THE SECURITIES and Exchange Commission (SEC) has issued guidelines to regulate the sale of properties with rental pool agreements.
On July 16, the SEC issued Memorandum Circular No. 12, which outlines the rules for Securing and Expanding Capital in Real Estate Investment Transactions (SEC RENT), the commission said in an e-mailed statement on Wednesday.
The SEC noted a growing trend of real estate developers offering potential investment returns and additional income through rental properties.
Rental pool agreements are defined as investment contracts where a property developer sells or offers units in real estate projects — such as condominiums, hotels, resorts, or dormitories — to prospective buyers, provided that the units are contributed to a rental pool managed and operated by the company or a third-party operator.
Buyers in rental pool agreements receive a share of the income generated from renting out the units to third parties.
“Such investment contracts, certificates of participation or participation in a profit sharing agreement, fall under the definition of securities under Republic Act No. 8799, or the Securities Regulation Code, which are required to be registered with the commission before they can be offered to the public,” the SEC said.
Under SEC RENT, the real estate developer or manager must obtain approvals from the SEC’s Company Registration and Monitoring Department, Corporate Governance and Finance Department, Enforcement and Investor Protection Department, Office of the General Counsel, and Office of the General Accountant (OGA) before filing its registration statement with the Markets and Securities Regulation Department (MSRD).
After completing pre-filing activities, the company must submit the pre-evaluation clearance, SEC RENT Checklist form, SEC RENT form, prospectus, and all other required exhibits to the MSRD for pre-processing.
Once accepted for processing, the MSRD will begin the 45-day review period upon the company’s payment of the necessary fees.
The MSRD will issue the order of registration and permit to sell securities once approved by the commission en banc and upon compliance with additional requirements.
“The public offering of the securities shall commence within ten business days from the date of the effectivity of the registration statement. Otherwise, the registration statement shall be cancelled,” the SEC said. — Revin Mikhael D. Ochave
