Article 2Use Restrictions

Section § 1917.330

Explanation

Lenders can offer shared appreciation loans to seniors for refinancing homes with one to four units, including condos and mobile homes. These loans are for owner-occupied units, but in buildings with two to four units, only one unit needs to be occupied by the owner. If a borrower writes to the lender confirming they live in the home at the time of the loan, it's considered owner-occupied. Also, lenders can base a loan solely on the land's value without considering home structures, and this part of the law just clarifies what's already allowed.

Lenders may make shared appreciation loans for seniors pursuant to this chapter for the refinancing of real property improved with one- to four-dwelling units, including structures ancillary to such dwelling units and including attached single-family dwelling units, single-family mobilehome units, residential condominium units, and dwelling units within a planned unit development. Shared appreciation loans shall be made to refinance only owner-occupied dwelling units, but in the case of two- to four-unit dwellings financed under this chapter, only one of the units need be owner-occupied. A dwelling unit shall be conclusively deemed to be owner-occupied for purposes of this chapter with respect to initial qualification for participation in the loan program if a borrower certifies in writing to the lender at the time the loan is made that he or she will occupy the property.
Nothing contained herein shall be deemed or interpreted to restrict a lender from providing a shared appreciation loan based solely upon the value of the real property upon which the borrower’s dwelling is situated, secured only by that real property and not by the improvements thereon. In that case, the lender’s actual contingent interest, and any other necessary calculations, shall be based upon the land value alone, not taking into account any improvements thereon. This paragraph is declaratory of existing law.
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(Amended by Stats. 1988, Ch. 1406, Sec. 2.)

Section § 1917.331

Explanation

This law outlines the terms for shared appreciation loans specifically designed for seniors. These loans have no fixed term and end when certain maturity events happen, like the borrower moving out or passing away, with the option to extend up to 12 months after such events. Borrowers can get an initial advance and monthly payments, with interest applied no more often than monthly. The property is secured by a deed of trust, and the combined fees for processing and documentation cannot exceed $500, with no prepaid interest allowed.

(a)CA Civil Law Code § 1917.331(a) A shared appreciation loan for seniors shall include all of the following:
(1)CA Civil Law Code § 1917.331(a)(1) The term of the loan shall be for an open-ended term, terminating upon the occurrence of a maturity event, or the failure of the borrower to meet the terms of a deed of trust granted by the borrower to the lender which are normally and customarily used by mortgage lenders in this state for loans secured by residential real property. However, if the maturity event is either cessation of occupancy of the property by the borrower or death of the borrower, the term shall be extended until the earlier of the sale or refinancing of the property or 12 months after the occurrence of the maturity event.
(2)CA Civil Law Code § 1917.331(a)(2) An initial advance, if desired by the borrower.
(3)CA Civil Law Code § 1917.331(a)(3) Monthly annuity payments which shall continue until the occurrence of a maturity event, or earlier termination in accordance with paragraph (1).
(4)CA Civil Law Code § 1917.331(a)(4) Interest on (2) and (3), calculated no more often than monthly at the stated interest rate.
(5)CA Civil Law Code § 1917.331(a)(5) Actual contingent interest.
(6)CA Civil Law Code § 1917.331(a)(6) Interest on paragraphs (2) to (5), inclusive, compounded no more often than monthly, from the date of a maturity event until the loan is repaid in full.
(b)CA Civil Law Code § 1917.331(b) The loan shall be secured by a deed of trust on the real property financed.
(c)CA Civil Law Code § 1917.331(c) The aggregate amount of any fee charged to the borrower by the lender for processing an application, preparing any necessary documents, obtaining a credit report, or any other costs incurred by the lender in connection with originating a shared appreciation loan for seniors shall not exceed five hundred dollars ($500). No prepaid interest shall be charged to the borrower.
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(Amended by Stats. 1988, Ch. 1406, Sec. 3.)

Section § 1917.332

Explanation

This law states that if a loan agreement tries to stop or end monthly payments before a specified event that ends the loan term, that part of the agreement is not valid and cannot be enforced.

Any provision in any loan made pursuant to this chapter for the discontinuation or termination of a monthly annuity other than upon the occurrence of a maturity event is void and unenforceable.
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(Added by Stats. 1984, Ch. 1701, Sec. 1.)

Section § 1917.333

Explanation

This law gives borrowers the right to pay off their loan completely or partially whenever they choose, without waiting for the loan term to end.

(a)CA Civil Law Code § 1917.333(a) The borrower shall have the right to prepay, at any time, in full or in part, the total loan obligation.
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(Added by Stats. 1984, Ch. 1701, Sec. 1.)

