NAR (the National Association of Realtors) has spent quite a lot of time and effort in an attempt to gain control over the tenant in common industry. NAR seems to have realized the massive amount of money that Realtors could earn by selling Tenant in Common deals (TICs) if they could. Tenant in Common is a way to take title to real estate but is also a way for real estate investors to buy a portion of a larger real estate investment which the SEC considers a security. In 2002, the IRS gave guidance on how the tenant in common ownership structure, commonly used by "sponsors" to get investors to buy a partial interest in a "hands off" commercial real estate investment could be used in a 1031 exchange. Since 2002 the tenant in common industry has exploded and because of the nature of securities. As of December 2007, Realtors are not legally allowed to be compensated for selling tenant in common investments. Although this is not stopping them from selling real estate TICs and getting paid!

Even though TIC interests are considered securities by the NASD, it is estimated that almost half of the TIC deals over the last few years have been sold by real estate brokers as real estate and not through a private placement with reps that specialize in tenant in common investments. Although the underlying asset in a tenant in common deal is real estate, TIC deals are considered securities by the NASD and therefore one must have a securities license to sell one. Most real estate brokers do not have securities licenses and therefore can not legally be compensated for selling tenant in common investments at this time. NAR has been negotiating with the SEC (Securities and Exchange Commission) to determine a process by which real estate brokers can legally be paid commissions on tenant in common security deals.

The last few years there have been two active groups selling tenant in common deals in two completely different ways. Real estate brokers have been selling TICs as real estate with total disregard for securities rules and the securities people have been following many more rules and selling them as securities. People looking to buy tenants in common deals have been forced to decide which set of rules to follow based on whether they went with a company that sold the deal as a security or as real estate. As of December 2007, there does not apper to be a set of rules that everyone follows.

This potential NAR TIC exemption must take into account the following securities rules.

• TIC investments prohibition of general solicitation.

• Suitability requirements of Reg D offerings.

• Current rules disallowing securities broker dealers from paying real estate brokers referral fees.

During "negotations" with the SEC, the National Association of Realtors has proposed that real estate brokers be exempt from these rules under a certain conditions so that they may advise clients on the real estate side of TIC investments and receive payment from the TIC sponsor or seller. NAR would like their members to be exempt under the following conditions:

• The client must sign a buyer agreement that would allow the Realtor to advise on tenant in common investments that are sold as securities.

• The real estate broker must not advertise TIC investments in any way.

• Suitability will be determined by the securities broker dealer.

• The sponsor (seller) will be responsible for paying the buyer’s agent a real estate referral fee (It is the responsibility of the sponsor to disclose this fee).

Also, the real estate broker may not be dissallowed from selling any security previously, must show the client traditional real estate investments, and should have some knowledge commercial real estate investments.