SEC issues rules for rental property investments


The Securities and Exchange Commission (SEC) has issued new rules to regulate the sale of properties with rental pool agreements.

The Commission issued Memorandum Circular No. 12, Series of 2024, on Securing and Expanding Capital in Real Estate Investment Transactions (SEC RENT) in line with the rising trend of real estate developers offering potential investment returns and additional income by renting out properties.

SEC RENT provides the guidelines for the issuance of investment contracts, certificates of participation, profit-sharing agreements, and other forms of securities issued by real estate developers and/or managers in relation to rental pool agreements.

Rental pool agreements refer to investment contracts in which a property developer sells or offers units in real estate projects such as condominiums, hotels, resorts or dormitories to prospective buyers, provided that they contribute the units to a rental pool managed and operated by the company or a third-party operator.

Buyers in rental pool agreements typically receive a share in the real estate developer’s income earned by 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 the Securities Regulation Code, which are required to be registered with the Commission before they can be offered to the public.

Under the guidelines, the real estate developer or manager shall secure the necessary approvals from the SEC 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).

The OGA shall review the company’s financial statements to determine their compliance with Revised SRC Rule 68 and the Philippine Financial Reporting Standards, and other relevant issuances of the SEC, after which the company shall be given pre-evaluation clearance.

After completing the pre-filing activities, the company shall submit the pre-evaluation clearance, SEC RENT Checklist form, SEC RENT Form and Prospectus, and all other required exhibits to the MSRD for pre-processing.

Once accepted for processing, the MSRD shall initiate the 45-day review period upon the company’s payment of the necessary fees.

Upon favorable consideration by the Commission En Banc of the registration statement, and the company’s subsequent compliance with additional requirements, the MSRD shall issue an Order of Registration and/or Permit to Sell Securities to the Public.

The public offering of the securities shall commence within 10 business days from the date of the effectivity of the registration statement. Otherwise, the registration statement shall be cancelled.