdivision interests. A material change in the subdivision or in the offering shall include, but shall
not be limited to the following:
(a) The sale, conveyance, including a transfer of title in trust, or the granting of an option to another to acquire, five or
more subdivision interests in a subdivision other than a time-share project or twelve or more time-share estates or time-
share uses in a time-share project.

(b) Change in the name or organization of the subdividing entity such as incorporation, dissolution of corporation or
change in corporate or fictitious business name.

(c) Change in purchase money handling procedures under Section 11013.2 or 11013.4 of the Code including but not
limited to a change in name or location of escrow or trust account depository or the creation of a blanket lien or
encumbrance affecting a lot, parcel or unit of subdivided land being offered for sale.
(d) Change in methods of marketing or conveyance of subdivision interests, including but not limited to the following:
(1) Use of real property sales contracts, lease-option agreements or similar marketing instruments.

(2) Special sales inducements involving a financial commitment to purchasers by or on behalf of the subdivider
such as buy-back agreements, special interest rates or a short-term basis and prizes, gifts or premiums.

(e) Inability of the subdivider to fulfill agreements and assurances to purchasers of subdivision interests given by the
subdivider to the commissioner in the application for a public report.

(f) Creation or discovery of latent hazards affecting the subdivisions such as adverse geologic conditions not apparent
at the time of issuance of the current public report for the subdivision.

(g) Addition of common areas or common facilities for the use and enjoyment of owners in the subdivision which were
not contemplated at the time of issuance of the current public report for the subdivision.
(h) A relocation of easements affecting unsold subdivision interests.

(i) The creation of a district, or the annexation of the subdivision into a district, having the power to tax or levy
assessments against real property interests within the subdivision.

(j) An increase of 20% or more or a decrease of 10% or more in the regular assessment charged by an Association
against owners in a common-interest subdivision over the amount of the regular assessment reflected in the current
public report for the subdivision.
(k) Delinquencies in the payment of regular assessments by owners within a common-interest subdivision resulting in
the receipt by the Association of income which is more than 10% less than scheduled income from said assessments.
(l) A proposed change in the use for which the subdivision is offered as, for example, from residential to investment or
a proposed change from an offering of the sole and exclusive use of a unit in a common-interest subdivision to a program
involving the sharing of ownership or use with others as, for example, a time sharing program.
(m) Changes in the means for furnishing potable water, sewage disposal and other public services to lots, parcels or
units within the subdivision.
(n) Any change in the configuration of the subdivision interest being offered for sale from the configuration according
to the subdivision map or parcel map upon which the current public report for the subdivision was based.
(o) An amendment to the CC&Rs or other governing instruments for the subdivision or for an association of owners of
subdivision interests.
(p) Failure by the subdivider as an owner of interests in a common interest subdivision to pay regular assessments
where:



(1) Assessments are payable on a monthly basis and the subdivider has failed to pay three or more months of such
assessments.
(2) Assessments are not payable on a monthly basis and the subdivider has failed to pay such assessments within
three months after such assessments become due and payable.
(q) A program which does not comply with Section 2792.10 in which the subdivider undertakes to subsidize the cost of
operating and maintaining common areas and of providing services in lieu of payment of regular assessments by the
subdivider.
(r) The affiliation by a single-site time-share project as defined in Section 11003.5 of the Code with: 1) other time-share
projects or accommodations under a contractual or membership program through a mandatory reservation system or 2)
a mandatory reservation system.

2801.5. “Subdivider” Defined.
The term “any person” in Section 11010 and the terms “owner” and “subdivider” in Sections 11012 and 11018.1 of the
Code include any person, who at any point in time, owns, or has an option or contract to acquire, the subdivision interests
listed in (a) or (b) below for purposes of sale, lease or financing if the subdivision interests were acquired or are to be
acquired from the original recipient of a public report for the subdivided land, or from a person who succeeded to the
interest of the original recipient in five or more subdivision interests in a subdivision other than a time-share project or
in twelve or more time-share estates or uses in a time-share project:

(a) Five or more subdivision interests in a subdivision other than a time-share project.
(b) Twelve or more time-shares estates or time-share uses in a time-share project.
Except as provided in Section 11010.5 of the Code, an “owner” or “subdivider” as herein defined shall not offer for sale
or lease, nor cause to be offered for sale or lease, any of the subdivision interests herein above referred to unless a
subdivision public report has been issued by the Bureau expressly authorizing the sale or lease of the interests by or on
behalf of said owner or subdivider.

2803. Noncontiguous Parcels.
If the notice of intention referred to in Section 11010 of the Code includes lots, parcels or units of subdivided land that
are not contiguous to each other, the commissioner will determine which of the lots, parcels or units are sufficiently
close together and sufficiently similar to each other in physical and other characteristics to be included within the
coverage of a single public report.

2804. Abandoning Application For Public Report.
(a) The commissioner may abandon an application for a final, conditional, amended, or renewed public report, if:
(1) The data required by Section 11010 has not been furnished within three years from the date a notice of intention
was filed for the subdivision public report; and

(2) Six months have elapsed since the commissioner has given notice of deficiencies or substantive inadequacies
contained in the documents which are required to make the filing substantially complete and the deficiencies and
inadequacies have not been corrected by the applicant; and
(3) The term of any one-year extension of time in which to complete the application, as provided in subdivision (d),
has elapsed.
(b) Ninety (90) days prior to abandoning an application the commissioner shall mail to the applicant and the applicant’s
designated representative, notice of the commissioner’s intent to abandon the application. The notice shall include a
statement that the applicant may, in accordance with subdivision (d), file a petition to keep the application open.

(c) Sixty (60) days or more following the mailing of the notice required by subdivision (b), the commissioner may issue
a final notice of intention to abandon the application. The application shall be deemed abandoned thirty (30) days after
the final notice is mailed to the applicant and the applicant’s designated representative, unless, prior to the expiration of
the thirty (30) day period, a one-year extension has been granted pursuant to subdivision (d).

(d) The commissioner, on his own motion, or after receipt of a petition from the applicant or the applicant’s designated
representative, may, under the following terms and conditions, grant a one-year extension in order to allow the applicant
to complete the application:
(1) The petition is received prior to the expiration of the thirty (30) day notice period referred to in subdivision (c).



(2) The petition sets forth reasons of hardship or justifiable extenuating circumstances explaining why the file has
been inactive. Hardship and justifiable extenuating circumstances shall include mistake, inadvertence, surprise,
excusable neglect, or circumstances beyond the control of the applicant or the applicant’s designated representative.

Written notice of the decision to grant or deny the petition will be mailed or delivered to the applicant and the applicant’s
designated representative, within thirty (30) calendar days after receipt of the petition.
(e) The commissioner may grant one or more one-year extensions, provided that the application has not been abandoned
as provided in subdivision (c).
(f) The term “applicant” as used in this section shall have the same meaning as the term “subdivider” as used in Section
11018.13 of the Code.
Article 12.2. Time-Share Projects

2805. “Developer” Defined.
The terms "developer" in Section 11212 and "any person" in Section 11212 and in Section 11226 of the Code include
any person, who at any point in time, owns, or has an option or contract to acquire eleven or more time-share interests
for purposes of sale in the ordinary course of business if the time-share interests were acquired or are to be acquired
from the original recipient of a public report for the time-share plan, or from a person who succeeded to the interest of
the original recipient in eleven or more time-share interests in a time-share plan.

2805.11. Impound of Funds to Assure Completion.
“All funds from the sale of time-share interests as the commissioner shall determine are sufficient to assure construction
of the improvement or improvements” as used in Section 11230(b) of the Code, means 100% of all funds received from
purchasers up to a maximum of the amount required to complete the improvement or improvements, consistent with
Section 11243 of the Code.

2805.5. Inducement to Out-of-State Solicitation.
The terms “sells”, “offers to sell” and “attempts to solicit prospective purchasers” in Section 11226 of the Code include
any written or oral communication which is disseminated or otherwise used within this state for the purpose of inducing
a resident to travel outside this state for a required presentation with the primary intention of causing the person to
purchase time-share interests located outside of this state.

2805.9. Reservation Rights.
(a) The term “the right to use accommodations at a specific time-share property” used in Section 11212(z)(2)(A) means
a priority right of not less than sixty days to reserve accommodations at that specific time-share property without
competing with owners of time-share interests at other time-share properties that are part of the multi-site time-share
plan.
(b) The term “use rights in accommodations at one or more other component sites” as used in Section 11212(z)(2)(A)
means the right, on a non-priority basis, to reserve accommodations in component sites of the multi-site time-share plan.

2806. Notification of Material Change.
The developer of a time-share plan which is the subject of an outstanding public report shall report to the Bureau
pursuant to Section 11226(f)(1), relevant details concerning any material change in the time-share plan. A material
change in the time-share plan includes, but shall not be limited to, the following:

(a) Deletion of an accommodation from the time-share plan or addition of an accommodation not authorized under an
existing time-share public report for the time-share plan.

(b) Change in the name or form of organization of the developer such as incorporation, dissolution of a corporation or
a change in the corporate or fictitious business name.

(c) Change in the methods of conveyancing of time-share interests such as the use of real property sales contracts.
(d) Change in purchase money handling procedures previously submitted to the Bureau including but not limited to a
change in the escrow depository or the creation of an encumbrance affecting more than one timeshare interest in the
time-share plan.
(e) Resignation of the trustee or other change in any of the terms of the trust agreement for the time-share plan.

