SEC Publishes Proposal to Allow Commercial Real Estate Brokers to Sell TIC Interests

In the past few years there has been a surge of TIC investments, particularly in the NNN leased investment market. There has been a lot of uncertainty in the area of TIC investments with regard to what commercial real estate brokers can and cannot broker.

On November 13, the SEC published a proposed rule governing the sale of TIC interests that will hopefully end the battle between brokers and securities broker-dealers. The rule, if finalized, would allow commercial real estate brokers to sell TIC interests under a certain set of rules. The rule is currently undergoing comments and review, and will likely be finalized during the middle of 2008.

The current set of rules are that commercial real estate brokers will be exempt from securities regulations if the following rules are followed:

• An agreement must be signed by the investor agreeing to have the broker provide advise on the TIC investment
• Securities broker-dealers will still need to decide if TICs are right for investors
• The investor would pay brokers a consulting fee, but the fee could be picked up by the securities broker-dealer or sponsor if the investor purchases the TIC investment
• Real estate brokers would not be allowed to advertise TIC investments

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