Section 260.140.113.10 - Asset Based Fee(a) An asset based fee includes compensation to a sponsor computed in accordance with this section.(b) A program may elect to compensate the sponsor according to the provisions of this section only if the program meets all of the following: (1) The prospectus states that a primary investment objective of the program is to generate and to distribute to the participants the cash flow from the operation of the properties of the program.(2) The anticipated life of the program does not exceed 20 years from the date the offering is declared effective by the Securities and Exchange Commission. However, the partnership agreement may provide that the program will be extended by the affirmative vote of a majority of the outstanding limited partnership interests.(3) The program will invest not less than 82% of the capital contributions in the purchase, development construction or improvement of specific properties. The remaining capital contributions may be used to pay organization and offering expenses, acquisition expenses, acquisition fees, and any other related fees and expenses, provided such expenses and fees are reasonable in accordance with Sections 260.140.113.1, 260.140.113.2., 260.140.113.3. and 260.140.113.4. The total amount of organization and offering expenses, acquisition expenses, acquisition fees, and any other related fees and expenses, whenever paid, shall be limited to the initial amount of capital contributions not applied to the purchase, construction or improvement of specific properties. Not more than 3% of the capital contributions invested in the purchase, development, construction, or improvement of specific properties may be included as a working capital reserve.(c) The annual asset based fee shall be 0.75% of the base amount. On capital contributions temporarily held while awaiting purchase, development, construction or improvement of specific properties, the asset based fee shall be 0.5% of those capital contributions. The sponsor may also be allowed the following additional fees and compensation: (1) A property management fee as provided in Section 260.140.113.8.(2) Real Estate Commissions as provided in Section 260.140.113.7.(3) A promotional interest as provided in Section 260.140.113.5(a)(2)(B).(4) Fees for insurance services as allowed by Section 260.140.113.9.(5) Organization and offering expenses, acquisition expenses and acquisition fees as provided in subparagraph (b)(3).(6) Reimbursement for program expenses as provided in Section 260.140.114.5.(7) Fees, interest and other charges as allowed in Section 260.140.114.10(a).(8) Except as provided above, the sponsor shall receive no fees or other compensation from the program.(d) An election to compensate the sponsor with an asset based fee as provided in this section shall be subject to the following limitations: (1) The program may reinvest the cash available from sale and refinancing of properties during the 7 years following the date of its effectiveness with the Securities and Exchange Commission. No deduction for organization and offering expenses, acquisition expenses, acquisition fees, and any other related fees and expenses, shall be allowed on such reinvestments. Beginning on a date 7 years after the date of effectiveness with the Securities and Exchange Commission, no reinvestment of the cash available from sale and refinancing of program properties shall be allowed.(2) The asset based fee may be accrued without interest when program funds are not available for its payment. Any accrued asset based fee may be paid from the next cash available from sale and refinancing of properties. No asset based fee may be paid from program reserves.(3) A sponsor that is terminated and entitled to compensation from the program as provided in the partnership documents and governed by Section 260.140.111.6 shall be paid the asset based fee through the date of such termination.(4) Except as modified by this section, all other rules governing real estate programs shall apply where appropriate to programs electing an asset based fee.(e) For purposes of this section, the base amount includes that portion of the capital contributions originally committed to the purchase, development, construction or improvement of specified properties without regard to leverage and including working capital reserves allowable under subsection (b). The base amount shall be recomputed annually by subtracting from the then fair market value of the program's real properties as determined by independent appraisals plus the working capital reserves allowable under subsection (b), an amount equal to the outstanding debt secured by the program's properties.Cal. Code Regs. Tit. 10, § 260.140.113.10
1. New section filed 5-18-92; operative 6-17-92 (Register 92, No. 22). Note: Authority cited: Section 25610, Corporations Code. Reference: Section 25140, Corporations Code.
1. New section filed 5-18-92; operative 6-17-92 (Register 92, No. 22).