NAR PROPOSED SEC EXEMPTION
FOR COMMERCIAL BROKERS
On November 9, 2007, the SEC released a "Notice of Application of the National
Association of Realtors for Exemptive Relief under Sections 15 and 3 of the Exchange Act
and Request for Comment." The SEC Release and National Association of Realtors (NAR)
Exemption Request can be downloaded at www.1031exchange-tic.com/SEC_Release -
NAR Exemption Request.pdf. NAR has requested an exemption that permits a licensed
real estate agent or broker who is predominantly engaged in commercial real estate and
has substantial commercial real estate experience to receive a "real estate advisory fee" in
connection with the offering and sale of a TIC property sold as a security through a
Registered Rep. who is associated with a registered B/D - provided certain disclosures and
procedures below are followed:
1. The TIC transaction must be completed through a licensed securities B/D.
2. The real estate professional must be predominantly engaged in and have
substantial experience in the sale of commercial real estate. This is defined as
someone who has received a CCIM or SIOR designation or other similar
professional designations and has educational and transaction experience
equivalent to these designations or has participated in at least five (5) commercial
real estate transactions with at least $3 million in total value in the prior five (5)
years - or - at least ten (10) commercial real estate transactions in the last ten (10)
years including three in the past three years.
3. Payment of the "Real Estate Advisory Fee" can be made by the investor or by the
sponsor on behalf of the investor.
4. The securities commission to the B/D could be reduced by the amount of the Real
Estate Advisory Fee.
5. The Real Estate Advisory Fee can be a flat dollar amount or based on a percentage
of the total purchase price.
6. Each investor must receive a deed when purchasing a TIC ownership and the
transactions should be structured to qualify as §1031 replacement property.
7. Prior to the real estate professional discussing a specific TIC security with the
investor, the investor must enter into an exclusive agreement to be represented by
that real estate professional (this is similar to a buyer broker agency agreement.)
8. The agreement must identify all real estate professionals to be compensated or be
amended in writing to add additional real estate professionals and specify the
maximum amount of the fee to be paid to all real estate professionals.
9. The real estate professional may only discuss the real estate characteristics of a TIC
security with the investor and arrange for the investor to visit the property before
referring the investor to a Registered Rep. The real estate professional has to
arrange the introduction to the Registered Rep when the investor advises the real
estate professional they are considering purchasing a specific TIC property.
Every investor and real estate professional is urged to seek independent legal/tax guidance on their specific
financial situation and the tax or investment ramifications of various real estate investment
alternatives. No part may be reproduced in any manner without the prior written consent
of Asset Preservation, Inc. © 2008 Asset Preservation, Inc. All rights reserved.
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