TIC Investment Lawyer

A TIC investment lawyer at Weltz Law represents investors who lost money in tenant-in-common real estate interests sold by a broker. TICs were often sold as 1031 exchange replacements with steady income. Many came with high fees, heavy debt, and no way to sell. When a registered broker made the sale, the dispute may belong in FINRA arbitration.

Our TIC investment lawyers work inside the FINRA dispute resolution forum on behalf of investors nationwide. FINRA stands for the Financial Industry Regulatory Authority. It oversees brokerage firms and runs the arbitration system for most disputes between investors and their brokers.

This page is part of our alternative investment attorney section, within our broader securities lawyer practice.

What Is a Tenant-in-Common (TIC) Investment?

A tenant-in-common, or TIC, investment is a fractional ownership interest in a large commercial property shared with other investors. Each owner holds an undivided share of the whole property. A sponsor usually finds the property, arranges the loan, sells the interests, and hires a company to manage it.

TIC investments let individual investors own part of an office building, shopping center, or apartment complex they could never buy alone. Each owner receives a share of rental income and a share of any profit when the property sells.

A TIC investment is different from ordinary tenancy in common between family members or business partners. Disputes between co-owners of a home or private property are a different kind of matter. This page covers TIC interests sold to investors as securities.

How Are TIC Investments Tied to 1031 Exchanges?

Many TIC investments were sold as replacement property for 1031 exchanges. A 1031 exchange lets an investor sell real estate and buy more without paying capital gains tax right away. A TIC let investors close quickly on a ready-made property and keep the tax break.

The 1031 deadline is tight. Investors generally have 45 days to name replacement properties and 180 days to close. TIC sponsors offered packaged deals that could close fast.

After IRS guidance in 2002 clarified how TICs could qualify, sales grew quickly through the mid-2000s. Then the 2008 crash hit commercial real estate hard. Many TIC programs never fully came back.

Learn more about these exchanges on our 1031 exchange attorney page.

Are TIC Investments Considered Securities?

Yes, in most cases. TIC interests sold by sponsors to passive investors are generally treated as securities. Regulators told brokerage firms years ago that TIC sales require the same due diligence and suitability reviews as other securities.

That matters a great deal. Because TICs are generally securities, the brokers who sell them must meet the suitability and best interest standards. Their firms must review the deals and supervise the sales.

It also means disputes with the broker or firm may go to FINRA arbitration.

What Are the Biggest Risks of TIC Investments?

The biggest risks of TIC investments include high upfront fees, heavy debt, and shared control with many co-owners. Investors also depend on one sponsor and have almost no way to sell. When rents fall or a loan comes due, investors can lose much or all of their money.

Key risks include:

• High fees: Commissions, sponsor fees, and markups can take a large share of the investment at the start.
• Heavy debt: Many TIC properties carry large loans. A default can wipe out the owners' equity.
• Shared control: Major decisions often need agreement from many co-owners, which can freeze action in a crisis.
• Sponsor risk: If the sponsor or manager fails, the property can be left without direction.
• No exit: There is usually no market to sell a TIC interest.
• Single-property risk: One building, one location, and often a few key tenants.

In some cases, fees and costs ate up more than the taxes the investor was trying to defer. A tax break is not worth much if the investment itself fails.

What Happened When TIC Sponsors Failed?

When TIC sponsors failed, many investors were left with troubled properties, defaulted loans, and no one to manage them. Some sponsors had used new investor money to cover shortfalls. In the worst cases, sponsors were later convicted of fraud.

DBSI, an Idaho real estate company that sold TIC interests and notes, filed for bankruptcy in November 2008. In 2014, a federal jury convicted its founder and other executives of securities fraud. The court found losses of more than $100 million.

Not every failed TIC involved fraud. Many simply collapsed under debt when the market turned. Either way, the broker's role at the time of sale is what matters in a FINRA claim.

When Can TIC Investors Bring a FINRA Claim?

TIC investors may be able to bring a FINRA claim when a registered broker or brokerage firm recommended or sold the TIC interest. The claim focuses on the broker's conduct. That can include an unsuitable recommendation, misstated risks, poor due diligence on the sponsor, or too much money in one property.

Claims may include unsuitable investment recommendations, misleading information, over-concentration, and failure to supervise.

