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Utah Rep. Brian Greene is sponsoring a bill this year that would do away with a slew of disclosures designed to protect potential investors in a specific type of real-estate transaction the type that he sold until recently.
The Pleasant Grove Republican's bill would deal specifically with tenant-in-common investments or TICs which allow investors to essentially buy an ownership interest in building developments like strip malls, big-box buildings, office complexes or restaurants.
Under existing rules, an agent selling a TIC has to provide potential investors with a long list of details about the deal. Greene's HB96 would eliminate almost all of those disclosures.
Things like a credit report, information about bankruptcies or civil judgments, potential environmental liabilities affecting the property, an appraisal of the property and an advisory that investors should consult with tax advisers or other professionals before investing would no longer be required.
Greene said these long lists of disclosures are not required in other real-estate transactions and it is unrealistic to expect agents selling a property to have access to such detailed information. As a result, he said, the disclosures simply weren't being made.
"The age-old axiom applying to real estate is 'caveat emptor,' " Greene said, using the Latin phrase for "buyer beware."
"You as the buyer of the real estate have to do your homework so you know what you're buying," he said.
Blaine Walker, a past president of the Utah Association of Realtors who has done extensive consulting on tenant-in-common policy, said Greene is right to a point, but potential investors need to be given enough information to make an informed decision.
"You don't see a used car and just go buy it," Walker said. "You're going to say, 'I want my mechanic to look at it. I want to drive it.' You are going to do your due diligence. All we are asking is that there is information sufficient to make an informed decision."
Officials with the Utah Department of Commerce have concerns about Greene's bill, as well.
"We believe that the free-market enterprise system works best when the consuming public has full and accurate information to make informed decisions," said Jennifer Bolton, a spokeswoman for the department.
Under another bill Greene is sponsoring, HB109, it could be even more difficult for potential investors to be informed on a host of investments. His bill would make it easier for people who have been the subject of administrative actions to have those records expunged, meaning the public would not be able to find out about fines or penalties for misconduct.
Until 2013, Greene, who is an attorney, was president and CEO of RealtyNet Advisors, which specialized in tenant-in-common investments. In his candidate filing in March 2014, Greene listed RealtyNet Advisors as having paid him more than $5,000 in the preceding year, but he did not list the company on his 2014 conflict-of-interest disclosure.
"I have done that in the past," he said. "In the recession [TICs] took a beating and there's not a whole lot of activity in there, so since I've been in the Legislature I haven't been in there a whole lot and in the past year not at all."
Greene currently is president and CEO of a related company, 1031 Exchange Service Center, which structures real-estate transactions that, under Section 1031 of the U.S. tax code, let owners avoid paying capital gains taxes if they use proceeds from the sale of one property to invest in another.
In 2005, the Utah Legislature changed how tenant-in-common deals were handled treating them as real-estate instead of securities, as they had been classified. But Greene said the Real Estate Commission enacted rules that required many of the same securities disclosures, contrary to the Legislature's intent.
Greene's bill strips the commission of any authority to make disclosure rules beyond those in his bill basically the master-lease agreement, the tenants-in-common agreement, improvements on the property and any management agreement.
"The issue is: What do you disclose to the buyer?" says Walker, who helped write the 2005 legislation. "My take on that is: An agent should disclose everything they have access to so a buyer can make an informed decision. Since it's an investment where a buyer has less control due to multiple investors, it is important to know as much information on the property as possible and information on the sponsors."