BILL ANALYSIS
AB 620
Page 1
CONCURRENCE IN SENATE AMENDMENTS
AB 620 (Leno)
As Amended August 25, 2003
Majority vote
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|ASSEMBLY: |78-0 |(May 1, 2003) |SENATE: |24-12|(August 28, |
| | | | | |2003) |
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Original Committee Reference: B. & F.
SUMMARY : Allows construction or rehabilitation loans with
multiple lenders to be made based on the value of the property
after improvements are completed.
The Senate amendments :
1)Move the operative language in the bill to a newly created
article of the Business and Professions Code.
2)Clarify that this new article applies only to the exemption
from securities qualification claimed under Corporations Code
Section 25102.5. This article does not apply to other
specified exemptions from securities qualification or to any
permit to qualify the offer and sale of securities under the
Corporate Securities Law of 1968.
3)Require a real estate broker who arranges a transaction
pursuant to this article or pursuant to an offering subject to
the Corporations Code to indicate in the broker's transaction
file the provision of law pertaining to qualification or
exemption from qualification under which the transaction is
being conducted. This information shall be retained for a
specified period.
4)Make other technical changes.
AS PASSED BY THE ASSEMBLY , this bill allowed that the term
"current market value" may be the value of the completed project
if the following safeguards are met:
1)An independent, neutral third-party escrow account is used for
all deposits and disbursements.
AB 620
Page 2
2)A comprehensive, detailed, draw schedule is used to ensure
proper and timely disbursements to allow for completion of the
project.
3)The loan is fully funded with the entire loan amount put in
escrow prior to recording the deed or deeds of trust.
4)The transaction documents include a detailed description of
actions that may be taken in the event of a failure to
complete the project.
5)The disbursement draws are based on verification from an
independent qualified person who certifies that the work
completed to-date meets the related codes and standards and
that the draws were made in accordance with the construction
contract and draw schedule.
6)An appraisal is completed by a qualified and licensed
appraiser in accordance with the Uniform Standards of
Professional Appraisal Practice.
7)The loan amount does not exceed $2.5 million.
FISCAL EFFECT : None
COMMENTS : Real estate brokers typically make loans under the
multi-lender law for construction and rehabilitation projects.
These loans have historically been made based on the value of
properties after construction or rehabilitation projects were
completed. This bill allows that practice to continue and
creates new protections for investors.
Analysis Prepared by : Margaret Gladstein / B. & F. / (916)
319-3081
FN: 0003048