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
Rights and Obligations of Participants
Section 260.140.116.8 - Assessments and Defaults

(a) Assessments will not be allowed for non-specified programs. In the case of specified programs, assessments shall be permitted only when specific circumstances demonstrate a need. If the anticipated cash flow from property (after payment of debt service and all operating expenses) is not sufficient to pay taxes and/or special assessments imposed by governmental or quasi-government units, the program agreement may include a provision for assessments to meet such deficiencies. Assessments must be limited to the foregoing obligations, and all amounts derived from such assessments must be applied only to satisfaction of said obligations.

(b) In the event of a default in the payment of assessments by a participant a program's interest shall not be subject to forfeiture, but may be subject to a reasonable penalty for failure to meet the participant's commitment. Provided that the arrangements are fair, this may take the form of reducing the participant's proportionate interest in the program, subordinating the interest to that of nondefaulting partners, a forced sale complying with applicable procedures for notice of sale, the lending of the amount necessary to meet such commitment by the other participants or a fixing of the value of such interest by independent appraisal or other suitable formula with provision for a delayed payment for the interest not beyond a reasonable period, but a debt security issued for such interest should not have a claim prior to that of the other investors in the event of liquidation.

(c) A participant shall be reinstated to his full status as a limited partner upon payment of the delinquent assessment with interest at the maximum rate allowed by law within 30 days of the date of default. A default shall occur upon failure to pay an assessment within a 30-day period from the date of the notice imposing the assessment.