State legislatures have made a number of moves to change the regulatory environment of tenancies in common transactions so far this year, though none has yet has come to fruition. The most notable of the proposals emerged from the Montana House of Representatives early this year.
Montana House Bill 256 proposed to exempt all tenancies in common or any other undivided interest in real estate between two and 35 owners from the state’s securities laws. Rep. Bob Lake, who is also a licensed real estate broker, wrote the bill. Supporters included Al Mansell, past president of the National Association of Realtors and former Utah State Senator, and other Montana real estate professionals.
The thrust of the proposal, according to its proponents, was to ensure that real estate professionals involved in TIC deals can receive compensation without having to be licensed to sell securities by the state of Montana.
The Indianapolis-based Tenancy-in-Common Association–TICA–came out against the proposal, with Patricia DelRosso, TICA president, appearing at a public hearing in Helena, Montana, before the Montana House Judiciary Committee to oppose HB 256. She noted at the hearing that TIC transactions ought to be regulated as securities for various reasons relating to the protection of investors, including requirements for full disclosure about the value of the property and the risks of investing. Regulation under state securities laws also means that investors can sue for redress under those laws in the event of fraud, she said.
Regarding the issue of compensation to real estate professionals involved in a TIC deal, DelRosso pointed out that Montana’s State Securities Commission could issue a no-action letter permitting licensed real estate professionals to participate in TIC transactions without a securities license.
In the spring, HB 256 was tabled in committee, and it’s unlikely that it will re-emerge. Similar legislation is cropping up in other western states, however.