General Provisions - Shared Appreciation Loans For Seniors - CA Civil Law

Section § 1917.320

This law outlines various terms related to shared appreciation loans for seniors. These loans allow seniors to use their home as security while giving the lender a share of any increase in the home’s value. Key terms include 'Actual contingent interest' which limits the interest based on home appreciation, and 'Maturity event' which specifies how and when the loan must be repaid, such as through the borrower's death or the sale of the home. 'Lender's appreciation share' and 'Borrower's life expectancy' are defined, determining the lender's portion of the appreciation and how long payments are estimated to last. The statute also explains how monthly payments (annuity) are calculated, highlighting any interest and limits based on changes in property value and other specifics of loan projection. Additionally, it clarifies what constitutes a sale and the calculation of total loan obligation.

The law ensures the terms are clear for both parties in these specialized loan agreements, protecting senior borrowers and providing guidelines for lenders.

For the purposes of this chapter:

(a) “Actual contingent interest” means the lender’s appreciation share of the net appreciated amount. In no event, however, shall the rate of appreciation upon which actual contingent interest is calculated at the end of the loan term exceed 2¹/₂ times the rate at which projected contingent interest had been calculated.

(b) “Actual life expectancy” shall be calculated based upon actuarial tables for women only, regardless of the sex of the borrower, and acceptable to both the state and the insurance industry.

(c) “Annuity base amount” means the projected loan amount less (1) the initial advance and (2) the projected contingent interest based on the reasonable appreciation rate used in calculating the projected loan amount.

(d) “Borrower” means the recipient or recipients of a shared appreciation loan for seniors who is obligated by execution of a promissory note and who is at least 65 years of age.

(e) “Borrower’s life expectancy” means the actual life expectancy of the borrower plus no more than five years. In the case of a loan executed by two borrowers, the actual life expectancy shall be based upon the youngest of the two.

(f) “Cessation of occupancy” means the rental to a third party of the right of exclusive occupancy of the subject property, or the abandonment by all coborrowers of the property as his or her residence.

(g) “Lender” means any corporation organized as a public benefit corporation pursuant to the Nonprofit Corporation Law (Part 2 (commencing with Section 5110), Div. 2, Title 1, Corp. C.).

(h) “Lender’s appreciation share” means a proportion not to exceed 25 percent of the appreciation of the property securing the loan calculated in accordance with this chapter.

(i) “Shared appreciation loan for seniors” means any loan made pursuant to this chapter upon the security of owner-occupied real property of a type specified in Section 1917.330, and in connection with which the lender has a right to receive a share of the appreciation in the value of the security property. “Shared appreciation loan” includes a deed of trust and any evidence of debt issued in connection with the loan.

(j) “Maturity event” means the earliest of any of the following:

(1) The death of the borrower. In the case of a married couple who are coborrowers, the death of the surviving spouse.

(2) The date of sale.

(3) The date a loan made pursuant to this chapter is refinanced or repaid in full.

(4) Cessation of occupancy.

(k) “Monthly annuity” means an amount paid in equal monthly installments to the borrower which, together with interest calculated at the stated rate, shall exhaust the annuity base amount during the borrower’s life expectancy.

In the event that the calculated monthly annuity exceeds the cap or ceiling determined in accordance with this subdivision, the lender may limit the actual monthly annuity payment to an amount not lower than the cap. If the cap is imposed, the lender’s appreciation share shall be limited to 25 percent times the ratio between the actual capped monthly payment and the monthly payment calculated in accordance with the first sentence of this subdivision. For example, if the monthly payment calculated in the first sentence is five thousand dollars ($5,000), but the lender applies a two thousand five hundred dollar ($2,500) ceiling, the lender’s share of the home’s appreciation shall be likewise reduced by 50 percent.

The minimum cap shall be two thousand five hundred dollars ($2,500) for loans made during the calendar year 1989. In subsequent calendar years, the minimum cap shall be two thousand five hundred dollars ($2,500) increased to reflect the proportional increase in the Consumer Price Index for the State of California, as determined by the United States Bureau of Labor Statistics, for the period from January 1, 1989, until the November monthly index figure for the year prior to the year in which the loan agreement is entered into.

(l) “Net advance” means any lump-sum advance of funds by the lender to the borrower made at the time of the loan closing. Net advance shall not exceed 15 percent of the projected loan amount.

(m) “Net appreciated value” means the difference between the fair market value of the property securing the loan at the time the loan is made and the fair market value of the property securing the loan at the time of the maturity event, less any credit for approved improvements made during the term of the loan.

(n) “Prevailing rate” means the yield of a 30-year mortgage commitment for delivery within 30 days for a standard conventional fixed rate mortgage of the Federal Home Loan Mortgage Corporation.