Section § 1917.334

Explanation

This law states that, unless otherwise specified in this article, the rules and conditions for shared appreciation loans for seniors must comply with all the loan laws that are in place when the loan is created.

Except as provided in this article, the terms and conditions of the shared appreciation loan for seniors shall be subject to all laws applicable to loans in effect on the date the loan is made.
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(Added by Stats. 1984, Ch. 1701, Sec. 1.)

Section § 1997.210

Explanation

This law explains that a lease can limit how a tenant uses the rented property, but if the lease doesn't specify any restrictions, the tenant can use the property in any reasonable way.

(a)CA Civil Law Code § 1997.210(a) Subject to the limitations in this chapter, a lease may include a restriction on use of leased property by a tenant.
(b)CA Civil Law Code § 1997.210(b) Unless the lease includes a restriction on use, a tenant’s rights under a lease include any reasonable use of leased property.
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(Added by Stats. 1991, Ch. 67, Sec. 3.)

Section § 1997.220

Explanation
If there's any confusion or unclear language about how a tenant can use a rented property, the tenant is allowed to use the property more freely.
An ambiguity in a restriction on use of leased property by a tenant shall be construed in favor of unrestricted use.
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(Added by Stats. 1991, Ch. 67, Sec. 3.)

Section § 1997.230

Explanation

This law allows a landlord to include in a lease agreement a rule that fully prevents a tenant from using the property for any purpose other than what was originally agreed upon.

A restriction on use of leased property by a tenant may absolutely prohibit a change in use.
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(Added by Stats. 1991, Ch. 67, Sec. 3.)

Section § 1997.240

Explanation

This law section means that if a tenant wants to change how they use the property they are leasing, they must follow any specific standards or conditions outlined in their lease agreement.

A restriction on use of leased property by a tenant may provide that a change in use is subject to any express standard or condition.
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(Added by Stats. 1991, Ch. 67, Sec. 3.)

Section § 1997.250

Explanation

This section of the law talks about how a tenant may need the landlord's approval to change how they use a leased property. It specifies that the landlord should not refuse consent without good reason unless there are specific conditions or standards mentioned in the lease that allow them to do so.

A restriction on use of leased property by a tenant may require the landlord’s consent for a change in use subject to any express standard or condition for giving or withholding consent, including, but not limited to, either of the following:
(a)CA Civil Law Code § 1997.250(a) The landlord’s consent may not be unreasonably withheld.
(b)CA Civil Law Code § 1997.250(b) The landlord’s consent may be withheld subject to express standards or conditions.
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(Added by Stats. 1991, Ch. 67, Sec. 3.)

Section § 1997.260

Explanation

This law says that if a tenant's lease requires the landlord's approval for changing how they use the property but doesn't explain how that decision should be made, the landlord must have a good reason not to agree. It's up to the tenant to prove if the landlord is being unreasonable about this. One way the tenant can prove it is by asking the landlord in writing why they refused and showing that the landlord didn’t give a good written reason within a reasonable time.

If a restriction on use of leased property by a tenant requires the landlord’s consent for a change in use but provides no standard for giving or withholding consent, the restriction shall be construed to include an implied standard that the landlord’s consent may not be unreasonably withheld. Whether the landlord’s consent has been unreasonably withheld in a particular case is a question of fact on which the tenant has the burden of proof. The tenant may satisfy the burden of proof by showing that, in response to the tenant’s written request for a statement of reasons for withholding consent, the landlord has failed, within a reasonable time, to state in writing a reasonable objection to the change in use.
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(Added by Stats. 1991, Ch. 67, Sec. 3. Applicable as prescribed by Section 1997.270.)

Section § 1997.270

Explanation

This law explains that if a lease agreement from before January 1, 1992, says a tenant needs the landlord's permission to change how they use a rented space, and it doesn’t specify how consent should be given or withheld, the landlord has full control over saying yes or no. Also, if the terms of changing the use are determined by an option or other agreement, the restriction is considered to be set on the date that option or agreement was first made.

(a)CA Civil Law Code § 1997.270(a) Section 1997.260 applies to a restriction on use executed on or after January 1, 1992. If a restriction on use executed before January 1, 1992, requires the landlord’s consent for a change in use of leased premises by a tenant, but provides no standard for giving or withholding consent, the landlord has sole and absolute discretion to give or withhold consent.
(b)CA Civil Law Code § 1997.270(b) For purposes of this section, if the terms of a restriction on change in use are fixed by an option or other agreement, the restriction on change in use is deemed to be executed on the date of execution of the option or other agreement.
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(Added by Stats. 1991, Ch. 67, Sec. 3.)