On November 9th, the National Association of Realtors (NAR) submitted a request to the Securities and Exchange Commission (SEC) on the organization’s exemption from securities broker/dealer registration. Under the requested exemption, a licensed real estate agent or broker that is predominantly engaged in, and has substantial experience in, commercial real estate to provide real estate services and receive compensation from buyers purchasing Tenant-In-Common (TIC) fractional ownership.
Under NAR’s request, a Real Estate Advisory Fee could be paid by the purchaser. It also allows the fee to paid on behalf of the purchaser by a sponsor or issuer of a TIC security that would reduce the commmission or compensation received by a registered broker-dealer involved with the TIC security transaction.
The requested exemption would allow for a potential purchaser of a TIC Security to benefit from the real estate expertise of a commercial real estate professional, while still receiving necessary protections afforded by security laws. It would also limit the role of the commercial real estate professional and real estate firm involved in the transaction. NAR believes this would be consistent with the SEC's mission to protect investors while allowing the public to benefit from a licensed broker's knowledge and experience.
The requested exemption will enter the Federal Register at the end of November. The public then has thirty days to review and comment on the request. After the close of the comment period, the SEC will review the request as well as the public comments and determine the outcome.
This ruling could have a significant impact on the Tenant-In-Common industry. If commercial real estate professionals are not allowed to provide real estate services to, and receive commission from, investors, the exposure to undivided partial ownership interests in real property might be limited.
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