Current through Register 2024 Notice Reg. No. 38, September 20, 2024
(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.
1. New section
filed 8-21-63; designated effective 9-20-63 (Register 63, No. 14).
2.
Repealer and new section filed 9-17-65; effective thirtieth day thereafter (Register
65, No. 17).
3. Amendment filed 12-10-71; effective thirtieth day
thereafter (Register 71, No. 50).
4. Amendment filed 1-16-76; effective
thirtieth day thereafter (Register 76, No. 3).
5. Amendment of
subdivision (b) filed 7-1-83; effective thirtieth day thereafter (Register 83, No.
30).
6. Amendment of subsections (a)(1)-(b), repealer of subsections
(b)(1) and (b)(2), and new subsections (b)(1)-(b)(4)(D) filed 12-30-97; operative
1-29-98 (Register 98, No. 1).
Note: Authority cited: Section
11001,
Business and Professions Code. Reference: Section
11018.5,
Business and Professions Code.