(f) The existence of either of the following conditions with respect to the corpus of the trust.



(1) Insufficient funds in the trust to satisfy the trust fund provision for payment of debt service, property taxes,
assessments and/or insurance premiums for the trust property.
(2) Insufficient non-delinquent installment sales contracts and/or promissory notes to satisfy the provision of the
trust agreement for payment of the aggregate principal balance owing under a blanket encumbrance against the trust
properties.
(g) Any legal or physical condition rendering an accommodation of the time-share plan unusable by time-share owners
for one year or more.
(h) Litigation undertaken by a governmental entity or time-share owners' association seeking to prohibit or restrict the
dedication of an accommodation to the time-share plan.
(i) An annual budget for a time-share project which will necessitate a regular annual assessment that is more than 20
percent greater than the regular annual assessment in the certified budget for the immediately preceding year.
(j) An amendment to any provision of the recorded time-share plan or declaration.

(k) A change in any aspect of the offering for the time-share plan which will cause information in the current public
report for the project to be incorrect or misleading.

2807. Purchase Money Impounds.
(a) The amount of the money paid or advanced by a prospective buyer toward the purchase of a time-share interest
(Purchase Money) that must be deposited and retained in an escrow depository or trust account pursuant to Section
11243 of the Code shall ordinarily be the entire amount of the Purchase Money less disbursements made to third parties
for services enumerated in subdivision (b) of Regulation 2791.
(b) For purposes of compliance with Section 11243 of the Code:
(l) A proper release has not been obtained from a deed of trust encumbering time-share interests or accommodations
in a time-share plan unless an instrument has been duly recorded unconditionally reconveying and releasing the
interests being sold or leased from the lien or charge of such deed of trust.
(2) As an alternative to obtaining a proper release from the lien or charge of such deed of trust, it shall be deemed
acceptable by the commissioner pursuant to Section 11243 of the Code if:
(A) the holder of the deed of trust has duly executed an agreement or demand (“release agreement”) wherein
the holder has agreed, notwithstanding any provision to the contrary in the deed of trust, to promptly perform
any act reasonably necessary to record an instrument unconditionally reconveying and releasing the time-share
interests or accommodations in a time-share plan being sold from the lien or charge of the deed of trust upon
payment to the holder of an amount or amounts specified in the release agreement as the release price for the
affected time-share interests or accommodations in a time-share plan, and the holder has further agreed that
specific performance of the terms and provisions of the release agreement shall be compelled in favor of the
purchaser of the time-share interests or accommodations in a time-share plan;
(B) the release agreement has been deposited with the escrow holder for the transaction(s);

(C) the developer has notified each purchaser that the release agreement is available upon request from the
escrow holder; and
(D) each purchaser has been provided a policy of title insurance insuring the purchaser or lessee against loss by
reason of the deed of trust.

2807.1. Alternative to Purchase Money Impound.
The penal sum of the financial assurances permitted pursuant to Section 11243(c) furnished by or on behalf of a
developer shall be in an amount equal to or in excess of the lesser of (1) the funds that would otherwise be placed in
escrow, or (2) the cost to complete the incomplete property in which the time-share interest is located. However, in no
event shall the amount be less than the amount of funds that would otherwise be placed in escrow pursuant to Section
11243(a)(1).

2807.2. Acceptable Escrow Depositories.
(a) The following entities which are qualified to do business in the State of California are escrow depositories acceptable
to the Commissioner: escrow agents licensed by the Corporations Commissioner, banks, trust companies, savings and
loan associations, title insurers and underwritten title companies.



(b) In exceptional circumstances the Commissioner may approve an escrow depository other than an entity enumerated
in subdivision (a).

2807.3. Acceptable Trustees.
A trust company as defined in Section 107 of the Financial Code which is qualified to do business in California is a
trustee acceptable to the Commissioner to hold title to a time-share plan pursuant to Section 11243 of the Code. In
exceptional circumstances the Commissioner may approve a trustee other than a trust company as defined in Section
107 of the Financial Code.

2807.4. Qualified Budget Certification.
The Budget Review Section of the Bureau of Real Estate is considered qualified pursuant to Section 11240(f)(3) to
determine whether budgets of time-share plans meet the requirements of the Vacation Ownership and Time-share Act
of 2004. In the event budget review is to be conducted by the Budget Review Section pursuant to Section 11240(g),
budget review may take place concurrently with processing the application for a final public report.

2808. Approved Form of Bond for Completion of Common Facilities.
A bond posted pursuant to Section 11230 to secure the faithful performance of a commitment by the developer to
complete common facilities and common-area improvements shall be in substantially the following form:

Bond for Completion of Common Facilities
Bond No. ________________
Premium: $ _______________

KNOW ALL MEN BY THESE PRESENTS, that we ____________ (Name of developer), as PRINCIPAL, and
_____________(Name of surety), a corporation organized under the law of the State of __________________, and
authorized to transact the business of surety in the State of California, as SURETY, are firmly held and bound unto
_____________ (Name of homeowner association) (hereinafter referred to as OBLIGEE) in the penal sum of
___________Dollars ($___________) for which sum, well and truly to be paid, we bind ourselves, our heirs,
administrators, successors and assigns, jointly and severally, firmly by these presents.
This bond is given pursuant to Section 11230 of the California Business and Professions Code to assure lien-free
completion of the improvements described in PRINCIPAL’s “Planned Construction Statement,” a copy of which is
attached hereto and incorporated herein by reference, for the time-share development known as ____________ (Name
of time-share), situated in the County of __________, State of __________.
SURETY, for value received, hereby agrees that the matters set forth in California Civil Code Section 3225, or similar
acts or omissions which might release the SURETY pursuant to law, shall not in any way release SURETY from the
obligation of this bond or reduce SURETY’s obligation thereunder.
SURETY, for value received, does hereby waive the right granted to SURETY under California Civil Code Section
2845 to require that OBLIGEE proceed independently against PRINCIPAL to enforce this obligation, but reserves to
itself any right under said Section 2845 to require that OBLIGEE proceed jointly against PRINCIPAL and SURETY in
any such action.

The condition of this obligation is such that if PRINCIPAL shall complete or cause to be completed said improvements
free of liens and claims on or before the latest completion date specified in said “Planned Construction Statement,” or
an extension thereof given in writing by OBLIGEE to PRINCIPAL and assented to in writing by SURETY, then this
obligation shall be null and void; otherwise, it shall remain in full force and effect.

This obligation may be reduced from time to time proportionate to the percentage of the covered improvements which
have been completed, upon presentation to the SURETY and OBLIGEE of a statement of an architect or engineer
familiar with the project certifying the percentage completion of the improvements.
A suit or action on this bond must be filed within two years after the latest completion date set forth in the “Planned
Construction Statement” or any extension thereof given in writing by OBLIGEE to PRINCIPAL and assented to in
writing by SURETY.

The SURETY, its successors and assigns, are jointly and severally liable on the obligations of the bond, chapter 2
(commencing with section 995.010), Title 14, part 2, Code of Civil Procedure and Article 2, Chapter 2, Part 2, Division
4, Business and Professions Code.



The PRINCIPAL and SURETY may be served with notices, papers and other documents under chapter 2 (commencing
with section 995.010), Title 14, part 2, Code of Civil Procedure at the addresses given below.
The terms, conditions and coverage of this bond have been approved by the Real Estate Commissioner of the State of
California.
IN WITNESS WHEREOF, PRINCIPAL and SURETY have caused these presents to be duly signed and sealed this __
day of ______________, 20___


_________________________ ___________________________
(Principal) (Surety)

By:______________________ By:_________________________
(Signature) (Signature)

Address:(for Principal) Address:(for Surety)
_________________________ ___________________________
_________________________ ___________________________
_________________________ ___________________________

This bond is executed under an unrevoked power of attorney.
I certify (or declare) under penalty of perjury under the laws of the State of California that the foregoing is true and
correct.
_______________ ________________________________
Date Signature of Attorney-in-
Fact for Surety

________________________________
Printed or typed name of
Attorney-in-Fact for Surety

2809. Application.
(a) An application for a public report to sell or to offer to sell interests in a time-share plan pursuant to Chapter 2 of Part
2 of the Real Estate Law shall be filed with Bureau at its principal office in Sacramento along with the applicable fee.
(b) The application shall be signed by or on behalf of the person to whom the permit is to be issued or by an agent with
appropriate written authorization on behalf of the person to whom the permit is to be issued. If executed within
California, the information in the application and in the document submitted therewith shall be certified to be true under
penalty of perjury or verified before a notary public or other person qualified to administer oaths. If executed outside of
California, the information in the application and accompanying documents shall be verified before a person qualified
to administer oaths within the jurisdiction where executed or certified under penalty of perjury in accordance with the
provisions of subdivision (b) of Section 2015.5 of the Code of Civil Procedure.

