(a) In any time-share plan, the developer may undertake to pay a portion of the assessments otherwise payable by each purchaser (“buy down subsidy”). Any developer undertaking to pay a buy down subsidy shall do both of the following:

(1) Enter into a contract with the association that specifies in detail the obligations of the developer and the methods to be used in valuing the goods and services furnished under the time-share plan.

lawyer at desk

Ask a legal question, get an answer ASAP!
Click here to chat with a lawyer about your rights.

Terms Used In California Business and Professions Code 11242

  • Assessment: means the share of funds required for the payment of common expenses that is assessed from time to time against each purchaser by the managing entity. See California Business and Professions Code 11212
  • Association: means the organized body consisting of the purchasers of time-share interests in a time-share plan. See California Business and Professions Code 11212
  • Commissioner: means the Real Estate Commissioner. See California Business and Professions Code 11212
  • Contract: A legal written agreement that becomes binding when signed.
  • Developer: means and includes any person who creates a time-share plan or is in the business of selling time-share interests, other than those employees or agents of the developer who sell time-share interests on the developer's behalf, or retains agents to do the same, or any person who succeeds to the interest of a developer by sale, lease, assignment, mortgage, or other transfer, but the term includes only those persons who offer time-share interests for disposition in the ordinary course of business. See California Business and Professions Code 11212
  • Escrow: Money given to a third party to be held for payment until certain conditions are met.
  • Lease: A contract transferring the use of property or occupancy of land, space, structures, or equipment in consideration of a payment (e.g., rent). Source: OCC
  • Obligation: An order placed, contract awarded, service received, or similar transaction during a given period that will require payments during the same or a future period.
  • Purchaser: means any person, other than a developer, who by means of a voluntary transfer for consideration acquires a legal or equitable interest in a time-share plan other than as security for an obligation. See California Business and Professions Code 11212
  • Time-share interest: means and includes either of the following:

    California Business and Professions Code 11212

  • Time-share plan: means any arrangement, plan, scheme, or similar device, other than an exchange program, whether by membership agreement, sale, lease, deed, license, right to use agreement, or by any other means, whereby a purchaser, in exchange for consideration, receives ownership rights in or the right to use accommodations for a period of time less than a full year during any given year, on a recurring basis for more than one year, but not necessarily for consecutive years. See California Business and Professions Code 11212

(2) Furnish the association with an executed copy of the subsidization contract within 10 days after closing of escrow of the first sale or lease of a time-share interest.

(b) If the developer is paying a buy down subsidy, the developer shall provide an assurance for its buy down subsidy obligation in an amount acceptable to the commissioner, but not more than the aggregate amount by which annual assessments are to be reduced, for example, the number of interests to be sold in each unit type multiplied by the amount by which the annual assessment for such unit type is to be reduced, multiplied by the number of years in the term of the buy down subsidy.

(c) For any buy down subsidy agreements entered into after July 1, 2005, the subsidy agreements shall provide that if there is a dispute between the developer and the association with respect to the question of satisfaction of the conditions for exoneration or release of the security, the issue shall, at the request of either party, be submitted to arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association or another third-party arbitration organization selected by the parties and in accordance with Title 9 (commencing with Section 1280) of Part 3 of the Code of Civil Procedure. Any fee to initiate the arbitration shall be remitted by the developer. The cost of arbitration shall ultimately be borne as determined by the arbitrator under those rules.

(Amended by Stats. 2019, Ch. 153, Sec. 2. (SB 578) Effective January 1, 2020.)

  Previous section
Next section  
 Article 2 Contents