A prior version of this post stated the investor questionnaire is required in the sale of “investment property.” This has been revised to state the questionnaire is only required in the sale of “notes secured by real estate or a business opportunity.” Changes are indicated in red.

California Business and Professions Code §10232.3, 10232.45
California Corporations Code §25102.2
Amended by S.B. 647
Effective: January 1, 2016

A broker who offers to sell or sells notes secured by a lien on real estate or a business opportunity is limited by maximum allowable loan-to-value ratios (LTV).

A maximum LTV of 60% now applies to notes secured by property that produces income from crops, minerals or timber.

Additionally, brokers who sell notes secured by real estate or a business opportunity need to have their prospective buyers complete an investor questionnaire approved by the Commissioner of the Department of Business Oversight (DBO).

The questionnaire now needs to be obtained from the buyer at least two business days and not more than one year prior to the sale of the notes.

Editor’s note — The investor questionnaire allows brokers to determine a client’s capacity for purchasing notes secured by real estate or a business opportunity, as required by the DBO. [See RPI Form 350 Client Profile Confidential Personal Data Sheet]

A broker needs only to ensure material facts are updated on the questionnaire with each new offer to the same buyer.