SERVING CLIENTS IN LONG BEACH, ORANGE COUNTY, IRVINE, SANTA ANA, WESTMINSTER, HUNTINGTON BEACH, FOUNTAIN VIEW, NEW PORT BEACH, SEAL
BEACH, COSTA MESA, SANTA MONICA, CARSON, TORRANCE, SAN PEDRO,
ALHAMBRA, PASADENA, SAN FERNANDO VALLEY, LOS ANGELES, LAKEWOOD, CERRITOS, GLENDALE, SEAL BEACH, VENICE BEACH, BEVERLY HILLS, AND HOLLYWOOD.
SMITH & GARG – LONG BEACH REAL ESTATE ATTORNEYS
California Usury Law
Regardless of whether you are a Seller, purchaser, or lender (especially if the property is Seller-financed) you must be aware of California Usury Law. Usury laws regulate interest rates on various type of loans. More specifically, usury laws are anti-loan-sharking laws that protect you as a consumer. The terms of usury law in California are as follows:
- Interest rate for judgments
- 7% is the Max Rate of Interest before a Judgment
- 10% is the Max rate of Interest after a Judgment
- 10% for Family personal household usage.
- The greater of 10% or 5 Points (Points is 1%) above the Federal Reserve Bank in San Francisco, on a NON-family household usage.
A loan secured by real property and made or arranged by a real estate Broker is exempt from usury law. Thus, the loan that is secured in real property that is arranged or made by a Broker can be higher than the greater of 10% or 5 points above the Federal Reserve rate, even at 25%. The Broker cannot make the loan himself. Loans made to corporations, companies, or partnerships are also exempt from usury laws. This exemption is extended to partner of a partnership when such individual is borrowing for the partnership. Under California Civil Code §1916.1, the Broker is exempt if:
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- He or she acts for compensation or in expectation of compensation for soliciting, negotiating, or arranging the loan for another.
- He or she acts for compensation or in expectation of compensation for selling, buying, leasing, exchanging, or negotiating the sale, purchase, lease, or exchange of real property or business. Expectation of compensation can be expectation through an investment that will have a return in the future, for example, a partner of a Partnership negotiates for the purchase or sale of real property for the Partnership in which he will benefit later on.
- He or she arranges or negotiates for another forbearance (delay of payment), extension, or refinancing of any loan secured by real property in connection with a past transaction in which a Broker had acted for compensation or in expectation of compensation for selling, buying, leasing, exchanging, or negotiating the sale, purchase, lease, or exchange of real property or business.
Should you have any questions or concerns, please contact our experienced real estate attorneys at Smith & Garg, LLC. The experienced real estate transaction and litigation attorneys at Smith & Garg, LLC can help.
Call Smith & Garg, LLC today at 1-877-517-4275 or complete our Contact Form and let us assist you.
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