Civ. Code, § 1917.006

For purposes of this chapter:

(a) “Shared appreciation loan” means, in addition to the meaning defined in Section 1917, a loan that obligates the borrower to pay to the lender contingent deferred interest pursuant to the loan documentation and that is made upon the security of an interest in real property that is an owner-occupied residence in compliance with all of the following conditions:

(1) The loan is made by, and all contingent deferred interest paid with respect to the loan is used by, a local public entity to provide financial assistance in the acquisition of housing that is affordable to persons and families of low or moderate income, as defined in Section 50093 of the Health and Safety Code.

(2) The loan is made or acquired with assets of the local public entity other than the proceeds of a bond meeting the requirements of Section 143 of the United States Internal Revenue Code of 1986.

(3) The loan documentation assures that the obligation to pay contingent deferred interest is subject to a superior right of the borrower, upon termination of the loan, to receive repayment of money paid by the borrower for purchase of the security property (including downpayment, installment payments of mortgage principal, escrow fees, transfer taxes, recording fees, brokerage commissions and similar costs of acquisition actually paid by the borrower) and money paid by the borrower for capital improvements to the security property, plus not less than the legal rate of interest on those cash payments.

(4) The loan documentation assures that the amount of contingent deferred interest shall not exceed that percentage of the appreciation in appraised fair market value of the security property that equals the local public entity’s proportionate share of the total initial equity in the security property. The amount of the total initial equity and of the local public entity’s share of the initial equity shall be agreed upon by the borrower and the local public entity at the time of executing the shared appreciation loan and shall include the local public entity’s cash investment, the difference between the price of land provided by the local public entity and the fair market value of the land, the amount of fees waived by the local public entity, and the value of in-kind contributions made by or on behalf of the local public entity. Funds borrowed by the borrower, the repayment of which are secured by the security property, shall not be included in the calculation of total initial equity of the borrower.

(5) At least 30 days in advance of executing the loan documentation, the borrower receives full disclosure of the terms and conditions of the loan, including the economic consequences to the borrower of the obligation to pay contingent deferred interest.

(b) “Local public entity” means a city and county, or a housing authority or redevelopment agency of a city and county.

(c) “Owner-occupied residence” means real property containing one to four residential units at least one of which at the time the loan is made is, or is to be, occupied by the borrower.