The California §10238 Multi-Lender Law and the Corporate Code §25102(f) private offering exemption run two different frameworks on private real estate notes held by multiple lender-investors. The two frameworks run different investor caps, different disclosure forms, different broker-arrangement structures, and different servicing requirements. This guide walks the comparison from the investor cap through the broker-arrangement framework.

Investor cap

The §10238 framework runs the lender-investor count cap at ten lender-investors per multi-lender note. The §25102(f) framework runs the lender-investor count cap at thirty-five lender-investors per offering with a pre-existing relationship to the broker. A note arranged against eleven to thirty-five lender-investors runs outside the §10238 framework and into the §25102(f) framework. A note arranged against thirty-six or more lender-investors runs outside both frameworks and into a federal Regulation D framework under SEC Rules 506(b) or 506(c).

Disclosure framework

The §10238 framework runs the Lender/Purchaser Disclosure Statement (RE 851A, RE 851B, RE 851C) on each lender-investor on the funding or assignment cycle. The §25102(f) framework runs the private placement memorandum on the offering against the investor base. The §25102(f) PPM runs broader scope than the RE 851 — the offering structure, the investor risk factors, the investor-qualification framework, the broker-compensation framework, and the federal-securities-law disclosure framework. The §10238 RE 851 runs narrower scope on the specific note transaction.

Investor qualification framework

The §10238 framework runs the lender-investor identical-interests requirement and runs the lender-investor-specific RE 851 disclosure against each lender-investor — no investor-qualification framework against accredited investor status. The §25102(f) framework runs the pre-existing relationship requirement against the investor base and runs the sophistication framework against the investor base. The §25102(f) framework runs differentiated investor classes — accredited, sophisticated non-accredited, and so on — with specific qualification frameworks.

Broker arrangement framework

The §10238 framework runs the California real estate broker arrangement against California real estate. The broker runs the arrangement under the §10131 real estate license framework and runs the servicing under the §10145 trust-fund framework. The §25102(f) framework runs the issuer arrangement against the investor base — a manager-managed limited liability company or a limited partnership — with the broker in a placement-agent role rather than the direct-arrangement role. The §25102(f) framework runs the issuer’s fiduciary framework against the investor base, while the §10238 framework runs the broker’s fiduciary framework against the lender-investor base.

Servicing framework

The §10238 framework runs the broker-servicing requirement against the multi-lender note. The broker runs the §10145 trust account against the lender-investor base and runs the pro-rata distribution from the trust account. The §25102(f) framework runs the issuer-servicing framework against the investor base — the manager runs the servicing through the entity’s operating account or runs through a third-party servicer. The §25102(f) framework runs no §10145 trust-account requirement and no specific broker-servicing framework against the issuer’s operations.

Regulator framework

The §10238 framework runs against the California Department of Real Estate on the broker’s arrangement and the broker’s servicing. The §25102(f) framework runs against the California Department of Financial Protection and Innovation on the issuer’s offering and against the federal Securities and Exchange Commission on the federal-securities-law framework. The two frameworks run separate regulators on separate sets of requirements.

When each framework runs

The §10238 framework runs on small-syndicate multi-lender notes with up to ten lender-investors against California real estate, arranged and serviced by a California real estate broker. The §25102(f) framework runs on larger-syndicate offerings with up to thirty-five investors through a manager-managed entity, against California or multi-state real estate or other investment classes. The two frameworks run different operational structures and different compliance overlays — a broker who arranges a multi-lender note against ten or fewer lender-investors runs §10238 as the operational anchor; a broker who arranges against eleven or more investors runs into the §25102(f) framework or federal alternatives.

Related Topics

This article is educational and does not constitute legal advice. The §10238 Multi-Lender Law runs under the California Department of Real Estate licensing framework — Cal Code Regs Title 10 §§2830–2835 and California Business and Professions Code §10238 on multi-lender loans — and runs alongside the §10145 trust-fund framework and the §10232.4 threshold-broker reporting framework. Consult qualified legal counsel and a qualified CPA on the specific structuring and disclosure requirements that apply to any California multi-lender note arrangement.

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