2809.1. Properly Completed Application – Single-Site Time-Share Plan.
An application for a final public report for a single-site time-share plan is “properly completed” within the meaning of
Section 11231 of the Code if it contains the documents and information enumerated below:

(a) For every single-site time-share plan:
(1) The developer's legal name, any assumed names used by the developer, principal office street address, mailing
address, primary contact person, and telephone number.
(2) The name of the developer's authorized or registered agent in the state upon whom claims can be served or
service of process be had, the agent's street address in California, and telephone number.
(3) The name, street address, mailing address, primary contact person, and telephone number of any time-share plan
being registered.



(4) The name, street address, mailing address, and telephone number of any managing entity of the time-share plan.
(5) Consent to service of process upon the Bureau of Real Estate if applicant is a nonresident of California.

(6) A description of the inventory control system that will ensure compliance with Section 11250 of the Code.
(7) Evidence that the accommodation is presently suitable for human occupancy or that financial arrangements have
been made to complete construction or renovation of the accommodation to make it suitable for human occupancy
on or before the first date for occupancy by a time-share interest owner.
(8) Evidence that the accommodations are owned or leased by the developer of the time-share plan or is the subject
of an enforceable option or contract under which the developer will build, purchase, or lease the accommodations.
(9) If an accommodation in a time-share plan is located within a local governmental jurisdiction or subdivision of
real property in which the dedication of accommodations to time-sharing is expressly prohibited by ordinance or
recorded restriction, either absolutely or without a permit or other entitlement from the governing body, the
applicant for a public report shall present evidence of a permit or other entitlement by the appropriate authority for
the local government or the subdivision.
(10) A description of the existing or proposed accommodations, including the type and number of time-share
interests in the accommodations.
(11) The number of accommodations and time-share interests expressed in periods of seven-day use availability or
other time increments applicable to the time-share plan, and available for use by purchasers and a representation
about the percentage of useable time authorized for sale.
(12) A description of any existing or proposed amenities that will be part of the time-share plan.

(13) A description of the financial arrangements that have been made, pursuant to Section 11230, for the completion
of any incomplete, promised amenities.

(14) A description of the duration, phases and operation of the time-share plan.
(15) Copy of the budget meeting the requirements of Section 11240, along with the budget certification or request
that the budget be certified by the Budget Review Section of the Bureau of Real Estate, and a description of the
method for calculating and apportioning the assessments among purchasers.
(16) A description of any initial or special fee due from the purchaser at closing together with a description of the
purpose and method of calculating the fee.
(17) A description of any financing available through the developer.

(18) A description of any liens, defects, or encumbrances on or affecting the title to the time-share interests.
(19) A description of any bankruptcies, pending civil or criminal suits, adjudications, or disciplinary actions of
which the developer has knowledge, that would have a material effect on the developer's ability to perform its
obligations.

(20) A description of any fees or charges to be paid by time-share purchasers for the use of any amenities related to
the time-share plan.
(21) A description and amount of insurance coverage provided for the protection of the purchaser.

(22) If applicable, a description of any right of first refusal or other restraint on the transfer of all or any portion of
a time-share interest.

(23) A copy of instructions to escrow depository for compliance with Section 11241 including the following:
(A) Name and address of escrow depository.
(B) A description of the nature of the transaction.

(C) Conditions that must be satisfied before escrow can be closed.
(D) Provision for the return to a prospective purchaser of funds deposited toward the purchase of a time-share
interest if the escrow for the transaction has not closed on or before a given date.



(24) Evidence of financial arrangements to assure fulfillment of developers obligation to pay assessments for unsold
timeshare interests pursuant to Section 11241.
(25) Copy of the contract utilized between the exchange company and a purchaser of a time-share interest and all
promotional and informational material delivered to purchasers pertaining to any offered exchange program.
(26) Filing fee including fee for preliminary public report if applicable.
(27) Certificate of qualification from Secretary of State if applicant is a foreign corporation.
(28) Preliminary title report for all accommodations comprising the time-share plan, dated not more than 90 days
prior to the date of submission of the application or, if the preliminary title report is dated more than 90 days earlier,
with an accompanying letter from the title officer, dated not more than 90 days prior to submission of the
application, indicating that state of title has not changed from that set forth in the submitted preliminary title report.

(29) If the offering is a security subject to the jurisdiction of the Department of Business Oversight, a Department
of Business Oversight permit or interpretive opinion or copy of application for permit or request for interpretive
opinion submitted to Department of Business Oversight.
(30) State or local assessment and improvement bond information if applicable to accommodations in the project.
(31) Copies of all contracts, deeds, fact sheets and other instruments to be used in marketing, financing and
conveyancing of time-share interests.
(32) Copy of the covenants to be recorded for the time-share plan pursuant to Section 11251 of the Code.

(33) Copy of trust agreement for the time-share plan if applicable.
(34) Copy of proposed or existing agreements for management of the time-share plan.
(35) Format of fidelity insurance or bond to be obtained for the managing agent of the time-share plan and other
employees who will have custody or control of funds of the Association.
(36) Copy of letter or other evidence giving notice of the proposed dedication of the timeshare project to local
governments in which accommodations of the time-share plan will be located. For time-share projects located
outside this state, evidence of approval or compliance of the time-share project in the state in which the time-share
project is located is sufficient to satisfy this requirement.
(37) Completed documents for reservations and reservation deposits if a preliminary public report is requested.

(38) Evidence of financial arrangements for any repurchase guarantee included in the offering.
(39) Description of the furnishings and other personal property to be included in the time-share offering.
(40) In a time-share plan which comprises less than all of the accommodations in a hotel, motel or similar
commercial lodging establishment and in which the accommodations not part of the time-share plan are
concurrently used for transient accommodations, a copy of the proposed contract for the following:

(A) Arrangements for temporary use for transient occupancy of accommodations comprising the time-share
plan and temporary use by the time-share plan of accommodations regularly used for transient occupancy.

(B) Apportionment of the costs of operation of the hotel/motel that are for the joint benefit of accommodations
in the time-share plan and accommodations for transient occupancy.

(41) Agreement of developer to subsidize maintenance and operation of the single-site time-share plan where
applicable.

(42) Description of each incidental benefit pursuant to Section 11237(b).
(43) If applicable, information as required by Section 11233.
(44) If applicable, a certification meeting requirements of Section 11246.
(45) Audited financial statements of the Association, if applicable.

(46) For every single-site time-share plan involving newly-built or as yet unbuilt accommodations, or
accommodations which will be renovated or reconstructed prior to occupancy, evidence of availability of domestic
utilities and services to the project.



(47) If the time-share plan is located outside this state, a public report or other disclosure document meeting the
requirements of Section 11226(c)(5).
(48) A draft public report.
(b) For the sole purpose of determining the effect on the time-share plan, for every single-site time-share plan with
accommodations in a condominium development or other common-interest subdivision:
(1) Proposed or existing governing instruments for the common-interest subdivision.
(2) Copies of all contracts or proposed contracts obligating the owners' association of the common-interest
subdivision if the subdivision is one for which a public report has not been issued.
(3) If included in the subdivision offering, a copy of agreement of developer to subsidize maintenance and
operations of the common interest subdivision if a public report has not been issued for the subdivision.
(4) Financial arrangements to assure performance of the subsidization agreement referred to in (3) above if
applicable.
(5) Latest balance sheet and annual operating statement for the owners' association for the common interest
subdivision.
(6) Pro-forma budget reflecting estimated ownership, maintenance and operational expenses and reserves for the
subdivision.
(7) Financial arrangements to assure fulfillment of developer's obligation to pay assessments for unsold time-share
interests if public report has not been issued for the subdivision.
(8) Copy of letters by which the developer has given notice of the proposed dedication of an accommodation to a
time-share project to the owners' association of each common-interest subdivision in which an accommodation of
the time-share project is located.

(9) Evidence of financial arrangements for completion of common areas and facilities in the subdivision.

2809.2. Properly Completed Application – Specific Interest Multi-Site Time-Share Plan.
An application for a final public report for a specific time-share interest multi-site time-share plan is “properly
completed” within the meaning of Section 11231 of the Code if it contains the documents and information enumerated
below:

(a) With regard to the component site(s) in which the purchaser will receive a specific time-share interest along with a
reservation priority right at that specific timeshare property, all of the applicable information related to that component
site as required under Section 2809.1.
(b) With regard to the component site(s) in which the purchaser does not receive a specific time-share interest, the
information required by Section 11234(b) and evidence:
(1) that the accommodation is presently suitable for human occupancy or that financial arrangements have been
made to complete construction or renovation of the accommodation to make it suitable for human occupancy on or
before the first date for occupancy by a time-share owner, and

(2) that there is an enforceable use right assuring occupancy of the accommodation by a time-share owner .

2809.3. Properly Completed Application – Nonspecific Time-Share Interest Multi-Site Time-Share Plan.
An application for a final public report for nonspecific time-share interest multi-site time-share plan is “properly
completed” within the meaning of Section 11231 of the Code if it contains the documents and information enumerated
below:
(a) For every nonspecific time-share interest multi-site time-share plan:

(1) The developer's legal name, any assumed names used by the developer, principal office street address, mailing
address, primary contact person, and telephone number.
(2) The name of the developer's authorized or registered agent in the state upon whom claims can be served or
service of process be had, the agent's street address in California, and telephone number.



(3) The name, street address, mailing address, and telephone number of any managing entity of the multi-site time-
share plan.
(4) Consent to service of process upon the Bureau of Real Estate if applicant is a nonresident of California.
(5) A description of the inventory control system that will ensure compliance with Section 11250 of the Code.