A falling real estate market alone does not create a claim. The question is what the broker and firm did, and what they told the investor.

What Due Diligence Should Brokerage Firms Have Done on TIC Sponsors?

Brokerage firms should have reviewed the TIC sponsor's history, the property, the loan terms, the fees, and how the sponsor planned to handle trouble. A firm that simply relied on the sponsor's sales materials may have fallen short of its duty.

Sponsor history matters most. Had earlier programs paid as promised? Did the sponsor move money between programs? Was the property bought from an affiliate at a markup?

A firm's review may be the only real check investors get on a private TIC deal. Learn more about investment product due diligence.

How Do TIC Investments Compare With Delaware Statutory Trusts?

TICs and Delaware statutory trusts (DSTs) both offer fractional real estate ownership for 1031 exchanges. TIC owners hold direct title and must agree on major decisions. DST investors hold beneficial interests and give up control to a trustee. DSTs largely replaced TICs after the 2008 crash.

Each structure has its own risks. TICs can freeze when co-owners cannot agree. DSTs cannot raise new money or easily refinance, which can trap the property in a downturn.

Both carry high fees and little liquidity. See our DST investments page for more.

Who Is Most at Risk From Unsuitable TIC Investments?

Retirees and long-time property owners are most at risk. Many sold rental properties they had held for decades and moved most of their wealth into one TIC deal. When the property failed, they lost both income and principal with little time to rebuild.

Picture a retired couple who sells a small apartment building to fund retirement. Their broker steers the proceeds into a TIC interest in an office building to avoid a big tax bill. A major tenant leaves, the loan defaults, and their equity is gone.

When older investors are involved, these sales may also raise concerns about financial elder abuse.

How Does the FINRA Six-Year Window Apply to TIC Investment Claims?

The FINRA eligibility rule generally bars claims filed more than six years after the event that caused the dispute. For TICs, that is often the purchase date. Many TICs were sold before 2008, so those purchases are well past the window. State deadlines may also apply.

Some TIC and similar fractional programs are still sold today. Newer purchases may fall within the window.

Our TIC investment lawyers check every purchase date early in a review.

What Damages Can a FINRA Panel Consider in a TIC Investment Claim?

A FINRA panel may consider the money an investor lost, what that money might have earned in suitable investments, interest, and costs. The panel decides which measures fit the facts. No one can say in advance what a panel will award.

Out-of-pocket damages compare what went in with what came back, including distributions. Well-managed account damages ask what the money would have earned in investments that matched the investor's goals.

The offering documents, the broker's statements, and the firm's review of the sponsor all shape the arguments our FINRA arbitration attorneys can make.

What Records Should You Gather for a TIC Investment Lawyer?

Gather the private placement memorandum, purchase and co-ownership agreements, 1031 exchange paperwork, distribution records, sponsor reports, and every communication with your broker. These records show what you bought, what you were told, and how the deal was set up.

The co-ownership agreement matters a great deal. It shows how decisions were made and what rights you had.

Emails, texts, and marketing pieces can show how the TIC was pitched. If something is missing, the brokerage firm keeps its own records, and many can be requested during discovery.

How Do Our TIC Investment Lawyers Handle a FINRA Claim?

Our TIC investment lawyers start with the sale. Who recommended the TIC, what were you told, and how much of your wealth went into it? Those answers shape whether a FINRA claim fits and which claims to bring.

Next, our team compares the investment with your age, goals, and need for income and access to cash. The review also covers the sponsor's history and the property's debt.

If the facts support a claim, our FINRA arbitration attorneys draft and file the Statement of Claim. That is the written filing that starts a FINRA case.

Discovery follows. Our team asks for the firm's due diligence files on the sponsor, product approval records, and the broker's commission data.

If the case reaches a final hearing, our TIC investment lawyers present the evidence and witnesses to the panel. No one can predict how a panel will rule. Our page on FINRA arbitration explains each stage.

Talk With a TIC Investment Lawyer at Weltz Law

Did a broker sell you a tenant-in-common interest that stopped paying, defaulted, or lost value? It may be worth a closer look. A conversation with a TIC investment lawyer can help you understand what options may exist in FINRA arbitration.

Our TIC investment lawyers represent property owners, retirees, families, and trusts nationwide. Bring your offering documents, exchange paperwork, and statements if you have them. Contact Weltz Law today to talk through what happened.