California Code of Regulations
Title 10 - Investment
Chapter 3 - Commissioner of Financial Protection and Innovation
Subchapter 2 - Corporate Securities
Article 4 - Standards for the Exercise of the Commissioner's Authority
Subarticle 10 - Real Estate Programs
Conflicts of Interest and Investment Restrictions
Section 260.140.114.6 - Development or Construction Contracts

(a) The transactions occur at the formation of the program.

(b) The specific terms of the development and construction of identifiable properties are ascertainable and fully disclosed in the prospectus.

(c) The purchase price to be paid by the program is based upon a firm contract price which in no event can exceed the sum of the cost of the land and the sponsor's cost of construction. For purposes of this subdivision, cost of construction includes the contractor or construction fee customarily paid for services as a general contractor, provided, however, that any overhead of the general contractor is not charged to the program or included in the cost of construction.

(d) In the case of construction, the only fees paid to the sponsor in connection with such project, other than a development fee, shall consist of a construction fee for acting as a general contractor, which fees must be comparable and competitive with the fee of unaffiliated persons rendering comparable services (excluding, however, any overhead of the contractor), and a real estate commission in connection with the acquisition of the land, if appropriate under the circumstances. Any such real estate commission shall be subject to the provisions of Section 260.140.113.3 of these Rules.

(e) In the case of both development and construction fees paid to the sponsor, the sponsor must comply with paragraphs (d)(2) and (3) of Section 260.140.114.5.