(6) Evidence that the accommodation is presently suitable for human occupancy or that financial arrangements have
been made to complete construction or renovation of the accommodation to make it suitable for human occupancy
on or before the first date for occupancy by a time-share interest owner.
(7) Evidence that the accommodations are owned or leased by the developer of the time-share plan or is the subject
of an enforceable option or contract under which the developer will build, purchase, or lease the accommodations.
(8) If an accommodation in a time-share plan is located within a local governmental jurisdiction or subdivision of
real property in which the dedication of accommodations to time-sharing is expressly prohibited by ordinance or
recorded restriction, either absolutely or without a permit or other entitlement from the governing body, the
applicant for a public report shall present evidence of a permit or other entitlement by the appropriate authority for
the local government or the subdivision.

(9) A description of the type of interest and usage rights the purchaser will receive.
(10) A description of the duration and operation of the time-share plan.
(11) A description of the type of insurance coverage provided for each component site.

(12) An explanation of who holds title to the accommodations of each component site.
(13) A description of each component site, including the name and address of each component site.
(14) The number of accommodations and time-share interests, expressed in periods of seven-day use availability or
other time increments applicable to the multi-site time-share plan for each component site committed to the multi-
site time-share plan and available for use by purchasers and a representation about the percentage of useable time
authorized for sale, and if that percentage is 100%, then a statement describing how adequate periods of time for
maintenance and repair will be provided.
(15) A description of each type of accommodation in terms of the number of bedrooms, bathrooms, and sleeping
capacity, and a statement of whether or not the accommodation contains a full kitchen. For purposes of this
description, a “full kitchen” means a kitchen having a minimum of a dishwasher, range, sink, oven, and refrigerator.
(16) A description of amenities available for use by the purchaser at each component site.

(17) A description of any incomplete amenities at any of the component sites along with a statement as to any
assurance for completion pursuant to Section 11230 and the estimated date the amenities will be available.

(18) The historical occupancy of each component site for the prior 12-month period, if the component site was part
of the multi-site time-share plan during such 12-month time period, as well as any periodic adjustment or
amendment to the reservation system that may be needed in order to respond to actual purchaser use patterns and
changes in purchaser use demand for the accommodations existing at that time within the multi-site time-share plan.

(19) A description of any right to make any additions, substitutions, or deletions of accommodations, amenities, or
component sites, and a description of the basis upon which accommodations, amenities, or component sites may be
added to, substituted in, or deleted from the multi-site time-share plan.
(20) A description of the reservation system that shall include all of the following:

(A) The entity responsible for operating the reservation system, its relationship to the developer, and the
duration of any agreement for operation of the reservation system.

(B) A summary of the rules and regulations governing access to and use of the reservation system.
(C) The existence of and an explanation regarding any priority reservation features that affect a purchaser's
ability to make reservations for the use of a given accommodation on a first-come, first-served basis.

(21) A description of any liens, defects, or encumbrances that materially affect the purchaser's use rights.



(22) A description of the relationship between a multi-site time-share plan managing entity and the managing entity
of the component sites of a multi-site time-share plan, if different from the multi-site time-share plan managing
entity.

(23) Copy of the budget meeting the requirements of Section 11240, along with the budget certification or request
that the budget be certified by the Budget Review Section of the Bureau of Real Estate and a description of the
method for calculating and apportioning the assessments among purchasers.
(24) Any current fees or charges to be paid by time-share purchasers for the use of any amenities related to the time-
share plan and a statement that the fees or charges are subject to change.

(25) Any initial or special fee due from the purchaser at closing with a description of the purpose and the method
of calculating the fee.

(26) A description of any financing offered by or available through the developer.
(27) A description of any bankruptcies, pending civil or criminal suits, adjudications, or disciplinary actions of
which the developer has knowledge, which would have a material effect on the developer's ability to perform its
obligations.

(28) A statement disclosing any right of first refusal or other restraint on the transfer of all or any portion of a time-
share interest.
(29) A copy of instructions to escrow depository for compliance with Section 11241 including the following:

(A) Name and address of escrow depository.
(B) A description of the nature of the transaction.

(C) Conditions that must be satisfied before escrow can be closed.
(D) Provision for the return to a prospective purchaser of funds deposited toward the purchase of a time-share
interest if the escrow for the transaction has not closed on or before a given date.
(30) Evidence of financial arrangements to assure fulfillment of developer obligation to pay assessments for unsold
time-share interests pursuant to Section 11241.

(31) Copy of the contract utilized between the exchange company and a purchaser of a time-share interest and all
promotional and informational material delivered to purchasers pertaining to any offered exchange program.

(32) Filing fee including fee for preliminary public report if applicable.
(33) Certificate of qualification from Secretary of State if applicant is a foreign corporation.
(34) Preliminary title report for all accommodations comprising the time-share plan, dated not more than 90 days
prior to the date of submission of the application or, if the preliminary title report is dated more than 90 days earlier,
with an accompanying letter from the title officer, dated not more than 90 days prior to submission of the
application, indicating that state of title has not changed from that set forth in the submitted preliminary title report.
(35) If the offering is a security subject to the jurisdiction of the Department of Business Oversight, a Department
of Business Oversight permit or interpretive opinion or copy of application for permit or request for interpretive
opinion submitted to Department of Business Oversight.

(36) State or local assessment and improvement bond information if applicable to accommodations in the project.
(37) Copies of all contracts, deeds, fact sheets and other instruments to be used in marketing, financing and
conveyancing of time-share interests.
(38) Copy of the covenants for component sites of the multi-site time-share plan in accordance with Section 11251
of the Code.
(39) Copy of trust agreement for the multi-site time-share plan if applicable.
(40) Copy of proposed or existing agreements for management of the multi-site time-share plan.

(41) Format of fidelity insurance or bond to be obtained for the managing agent of the multi-site time-share plan
and other employees who will have custody or control of funds of the multi-site time-share plan association.



(42) Copy of letter or other evidence giving notice of the proposed dedication of the timeshare project to local
governments in which accommodations of the multi-site time-share plan will be located. For time-share projects
located outside this state, evidence of approval or compliance of the time-share project in the state in which the
time-share project is located is sufficient to satisfy this requirement.
(43) Completed documents for reservations and reservation deposits if a preliminary public report is requested.
(44) Evidence of financial arrangements for any repurchase guarantee included in the offering.

(45) Description of the furnishings and other personal property to be included in the time-share offering.
(46) In a time-share plan which comprises less than all of the accommodations in a hotel, motel or similar
commercial lodging establishment and in which the accommodations not part of the time-share plan are
concurrently used for transient accommodations, a copy of the proposed contract for the following:

(A) Arrangements for temporary use for transient occupancy of accommodations comprising the time-share
plan and temporary use by the time-share plan of accommodations regularly used for transient occupancy.

(B) Apportionment of the costs of operation of the hotel/motel that are for the joint benefit of accommodations
in the time-share plan and accommodations for transient occupancy.
(47) Agreement of developer to subsidize maintenance and operation of the multi-site time-share plan where
applicable.
(48) Description of each incidental benefit pursuant to Section 11237(b).

(49) If applicable, information as required by Section 11233.
(50) If applicable, a certification meeting requirements of Section 11246.
(51) Audited financial statements of the multi-site time-share plan association, if applicable.

(52) For every component involving newly-built or as yet unbuilt accommodations, or accommodations which will
be renovated or reconstructed prior to occupancy, evidence of availability of domestic utilities and services to the
component site.
(53) If the time-share plan is located outside this state, a public report or other disclosure document meeting the
requirements of Section 11226(c)(5).
(54) A draft public report.
(b) For the sole purpose of determining the effect on the time-share plan, for every multi-site time-share plan with
accommodations in a condominium development or other common-interest subdivision:
(1) Proposed or existing governing instruments for the common-interest subdivision.

(2) Copies of all contracts or proposed contracts obligating the owners' association of the common-interest
subdivision if the subdivision is one for which a public report has not been issued.
(3) If included in the subdivision offering, a copy of agreement of developer to subsidize maintenance and
operations of the common interest subdivision if a public report has not been issued for the subdivision.
(4) Financial arrangements to assure performance of the subsidization agreement referred to in (3) above if
applicable.
(5) Latest balance sheet and annual operating statement for the owners' association for the common interest
subdivision.
(6) Pro-forma budget reflecting estimated ownership, maintenance and operational expenses and reserves for the
subdivision.
(7) Financial arrangements to assure fulfillment of developer's obligation to pay assessments for unsold time-share
interests if public report has not been issued for the subdivision.
(8) Copy of letters by which the developer has given notice of the proposed dedication of an accommodation to a
time-share project to the owners' association of each common-interest subdivision in which an accommodation of
the time-share project is located.



(9) Evidence of financial arrangements for completion of any promised and not yet completed amenities in the
subdivision.

