Real Estate Investment Trusts - Unincorporated Associations - Corporations - CA

Section § 23000

This law defines what a 'real estate investment trust' (REIT) is in this context. It refers to any unincorporated group or trust formed to do business, managed by trustees for the benefit of people holding shares in the trust. To be considered a REIT, it must either have received certain approvals before this law was effective and filed taxes like a REIT in the past, or it must be created to be a REIT according to federal guidelines, have its shares approved for sale, and have started business in good faith as a REIT. Even if it doesn't pay taxes as a REIT, it can still be considered one if it meets these criteria.

“Real estate investment trust” as used in this part means any unincorporated association or trust formed to engage in business and managed by, or under the direction of, one or more trustees for the benefit of the holders or owners (hereinafter in this part “shareowners”) of transferable shares of beneficial interest in the trust estate (hereinafter in this part “shares”) and that meets one of the following two tests:

(a) It received, before the effective date of this part, an order, permit, or qualification from the Commissioner of Corporations pursuant to the provisions of the Corporate Securities Law of 1968 or any predecessor statute finding that it was a real estate investment trust, notwithstanding the subsequent amendment, suspension or revocation of any such finding, order, permit, or qualification, and it has for one or more of its three fiscal years immediately prior to the effective date of this part complied with, or in good faith filed a federal income tax return on the basis that it has complied with the requirements for real estate investment trusts set forth in Section 856 of the Federal Internal Revenue Code; or

(b) It is formed for the purpose of engaging in business as a real estate investment trust under Part II of Subchapter M of Chapter 1 of Subtitle A of the Internal Revenue Code of 1986, as amended from time to time; the sale of its shares has been qualified at any time by the Commissioner of Financial Protection and Innovation pursuant to the Corporate Securities Law of 1968; and in good faith it has commenced business as a real estate investment trust.

An unincorporated association or trust that otherwise meets the requirements of this section shall not be affected in its status as a real estate investment trust, regardless of whether it is in fact taxable for any year or years under Part II of Subchapter M of Chapter 1 of Subtitle A of the Internal Revenue Code of 1986, as amended from time to time.

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Section § 23001

If you own shares in a real estate investment trust, you won't be personally responsible for paying any of the trust's debts, claims, or liabilities, no matter when you acquired your shares.

No shareowner of a real estate investment trust shall be personally liable as such for any liabilities, debts or obligations of, or claims against, the real estate investment trust, whether arising before or after such shareowner became the owner or holder of the shares thereof.

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Section § 23002

This section states that certain rules apply to real estate investment trusts (REITs). For REITs formed in California, these rules cover their debts and obligations no matter where they occur. For REITs formed outside of California, the rules apply to debts and obligations that happen within California.

Section 23001 shall apply to any real estate investment trust organized under the laws of this state with respect to liabilities, debts, obligations and claims wherever arising, and to any real estate investment trust organized under the laws of a foreign jurisdiction with respect to liabilities, debts, obligations and claims arising in this state.

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Section § 23003

If you invest in a real estate investment trust (REIT), you can't decide to cash out or redeem your investment whenever you want. That's something the trust doesn't allow.

A real estate investment trust shall not issue any security redeemable at the option of the holder of the security.

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Section § 23004

This section says that new rules apply to debts and obligations of real estate investment trusts (REITs) after a certain date, while older rules apply to debts that existed before that date. It also clarifies that the adoption of these rules shouldn't be taken to argue one way or the other about whether owners of non-REIT business trusts are personally responsible for the trust's debts or obligations.

Section 23001 shall apply with respect to all liabilities, debts, obligations of, and claims against, a real estate investment trust arising after the effective date of this part, and prior law shall continue to govern with respect to liabilities, debts, obligations and claims existing on the effective date of this part. No implication shall be created by the adoption of this part that the holders or owners of shares of beneficial interest in business trusts which do not meet the definition of real estate investment trust in Section 23000 are, or are not, as such, personally liable for the liabilities, debts or obligations of, or claims against, any such trust.

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Section § 23005

This law explains that the rules for corporate bankruptcy reorganizations also apply to real estate investment trusts (REITs). When reading those rules, substitute the terms to make them relevant to REITs. For instance, use 'trustee' instead of 'director' and 'declaration of trust' instead of 'articles'.

The provisions of Sections 1400 and 1402 governing bankruptcy reorganizations for corporations also apply to real estate investment trusts. For that purpose where the term “corporation” is used in such sections it shall also include the term “real estate investment trust,” the terms “director” or “board of directors” shall include “trustee” or “board of trustees,” the term “articles” shall include “declaration of trust” and the term “capital stock” shall include “shares of beneficial interest.”

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Section § 23006

This law section outlines how mergers can occur between certain entities, specifically real estate investment trusts (REITs) and limited partnerships. It allows two or more REITs to merge into a single REIT if their declarations of trust allow it and detail the necessary procedures. Similarly, one or more REITs can merge with limited partnerships either into a limited partnership or into a REIT, again if permitted and detailed by their declarations of trust. Additionally, for any of these mergers to be finalized, the majority of the REIT's shareholders must approve it.

(a) The following entities may be merged pursuant to this article:

(1) Any two or more real estate investment trusts into one real estate investment trust, provided that the merger is specifically permitted by the declarations of trust, and that procedure is detailed in those declarations.

(2) One or more real estate investment trusts with one or more limited partnerships into one limited partnership, provided that the merger is specifically permitted by the declarations of trust, and that procedure is detailed in those declarations.

(3) One or more real estate investment trusts with one or more limited partnerships into one real estate investment trust, provided that the merger is specifically permitted by the declarations of trust, and that procedure is detailed in those declarations.

(b) Any merger under this section shall only be effective upon the approval of the holders of a majority of the shares of beneficial interest of the real estate investment trust.

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