You are here: California / Business and Professions Code - BPC / ARTICLE 6. Real Property Securities Dealers [10237. - 10238.8.] / Section 10237.1.


Section 10237.1. (Amended by Stats. 1983, Ch. 443, Sec. 5.)
Cite as: Cal. Bus. & Prof. Code §10237.1.

The term real property security as used in this article means:

(a)An agreement made in connection with the arranging of a loan evidenced by a promissory note secured directly or collaterally by a lien on real property or made in connection with the sale of a promissory note secured directly or collaterally by a lien on real property or a real property sales contract wherein the real property securities dealer or his principal expressly or impliedly agrees to do any of the following:

1.Guarantee the note or contract against loss at any time, or

2.Guarantee that payments of principal or interest will be paid in conformity with the terms of the note or contract, or

3.Assume any payments necessary to protect the security of the note or contract, or

4.Accept, from time to time, partial payments for funding the loan or purchasing the note or contract, or

5.Guarantee a specific yield or return on the note or contract, or

6.Pay with his own funds any interest or premium for a period prior to actual purchase and delivery of the note or contract, or

7.Repurchase the note or contract.

(b)A promissory note secured directly or collaterally by a lien on real property or a real property sales contract on which the real estate broker who arranged the loan evidenced by the note, negotiated the sale of a note or contract or who is servicing the note or contract for the owner, knowingly causes any payment on the note or contract to be made to the owner, directly or indirectly, with funds other than funds of the obligor while the obligor is delinquent on the note or contract.

Payments of principal or interest made in good faith to the owner by a broker, when made after receipt by the broker of the obligor’s remittance, shall not be deemed a payment with funds other than the funds of the obligor.

The provisions of this subdivision shall not be applicable in the case of a promissory note which the obligor as purchaser of the real property securing the note has given to the holder of the note as seller of the real property for purposes of financing the purchase nor shall the provisions of this subdivision be applicable in the case of a real property sales contract under the terms of which the obligor is making installment payments to acquire title to the real property from the vendor.

(c)One of a series of promotional notes secured by liens on separate parcels of real property in one subdivision or in contiguous subdivisions.

(d)One of a series of real property sales contracts pertaining to separate parcels of real property in one subdivision or in contiguous subdivisions, all of which are executed by one person or persons associated together as owners.

Except as provided in subdivisions (a) or (b), performance of services in connection with loans or promissory notes secured directly or collaterally by a lien on real property or a real property sales contract, as agent for and at the direction of the lender, borrower, or purchaser, including but not limited to the payment of taxes, debt service on an obligation secured by the same real property having priority over any mortgage or deed of trust securing the promissory note serviced by the agent, insurance premiums or costs of foreclosure, if all such costs (excluding routine office expenses) of such services are paid by or payable by borrower, lender, or purchaser shall not be construed to be a real property security as defined in subdivision (a) of this section, or as a security for the purposes of the Corporate Securities Act.

As used in subdivision (c) “promotional note” means a promissory note secured by a trust deed executed on unimproved real property, or executed after construction of an improvement of the property but before the first sale of the property as so improved, or executed as a means of financing the first purchase of the property as so improved, and which is subordinate or which by its terms may become subordinate to any other trust deed on the property; provided that the term “promotional note” does not include (i) a note which was executed in excess of three (3) years prior to being offered for sale or (ii) a note secured by a first trust deed on real property in a subdivision, which evidences a bona fide loan made in connection with the financing of the usual costs of the development of a residential, commercial, or industrial building or buildings on the property under a written agreement providing for the disbursement of the loan funds as costs are incurred or in relation to the progress of the work and providing for title insurance insuring the priority of the security as against mechanic’s and materialmen’s liens or for the final disbursement of at least 10 percent of the loan funds after the expiration of the period for the filing of mechanics’ and materialmen’s liens.

As used in subdivision (d), the term “real property sales contract” does not include a contract executed more than three years prior to being offered for sale.

The term real property security does not include any bond or debenture or note which is one of a series of notes of equal priority secured by an interest in the same real property.



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