2809.5. Abandoning Application For Public Report.
(a) The commissioner may abandon an application for a final, conditional, amended, or renewed public report, if:
(1) The data required by Sections 11226 and 11234 of the Code has not been furnished within three years from the
date a notice of intention was filed for the subdivision public report; and

(2) Six months have elapsed, without communication from the developer, since the commissioner has given notice
of deficiencies or substantive inadequacies contained in the documents which are required to make the filing
substantially complete and the deficiencies and inadequacies have not been corrected by the applicant; and
(3) The term of any one-year extension of time in which to complete the application, as provided in subdivision (d),
has elapsed.
(b) Ninety (90) days prior to abandoning an application the commissioner shall mail to the applicant and the applicant’s
designated representative, notice of the commissioner’s intent to abandon the application. The notice shall include a
statement that the applicant may, in accordance with subdivision (d), file a petition to keep the application open.

(c) Sixty (60) days or more following the mailing of the notice required by subdivision (b), the commissioner may issue
a final notice of intention to abandon the application. The application shall be deemed abandoned thirty (30) days after
the final notice is mailed to the applicant and the applicant’s designated representative, unless, prior to the expiration of
the thirty (30) day period, a one-year extension has been granted pursuant to subdivision (d).

(d) The commissioner, on his own motion, or after receipt of a petition from the applicant or the applicant’s designated
representative, may, under the following terms and conditions, grant a one-year extension in order to allow the applicant
to complete the application:
(1) The petition is received prior to the expiration of the thirty (30) day notice period referred to in subdivision (c).

(2) The petition sets forth reasons of hardship or justifiable extenuating circumstances explaining why the file has
been inactive. Hardship and justifiable extenuating circumstances shall include mistake, inadvertence, surprise,
excusable neglect, or circumstances beyond the control of the applicant or the applicant’s designated representative.
Written notice of the decision to grant or deny the petition will be mailed or delivered to the applicant and the
applicant’s designated representative, within thirty (30) calendar days after receipt of the petition.
(e) The commissioner may grant one or more one-year extensions, provided that the application has not been abandoned
as provided in subdivision (c).
(f) The term “applicant” as used in this section shall have the same meaning as the term “developer” as used in Section
11212 of the Code.

2810.5. Filing Fees.
(a) The filing fees in connection with applications to the Bureau pursuant to Article 2 of Chapter 2 of Part 2 of the Real
Estate Law shall be the following:

(1) One thousand seven hundred dollars ($1,700) plus ten dollars ($10) for each time-share interest to be offered
for an original public report application.
(2) Six hundred dollars ($600) plus ten dollars ($10) for each time-share interest to be offered that was not permitted
to be offered under the public report to be renewed for a renewal public report application.
(3) Five hundred dollars ($500) plus ten dollars ($10) for each time-share interest to be offered under the amended
public report for which a fee has not previously been paid for an amended public report application.
(4) Five hundred dollars ($500) for a conditional public report application.

(5) Five hundred dollars ($500) for a preliminary public report application.
(b) The maximum fee for an original, renewal or amended public report shall not exceed $7,500 regardless of the number
of interests authorized to be offered for sale or lease.
(c) The filing fee for an amended public report where the amendment consists only of a recurring and non-substantive
change including, but not limited to, a change in the name of the developer, shall be $125 and the filing fee for each



additional amended public report consisting only of the same recurring and non-substantive change including, but not
limited to, a change in the name of the developer, submitted by that developer at the same time, shall be $60. This
subsection does not apply where there is a change in the ownership of the time-share property along with a change in
the name of the developer.

2811. Time-Share Advertising Criteria.
Standards which will be applied by the Real Estate Commissioner in determining whether advertising for sale or lease
of time-share interests is false, untrue or misleading within the meaning of those terms in Section 11245 of the Code
shall include, but shall not be limited to the following:
(1) Advertising shall not represent the availability for use of a time-share interest that is not set forth in the public
report.
(2) A time-share plan shall not be advertised under a name that is not set forth in the application.
(3) A time-share plan shall not be advertised by a name or trade style which implies, contrary to fact, that the
developer or his agent is a bona fide research organization, public agency, nonprofit organization or similar entity.
(4) No accommodation, improvement or facility, over which the developer does not have control with respect to
completion, may be advertised unless (1) it has been completed (2) completion is assured through bonding or other
arrangements approved by the commissioner, or (3) a clear and conspicuous disclosure is included in close
proximity to the mention or depiction of the advertised accommodation, improvement or facility stating that the
accommodation, improvement or facility is proposed and may not be built.
(5) Reference shall not be made to a proposed public facility or project which purports to affect the value and utility
of time-share interests without a disclosure of the existing status of the proposed facility based upon information
supplied or verified by the authority responsible for the public facility or project.
(6) Pictorial or illustrative depictions of the time-share property and surrounding lands must accurately portray the
land as it exists and proposed improvements as they will be constructed.
(7) Pictorial or illustrative depictions other than unmodified photographs shall bear a prominent disclosure
identifying the nature of the depiction, e.g., ARTISTS CONCEPTION and a legend identifying those improvements
which are not then in existence.
(8) If a map or diagram is used to show the location of the time-share property in relation to other places, actual
miles from each other place to the time-share property shall be shown or the map or diagram shall be prepared to
scale and shall include a scale of miles or the map or diagram shall be prominently marked “Not to Scale.”
(9) If the existence of a lake, river, canal or other body of water, which is subject to a fluctuating water level other
than through natural causes, is advertised as a feature of the time-share property, any significant effect of the
fluctuation upon the use of the water facility and upon the time-share interests shall be described.

(10) No advertisement shall imply that a facility is available for the exclusive use of purchasers of time-share
interests if a public right of access or of use of the facility exists.

(11) Full disclosure shall be made of the conditions or restrictions upon the availability for use by owners of time-
share interests of private clubs or facilities in which an owner will not acquire a proprietary or contractual interest
through purchase of a time-share interest, including, if applicable, that the use is at the pleasure of the owner of the
facility.
(12) No representation may be made that time-share interests being offered for sale can be further divided unless a
full disclosure is included as to the legal requirements for further division of the interests.

(13) Time-share interests may not be advertised as available at a particular minimum price if the number of time-
share interests available at that price comprise less than 10% of the unsold inventory of the developer, unless the
number of interests then for sale at the minimum price is set forth in the advertisement.
(14) Advertising of a discounted purchase price shall not be made unless the developer has established base prices
for application of the discount through a substantial number of sales at base prices.
(15) A prospective increase in the price of a time-share interest may not be implied nor shall a price increase of
such a time-share interest be announced without announcing the approximate date on which the increase will be
placed into effect, and without a good faith belief that the price increase will be placed into effect on that date.



(16) If the phrase “closing costs only” or similar terminology is used to describe the price of a time-share interest,
the estimated dollar amount of the costs must be set forth in the advertisement.
(17) No representation shall be made as to the availability of a resale program offered by or on behalf of the
developer, unless the resale program is then in existence and the extent and intended duration of the resale program
and any restrictions on the program are fully disclosed to the prospective purchaser.
(18) An asterisk or other reference symbol may be used to explain, but not to contradict or to change the ordinary
meaning of the material in the body of the advertisement.
(19) Unless an offer made in connection with a sales promotion is unequivocally without conditions, the terms
“free”, “no obligation” or similar terms may not be used to describe that which is offered.
(20) Offers of travel, accommodations, meals or entertainment at no cost or reduced cost, the purpose of which is
to promote sales, shall not be described as “awards”, “prizes” or similar terms.
(21) Offers or solicitations of trip reservations to visit time-share property or any other place where a sales
presentation for subdivided property is to be made shall set forth all conditions, limitations or qualifications that
will be applied before the recipient will be allowed to make the trip.

(22) The approximate retail value of any gift, prize or premium offered through an advertisement to prospective
purchasers shall be set forth in the advertisement. This requirement is limited to gifts, prizes or premiums with a
retail value in excess of $25.
(23) Complete rules and procedures for any contest or drawing advertised in connection with the marketing of time-
share interests shall be included in the advertisement, or the advertisement shall state the means by which a person
can secure full information concerning said rules and procedures prior to his participation in the contest or drawing.

(24) Advertising shall not include testimonials or endorsements which contain matters which the developer would
be precluded by law or regulation from making in his own behalf.

(25) An offer or inducement to purchase which purports to be limited as to quantity or restricted as to time shall set
forth the numerical quantity and/or time applicable to the offer or inducement.

(26) No direct mail advertisement purporting to have resulted through a referral shall be used unless the developer
can, upon request of the commissioner, provide evidence of the referral. Names purchased from marketing lists and
similar commercial sources are not considered “referrals” for purposes of this section.
(27) Statements appearing in the public report for a time-share plan shall not be quoted, paraphrased or cited out of
context nor shall any part of the public report be underscored, italicized, bold faced or otherwise highlighted except
in strict conformance with highlighting in the public report itself.
Article 12.3. Qualified Resort Vacation Club Projects

2814. Applicable Regulations.
A qualified resort vacation club is subject to Sections 2810 and 2810.5.

2817. Prospective Purchaser Disclosure Form.
(a) To inform a prospective purchaser of an interest in a qualified resort vacation club of the requirements under Section
10260(e), the notice set forth in subdivision (b) hereof printed in not less than 12-point bold-face capital letters and
numerals shall be contained in and immediately follow the face page of every subdivision permit issued for a qualified
resort vacation club.
(b) The form and the content of the notice shall be as follows:


NOTICE
IF YOU DECIDE TO PURCHASE AN INTEREST IN THIS QUALIFIED RESORT VACATION CLUB YOU
SHOULD BASE YOUR PURCHASE ON THE VALUE OF THE INTEREST AS A VACATION OR LEISURE
TIME EXPERIENCE AND NOT AS AN APPRECIATING INVESTMENT OR ON AN EXPECTATION OF
RESALE. BEFORE CONTRACTING TO PURCHASE YOU SHOULD CONSIDER THE FOLLOWING:

1. A QUALIFIED RESORT VACATION CLUB PROJECT IS AN OFFERING OF TIME SHARES.



2. AS A GENERAL RULE, A SIGNIFICANT PORTION OF THE PURCHASE PRICE OF AN INTEREST
IN A TIME-SHARE PROJECT REPRESENTS THE DEVELOPER’S PROMOTIONAL AND
MARKETING COSTS.