(o) “Projected contingent interest” means the lender’s appreciation share of the projected appreciation of the property securing the loan from the date of the loan until the end of the borrower’s life expectancy, using the same reasonable projection of annual appreciation used in determining the projected loan amount.

(p) “Projected loan amount” means not less than 75 percent of the estimated fair market value of the borrower’s home at the end of the borrower’s life expectancy, calculated by applying to the fair market value a reasonable projection of appreciation over the borrower’s life expectancy based on a reasonable projected annual appreciation rate of the fair market value of the home.

(q) “Sale” means any transfer of title to the property and includes the execution of an installment sale contract giving the purchaser a right to possess the property before transfer of title, refinancing, judicial sale on execution, or other legal process of foreclosure or trustee’s sale, but “sale” does not include a transfer specified in Section 2924.6 if any spouse to whom the property is transferred is also a coborrower.

(r) “Stated interest rate” means a total interest rate of not more than four-fifths of the prevailing rate.

(s) “Total loan obligation” means the net original loan and the sum total of all monthly annuity payments received by the borrower, with interest on all outstanding amounts calculated no more often than monthly at the stated interest rate, and actual contingent interest plus interest at the prevailing rate as disclosed to the borrower at the time the loan was entered into on all of the above amounts from the date of any maturity event until the outstanding loan obligation is repaid in full. In no event shall the total loan obligation exceed the actual fair market value of the home on the date of the maturity event.

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(Amended by Stats. 1988, Ch. 1406, Sec. 1.)

Section § 1997.010

This law section deals with rules about how tenants can use rented property when it's leased for non-residential purposes, like businesses or offices.

This chapter applies to a restriction on use of leased property by a tenant under a lease of real property for other than residential purposes.

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(Added by Stats. 1991, Ch. 67, Sec. 3.)

Section § 1997.020

This section explains the meanings of key terms used in leases for non-residential properties. A 'landlord' can also be a tenant who is subleasing the property. A 'lease' refers to a lease or sublease, including any changes to it, for non-residential purposes. A 'restriction on use' is a lease term that limits or defines how the tenant can use the property. Lastly, a 'tenant' also includes subtenants or those who have taken over the lease.

As used in this chapter:

(a) “Landlord” includes a tenant who is a sublandlord under a sublease.

(b) “Lease” means a lease or sublease of real property for other than residential purposes, and includes modifications and other agreements affecting a lease.

(c) “Restriction on use” means a provision in a lease that restricts the use of leased property by a tenant, whether by limiting use to a specified purpose, mandating use for a specified purpose, prohibiting use for a specified purpose, limiting or prohibiting a change in use, or otherwise.

(d) “Tenant” includes a subtenant or assignee.

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(Added by Stats. 1991, Ch. 67, Sec. 3.)

Section § 1997.030

This law makes it clear that nothing in this chapter allows for restrictions that are already banned by other laws.

Nothing in this chapter authorizes a restriction on use that is otherwise prohibited by law.

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(Added by Stats. 1991, Ch. 67, Sec. 3.)

Section § 1997.040

This statute explains how rental losses are calculated if a lease is broken and the lease property has restrictions on its use. If ending the lease could have reasonably avoided these losses, then the usable potential of the property is considered. If a lease limits how the property is used, this is factored into the calculation unless the tenant can prove these limits are unfair. The law also allows a lease to continue even if the property use is restricted, as long as these restrictions are reasonable and enforceable. Tenants can challenge the fairness of these restrictions by considering the circumstances related to the specific property and surrounding buildings.

(a) For the purpose of subdivision (a) of Section 1951.2 (damages on termination for breach), the amount of rental loss that could be or could have been reasonably avoided is computed by taking into account any reasonable use of the leased property. However, if the lease contains a restriction on use that is enforceable under this chapter, the computation shall take into account the restricted use of the property except to the extent the tenant proves that under all the circumstances enforcement of the restriction would be unreasonable. The circumstances include, but are not limited to, those involving both the leased property and any building or complex in which it is located.

(b) The remedy described in Section 1951.4 (continuation of lease after breach and abandonment) is available notwithstanding the presence in the lease of a restriction on use of the leased property. The restriction on use applies under Section 1951.4 if it is enforceable under this chapter except to the extent the tenant proves that under all the circumstances enforcement of the restriction would be unreasonable. The circumstances include, but are not limited to, those involving both the leased property and any building or complex in which it is located.

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(Added by Stats. 1991, Ch. 67, Sec. 3.)

Section § 1997.050

This law says that a certain set of rules applies to any lease agreements made before, on, or after January 1, 1992, unless there's an exception mentioned in another section (1997.270).

Except as provided in Section 1997.270, this chapter applies to a lease executed before, on, or after January 1, 1992.

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(Added by Stats. 1991, Ch. 67, Sec. 3.)