The Securities and Exchange Commission said Thursday it issued rules for real estate developers offering properties with rental pool agreements.
The agency said in a statement it issued Memorandum Circular No. 12, Series of 2024 on “Securing and Expanding Capital in Real Estate Investment Transactions” (SEC RENT). The move comes amid a rising trend of developers offering potential investment returns and additional income by renting out properties.
SEC RENT outlines guidelines for investment contracts, certificates of participation, profit-sharing agreements and other securities issued by real estate developers or managers in connection with rental pool agreements.
Such agreements are investment contracts where a developer sells or offers units in projects like condominiums, hotels, resorts or dormitories. Buyers contribute the units to a rental pool managed by the company or a third-party operator and receive a share of rental income.
These investment contracts are considered securities under Republic Act No. 8799, the Securities Regulation Code, and should be registered with the SEC before public offering. DoubleDragon Corp. and DMC Homes are among the firms offering this type of investment.
Under the guidelines, developers are required to secure approvals from several SEC departments before filing a registration statement with the Markets and Securities Regulation Department (MSRD). The MSRD has a 45-day review period after receiving the necessary fees.
Upon approval and compliance with additional requirements, the MSRD will issue an order of registration or permit to sell securities. Public offering should start within 10 business days of the registration statement’s effective date, or it will be canceled.
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