3. INDIVIDUAL RESALE OF TIME-SHARE INTERESTS HAVE PROVEN TO BE DIFFICULT FOR
OWNERS PRIMARILY BECAUSE TIME-SHARE OWNERS HAVE TO COMPETE WITH HIGHLY
SOPHISTICATED SALES PROMOTIONS OF THE DEVELOPER.
4. BECAUSE THE ORIGINAL PURCHASE PRICE REPRESENTS A SIGNIFICANT PART OF THE
DEVELOPER’S MARKETING COSTS, A TIME-SHARE OWNER MAY RECOUP ONLY A PORTION
OF THE PURCHASE PRICE IF A RESALE BUYER CAN BE FOUND.
5. SINCE MOST TIME-SHARE OWNERS RESIDE SOME DISTANCE FROM THE RESORT OR
RESORTS INCLUDED IN THE OFFERING, IT IS USUALLY INCONVENIENT FOR SUCH OWNERS
TO SHOW THE DWELLING UNITS TO PROSPECTIVE RESALE BUYERS AND USUALLY THIS CAN
ONLY BE DONE DURING THE PERIODS OF USE.

6. LICENSED REAL ESTATE AGENTS HAVE NOT ENTERED INTO THE TIME-SHARE RESALE
MARKET IN GREAT NUMBERS, AND THOSE WHO HAVE OFTEN CHARGE A COMMISSION
THAT SIGNIFICANTLY EXCEEDS THE NORMAL COMMISSION FOR SALE OF A SINGLE-
FAMILY DWELLING.

Article 15. Trust Fund Accounts

2830. Broker Placement of Trust Funds with Financial Institutions.
The relationship between a real estate broker and a client for whom the broker holds funds in trust is an agency
relationship. As an agent, the broker owes a fiduciary duty to the client regarding the handling of the trust. Any benefit
received by the broker relating to the broker's handling of client funds in trust belongs to the client by law, and the
broker must pass that benefit along to the client.

(a) Unless in possession of written permission from the client, it is unlawful for any real estate broker, including any
corporate broker, to receive, directly or indirectly, any commission, compensation, or other consideration, whether
personal or professional, from any person or institution other than the client as an inducement for the placement of a
trust fund account in accordance with Section 10145 of the Business and Professions Code. Actual placement of a trust
fund account is not a precondition to a violation of this section, whether the violation is or is not a per se violation
pursuant to subsection (c), below.
(b) For purposes of this section, a "compensating balance" is a balance maintained in a checking account or other
account in a bank or other recognized depository in the name of a real estate broker for the purpose of paying bank fees
on a separate trust fund account.
(c) Unless in possession of written permission from the client as described in subsection (a), the following activities,
whether performed directly or indirectly, are deemed per se receipt of inducements for the placement of trust account
business by any person and are unlawful:
(1) Receiving or requesting payment for, accepting or requesting provision of, or accepting or requesting assistance
with business expenses, including, but not limited to, rent, employee salaries, furniture, copiers, facsimile machines,
automobiles, telephone services or equipment, or computers.
(2) Receiving or requesting receipt of any form of consideration intended for the benefit of the broker, rather than
the trust account itself, including cash, below market rate loans, automobile charges, or merchandise or merchandise
credits.
(3) Receiving or requesting to receive on behalf of the broker or corporation, compensating balances or benefits in
the pricing or fees for the maintenance of a compensating balance account.
(4) Receiving or requesting provision of all, or any part, of the time or productive effort of any employee of the
bank or other recognized depository for any service unrelated to the trust account.

(5) Receiving or requesting expenditures for food, beverages, and entertainment.
(d) Receipt or request of receipt of the following are not deemed to be unlawful or in violation of this section:



(1) Promotional items with a permanently affixed company logo of the bank or other recognized depository with a
value of not more than ten dollars ($10) each. "Promotional item" does not include a gift certificate, gift card, or
other item that has a specific monetary value on its face, or that may be exchanged for any other item having a
specific monetary value.
(2) Receipt or requested receipt of education or educational materials exclusively related to the business of trust
fund management if continuing education credits are not provided.
(e) The receipt or requested receipt of any form of consideration as an inducement for the placement of a trust account
not specifically set forth in this section shall not be presumed lawful merely because it is not specifically prohibited.

2830.1. Interest-Bearing Trust Account.
A real estate broker, when acting as agent for a financial institution as beneficiary of a loan, may deposit and maintain
funds from or for the account of an obligor for the future payment of property taxes, assessments or insurance relating
to real property containing only a one-to-four family residence, in an interest-bearing trust account in a bank or savings
and loan association in order to pay interest to the obligor in accordance with Section 2954.8 of the Civil Code if the
following requirements are met:
(a) The account is in the name of the broker as trustee.

(b) All of the funds in the account are covered by insurance provided by an agency of the federal government.
(c) All of the funds in the account are funds held in trust by the broker for others.
(d) The broker discloses to the obligor how interest will be calculated and paid.
(e) No interest earned on the funds shall inure directly or indirectly to the benefit of the broker nor to any person licensed
to the broker.

2831. Trust Fund Records To Be Maintained.
(a) Every broker shall keep a record of all trust funds received, including uncashed checks held pursuant to instructions
of his or her principal. This record, including records maintained under an automated data processing system, shall set
forth in chronological sequence the following information in columnar form:

(1) Date trust funds received.
(2) From whom trust funds received.
(3) Amount received.
(4) With respect to funds deposited in an account, date of said deposit.

(5) With respect to trust funds previously deposited to an account, check number and date of related disbursement.
(6) With respect to trust funds not deposited in an account, identity of other depository and date funds were
forwarded.
(7) Daily balance of said account.
(b) For each bank account which contains trust funds, a record of all trust funds received and disbursed shall be
maintained in accordance with subdivision (a) or (c).
(c) Maintenance of journals of account cash receipts and disbursements, or similar records, or automated data processing
systems, including computer systems and electronic storage and manipulation of information and documents, in
accordance with generally accepted accounting principles, shall constitute compliance with subdivision (a) provided
that such journals, records, or systems contain the elements required by subdivision (a) and that such elements are
maintained in a format that will readily enable tracing and reconciliation in accordance with Section 2831.2.
(d) Nothing in this section shall be construed to permit a violation of Section 10145 of the Code.
(e) A broker is not required to keep records pursuant to this section of checks which are written by a principal, given to
the broker and made payable to third parties for the provision of services, including but not limited to escrow, credit
and appraisal services, when the total amount of such checks for any transaction from that principal does not exceed
$1,000. Upon request of the Bureau or the maker of such checks, a broker shall account for the receipt and distribution
of such checks. A broker shall retain for three years copies of receipts issued or obtained in connection with the receipt
and distribution of such checks.

2831.1. Separate Record for Each Beneficiary or Transaction.
(a) A broker shall keep a separate record for each beneficiary or transaction, accounting for all funds which have been
deposited to the broker’s trust bank account and interest, if any, earned on the funds on deposit. This record shall include
information sufficient to identify the transaction and the parties to the transaction. Each record shall set forth in
chronological sequence the following information in columnar form:

(1) Date of deposit.
(2) Amount of deposit.
(3) Date of each related disbursement.

(4) Check number of each related disbursement.
(5) Amount of each related disbursement.
(6) If applicable, dates and amounts of interest earned and credited to the account.

(7) Balance after posting transactions on any date.
(b) Maintenance of trust ledgers of separate beneficiaries or transactions, or similar records, or automated data
processing systems, including computer systems and electronic storage and manipulation of information and documents,
in accordance with generally accepted accounting principles will constitute compliance with subdivision (a), provided
that such ledgers, records, or systems contain the elements required by subdivision (a) and that such elements are
maintained in a format that will readily enable tracing and reconciliation in accordance with Section 2831.2.

2831.2. Trust Account Reconciliation.
The balance of all separate beneficiary or transaction records maintained pursuant to the provisions of Section 2831.1
must be reconciled with the record of all trust funds received and disbursed required by Section 2831, at least once a
month, except in those months when the bank account did not have any activities. A record of the reconciliation must
be maintained, and it must identify the bank account name and number, the date of the reconciliation, the account
number or name of the principals or beneficiaries or transactions, and the trust fund liabilities of the broker to each of
the principals, beneficiaries or transactions.

2832. Trust Fund Handling.
(a) Compliance with Section 10145 of the Code requires that the broker place funds accepted on behalf of another into
the hands of the owner of the funds, into a neutral escrow depository or into a trust fund account in the name of the
broker, or in a fictitious name if the broker is the holder of a license bearing such fictitious name, as trustee at a bank or
other financial institution not later than three business days following receipt of the funds by the broker or by the
broker’s salesperson.

(b) Except as expressly provided by subdivision (d) of Section 10145 of the Code or by a regulation in this article, the
account into which the trust funds are deposited shall not be an interest-bearing account for which prior written notice
can by law or regulation be required by the financial institution as a condition to the withdrawal of funds.
(c) A check received from the offeror may be held uncashed by the broker until acceptance of the offer if

(1) the check by its terms is not negotiable by the broker or if the offeror has given written instructions that the
check shall not be deposited nor cashed until acceptance of the offer and
(2) the offeree is informed that the check is being so held before or at the time the offer is presented for acceptance.

(d) In these circumstances if the offeror’s check was held by the broker in accordance with subdivision (c) until
acceptance of the offer, the check shall be placed into a neutral escrow depository or the trust fund account, or into the
hands of the offeree if offeror and offeree expressly so provide in writing, not later than three business days following
acceptance of the offer unless the broker receives written authorization from the offeree to continue to hold the check.

(e) Notwithstanding the provisions of subdivisions (a) and (d), a real estate broker who is not licensed under the Escrow
Law (Section 17000, et seq., of the Financial Code) when acting in the capacity of an escrow holder in a real estate
purchase and sale, exchange or loan transaction in which the broker is performing acts for which a real estate license is
required shall place all funds accepted on behalf of another into the hands of the owner of the funds, into a neutral
escrow depository or into a trust fund account in the name of the broker, or in a fictitious name if the broker is the holder
of a license bearing such fictitious name, as trustee at a bank or other financial institution not later than the next business
day following receipt of the funds by the broker or by the broker’s salesperson.

2832.1. Trust Fund Handling for Multiple Beneficiaries.
The written consent of every principal who is an owner of the funds in the account shall be obtained by a real estate
broker prior to each disbursement if such a disbursement will reduce the balance of funds in the account to an amount
less than the existing aggregate trust fund liability of the broker to all owners of the funds.

2834. Trust Account Withdrawals.
(a) Withdrawals may be made from a trust fund account of an individual broker only upon the signature of the broker
or one or more of the following persons if specifically authorized in writing by the broker:
(1) a salesperson licensed to the broker.

(2) a person licensed as a broker who has entered into a written agreement pursuant to Section 2726 with the broker.
(3) an unlicensed employee of the broker with fidelity bond coverage at least equal to the maximum amount of the
trust funds to which the employee has access at any time.
(b) Withdrawals may be made from the trust fund account of a corporate broker only upon the signature of:

(1) an officer through whom the corporation is licensed pursuant to Section 10158 or 10211 of the Code; or
(2) one of the persons enumerated in paragraph (1), (2) or (3) of subdivision (a) above, provided that specific
authorization in writing is given by the officer through whom the corporation is licensed and that the officer is an
authorized signatory of the trust fund account.
(c) An arrangement under which a person enumerated in paragraph (1), (2) or (3) of subdivision (a) above is authorized
to make withdrawals from a trust fund account of a broker shall not relieve an individual broker, nor the broker-officer
of a corporate broker licensee, from responsibility or liability as provided by law in handling trust funds in the broker’s
custody.

2835. Commingling.
“Commingling” as used in Section 10176(e) of the Code is prohibited except as specified in this section. For purposes
of Section 10176(e), the following shall not constitute “commingling”:
(a) The deposit into a trust account of reasonably sufficient funds, not to exceed $200, to pay service charges or fees
levied or assessed against the account by the bank or financial institution where the account is maintained.
(b) The deposit into a trust account maintained in compliance with subdivision (d) of funds belonging in part to the
broker’s principal and in part to the broker when it is not reasonably practicable to separate such funds, provided the
part of the funds belonging to the broker is disbursed not later than twenty-five days after their deposit and there is no
dispute between the broker and the broker’s principal as to the broker’s portion of the funds. When the right of a broker
to receive a portion of trust funds is disputed by the broker’s principal, the disputed portion shall not be withdrawn until
the dispute is finally settled.
(c) The deposit into a trust account of broker owned funds in connection with activities pursuant to either subdivision
(d) or (e) of Section 10131 of the Code or when making, collecting payments or servicing a loan which is subject to the
provisions of Section 10240 of the Code provided:

(1) The broker meets the criteria of Section 10232 of the Code.
(2) All funds in the account which are owned by the broker are identified at all times in a separate record which is
distinct from any separate record maintained for a beneficiary.

(3) All broker owned funds deposited into the account are disbursed from the account not later than 25 days after
their deposit.

(4) The funds are deposited and maintained in compliance with subdivision (d).
(5) For the purpose of this section, a broker shall be deemed to be subject to the provisions of Section 10240 of the
Code if the broker delivers the statement to the borrower required by Section 10240.
(d) The trust fund account into which the funds are deposited is maintained in accordance with the provisions of Section
10145 and the regulations of this article.

2836. Subdivider and Broker Records.
(a) (1) A subdivider shall maintain or cause to be maintained, in accordance with accepted accounting practices,
records of all funds received from prospective purchasers or lessees of subdivisions interests.

(2) A subdivider shall maintain or cause to be maintained, in accordance with accepted accounting practices, records
of receipt, deposit and disbursement of all funds collected or obtained in connection with the operation of a
homeowners association
(3) The records shall reflect dates of receipt and disbursement of funds and the names of persons from whom
received and to whom disbursed. The records shall be retained by the subdivider for a period of three years after
the date of receipt or disbursement.
(b) A broker shall maintain or cause to be maintained, in accordance with accepted accounting practices, all trust fund
records described in Section 10148 of the Code.
(c) Such records shall be made available for examination and inspection in California during regular business hours
upon request by the commissioner or his or her designated representative.
Article 16. Mortgage Loan Brokerage

2840. Approved Borrower Disclosure Statements.
(a) The Commissioner shall publish and make available to interested persons as official forms of the Bureau of Real
Estate Forms RE 882 (Rev. 8/08) and RE 883 (Rev. 8/08) which are incorporated by reference. Forms RE 882 and RE
883 contain approved format and content for the disclosure statement required by subdivision (a) of Section 10240 of
the Code and Section 10241 of the Code.
(b) The publication of the forms pursuant to subdivision (a) hereof is for the purpose of aiding real estate licensees in
providing the disclosure of material information to prospective borrowers in a uniform and effective manner.
(c) A real estate broker must obtain the prior written approval of the Commissioner if he/she wishes to use forms
different than those referred to in (a). Forms that do not adequately provide the information required by the forms in
subsection (a) above, as appropriate, and in a format that is easily used by the Bureau will not be approved.

2841. Mortgage Loan Negotiation.
(a) The term "negotiation" as used in Section 10133.1(c) of the Code does not include any of the limited activities
described as follows when done by an employee of a real estate broker under the control, direction and supervision of
the broker:
(1) Preparing and designing advertising relating to loan transactions for broker review and written approval prior to
its distribution, circulation, use or publication.
(2) Distributing, circulating, using or publishing preprinted brochures, flyers, fact sheets or other written materials
relating to loans secured by real property which the broker can make or negotiate and which have been reviewed
and approved in writing by the broker prior to their being distributed, circulated or published. Materials subject to
this subdivision may not contain the name, address or telephone number of the nonlicensed employee.

(3) Providing written factual information about loan terms, conditions or qualification requirements to a prospective
borrower that has been either prepared by the broker, or reviewed and approved in writing by the broker. A
nonlicensed employee may discuss such information with a prospective borrower in general terms, but may not
provide counseling or advice to a prospective borrower.
(4) Notifying a prospective borrower of the information needed in order to complete a loan application without
providing counseling or advice to a prospective borrower.
(5) Entering information provided by the prospective borrower on a pre-printed application form without providing
counseling or advice to a prospective borrower.

(6) Entering information provided by a prospective borrower or third party into a preformatted computer database.
(7) Accepting and providing a receipt on behalf of a broker for funds received from a prospective borrower for
credit or appraisal fees.
(8) Preparing and mailing requests for verification of employment, verification of deposits, credit reports or
appraisal reports. Obtaining such reports for transmission to the broker.



(9) Assembling, under the direction of the broker, materials obtained in the course of a loan transaction for
submission to a prospective lender or loan committee, providing the final determination as to completeness or
compliance is made by the broker.

(10) Communicating with a service provider in connection with a loan transaction to determine when reports or
other information needed concerning any aspect of the transaction will be delivered, or when certain services will
be performed or completed.
(11) Mailing, delivering, picking up, or arranging the mailing, delivery, or picking up of documents or instruments
related to the loan transaction, including obtaining signatures to the documents or instruments from principals,
parties or service providers in connection with the loan transaction, as long as the nonlicensed employee does not
interpret or explain the content, relevance, significance or effect of the document or signature and such documents
or instruments have been reviewed and approved in writing by the broker.

(12) Contacting a prospective lender to determine the status of a loan application.
(13) Responding to an inquiry or notifying a prospective borrower or his or her agent of the status of the loan
application as long as the nonlicensed employee does not interpret or explain the relevance, significance or effect
of that status. A nonlicensed employee may communicate omissions to a party or principal to the loan as long as
the nonlicensed employee does not interpret or explain the relevance or significance of those omissions.
(14) Preparing and completing documents and instruments under the supervision and direction of the broker if the
final documents or instruments will be or have been reviewed and approved in writing by the broker.
(15) Arranging or making appointments for third party service providers to enter the real property securing the loan,
or arranging or making appointments for the prospective borrower or lender to meet with the broker, lender or other
party or service provider in connection with the loan.
(b) As used in this section the terms "loan" or "loan transaction" mean a loan secured directly or collaterally by a lien
on real property which is a residential mortgage loan transaction, as defined in Section 50003 of the Financial Code and
where the lender is an institutional lender, as defined in Section 50003 of the Financial Code. Other than the acts
specifically authorized by this Section, at no time may the nonlicensed employee perform any acts for which a real
estate license is required within the meaning of Section 10131(d) of the Business and Professions Code.
(c) As used in this Section and in Section 10133.1(c) of the Code the term "employee" means a person in the service of
a broker under any appointment or contract of hire, express or implied, oral or written and for whom the broker is
obligated to withhold income tax payments and provide workers compensation insurance and unemployment insurance.

(d) As used in this Section, the term "written approval" shall consist of the broker’s signature or initials affixed by the
broker to a copy of the instrument being approved along with the date of the approval. The broker shall retain a copy of
the approval for a period of three years from the date the approval was made. A broker may delegate to a broker or
salesperson employed by the broker the authority to provide written approval so long as the broker does not relinquish
overall responsibility for supervision of nonlicensed persons acting under this Section.

2841.5. Recordation of Trust Deeds – Multi-Lender Loans.
A real estate licensee who negotiates a promissory note secured by a trust deed on real property pursuant to Section
10238 of the Code shall cause the trust deed to be executed naming as beneficiaries the lenders or their nominee (who
shall not be the licensee or the licensee's nominee) and shall cause the trust deed to be recorded, with the county recorder
of the county in which the real property is located prior to the time that any funds are disbursed, except when the lender
has given written authorization for prior release. If funds are released on the lenders' written authorization, the trust
deed shall be recorded, or delivered to the lenders or beneficiaries with a written recommendation that it be recorded
forthwith, within 10 days following release.

2842. Approved Borrower Disclosure Statement for Nontraditional and Subprime Mortgage Products.
(a) Notwithstanding Section 2840 of these regulations, the Commissioner shall publish and make available to interested
persons as an official form of the Bureau of Real Estate Form RE 885 (Rev. 8/08) which is incorporated by reference,
with approved format and content for the disclosure statement referred to in subdivision (a) of Section 10240 of the
Code and Section 10241 of the Code.
(b) The publication of the form pursuant to subdivision (a) hereof is for the purpose of aiding real estate licensees in
providing the disclosure of material information in a uniform and effective manner to prospective borrowers relating to



home loans on one-to-four unit single-family residences whose loans involve a “nontraditional mortgage product” as
that term is defined in subsection (c) below.
(c) For the purpose of this regulation, a “nontraditional mortgage product” is a loan that allows borrowers to defer
repayment of principal or interest. Such products include, but are not limited to, interest only loans where a borrower
pays no loan principal for a period of time and payment option loans where one or more of the payment options may
result in negative amortization.
A “nontraditional mortgage product” does not include reverse mortgages or home equity lines of credit (other than
simultaneous second lien loans).

(d) A real estate broker must obtain the prior written approval of the Commissioner if he/she wishes to use a form
different than that referred to in subsection (a) above with a nontraditional mortgage product. Forms that do not
adequately provide the information required by Sections 10240 and/or 10241 of the Code, as appropriate, and in a
format that is easily used by the Bureau, will not be approved.
2842.5. Completed Written Loan Application
For purposes of Section 10240 of the Code, a loan application shall be considered complete when the licensee receives
or has prepared a written application on an application form or forms normally used by the lender for a Federally Related
Mortgage Loan, and as to non-federally related mortgage loans, when the licensee receives or has prepared a written
application on an application form or forms normally used by a lender or the licensee.

2843. Restrictions on Chargeable Costs and Expenses.
No “costs and expenses of making the loan” referred to in Section 10241 (a) which have not been paid, incurred or
reasonably earned by the broker shall be charged to the borrower. No fee may be charged to a borrower as part of the
costs and expenses of making the loan which exceeds the fee customarily charged for the same or comparable service
in the community where the service was rendered.
If the escrow depositary for a loan transaction is a licensed escrow agent, a title insurance company, a bank or trust
company or a savings and loan association, and a fee is charged to the borrower by the escrow depositary for the escrow
function, no additional fee may be charged by the broker, a salesperson licensed to the broker or any entity controlled
by the broker for services related to the conduct of an escrow.

2844. Lending Practices for Nontraditional and Subprime Mortgage Products.
(a) A real estate broker acting within the meaning of Section 10131.1 of the Code shall adopt and adhere to the policies
and procedures set forth in the guidance on nontraditional mortgage product risks published on November 14, 2006, by
the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators, and the
Statement on Subprime Mortgage Lending published on July 17, 2007, by the aforementioned entities and the National
Association of Consumer Credit Administrators, and which are incorporated by reference.

(b) Pursuant to subdivision (a), a real estate broker shall, at a minimum, adopt and adhere to the following:
(1) Risk Management Practices
(A) Consider a borrower's ability to repay the mortgage loan according to its terms as the primary basis for
making the loan rather than the foreclosure or liquidation value of the collateral.
(B) Ensure that a loan results in an identifiable benefit to the borrower and refrain from inducing a borrower to
repeatedly refinance a loan in order to charge high points and fees each time the loan is refinanced.
(C) Fully disclose the true nature of the mortgage loan obligation, or ancillary products to the borrower.
(2) Underwriting Standards

(A) Analyze a borrower's repayment capacity to include an evaluation of his/her ability to repay the loan by
final maturity at the fully indexed rate, assuming a fully amortizing repayment schedule. For products that
permit negative amortization, a repayment analysis should be based on the initial loan amount plus any balance
increase that may accrue from the negative amortization.

(B) Avoid combining nontraditional loan features such as interest-only or negative amortization loans with
reduced documentation or simultaneous second-lien loans (piggyback) unless there are mitigating factors such
as high credit scores, low loan to value ratios (LTVs) and debt to income ratios (DTI), significant liquid assets,
mortgage insurance or other credit enhancements.



(C) Accept stated income or reduced documentation only if there are mitigating factors that clearly minimize
the need for direct verification of the borrower's repayment. The mitigating factors shall be documented.
(D) When setting introductory rates on adjustable rate mortgages, consider the spread between the introductory
rate and the fully indexed rate to minimize negative amortization, "payment shock" and earlier-than-scheduled
recasting of monthly payments. Pursuant to the Statement on Subprime Mortgage Landing ". . . [p]ayment shock
refers to a significant increase in the amount of the monthly payment that generally occurs as the interest rate
adjusts to a fully indexed basis. Products with a wide spread between the initial interest rate and the fully
indexed rate that do not have payment caps or periodic interest rate caps, or that contain very high caps, can
produce significant payment shock".

(E) When making loans to borrowers ensure that such programs do not feature terms that could become
predatory or abusive as described in the "Statement on Subprime Mortgage Lending" under "Predatory Lending
Considerations" and the "Guidance on Nontraditional Mortgage Product Risks" under "Lending to Subprime
Borrowers".

(F) Qualify borrowers financing non-owner occupied investment properties on their ability to service the debt
over the life of the loan and require evidence that the borrower has sufficient cash reserves to service the loan
considering the possibility of extended periods of property vacancy and the variability of debt service
requirements associated with nontraditional mortgage loan products.
(G) Qualify a borrower's repayment capacity by a debt-to-income (DTI) ratio that includes an assessment of the
borrower's total monthly housing-related payments (e.g. principal, interest, taxes and insurance) and total
monthly obligations as a percentage of gross income.
(3) Control Systems

(A) Design compensation programs that avoid providing incentives for originations inconsistent with sound
underwriting and consumer protection principles. Such programs should not result in the steering of consumers
to products resulting in payment shock or containing prepayment penalties, balloon payments or a higher cost
due to reduced documentation or stated income, to the exclusion of other products for which the consumer may
qualify.
(B) Monitor the quality of third-party originations so that they reflect the broker's lending standards and
compliance with the Real Estate Law, Regulations of the Real Estate Commissioner and other applicable state
and federal laws and regulations.
(4) Consumer Protection
(A) In approving loans, primarily consider the borrower's ability to repay the loan according to its terms.
(B) Assist the consumer in selecting a product by providing information that enables the consumer to understand
material terms, costs, and risks of loan products.
(C) When offering mortgage product descriptions and advertisements, provide clear, detailed information about
the costs, terms, features, and risks of the loan to the borrower including:
 Potential payment shock

 Negative amortization

 Prepayment penalties

 Balloon payments

 Cost of reduced documentation loans

 Responsibility for taxes and insurance

(D) Provide monthly statements to consumers who have Payment Option adjustable rate mortgages (ARMs)
which include information that enables consumers to make informed payment choices, and which include an
explanation of each payment option available and the impact of that choice on loan balances.



(E) Avoid leading borrowers who have Payment Option ARMs to select a non-amortizing or negatively
amortizing payment.