On September 7, 2025, the North American Securities Administrators Association (NASAA) approved amendments to its Statement of Policy Regarding Real Estate Investment Trusts (the “REIT Guidelines”), which were last amended in 2007. The proposed amendments were last put forth for public comment by NASAA on March 25, 2025.

The REIT Guidelines contain requirements for non-traded real estate investment trusts (“REITs”) in order to register a securities offering in states that apply the REIT Guidelines.  They are intended to ensure retail investors are afforded protections against excessive fees, conflicts of interest between the sponsor and adviser and the REIT and its investors, limitations on leverage and certain types of investments, and that sponsors and advisers honor their fiduciary duties to investors.  The REIT Guidelines also set minimum investment suitability standards designed to ensure that REIT shares are not sold to investors who are unlikely to be able to withstand a loss or an inability to liquidate their investment.  The revised REIT Guidelines:

  • Update the conduct standards for brokers that sell non-traded REITs to incorporate the Securities and Exchange Commission’s Regulation Best Interest (“Reg BI”);
  • Increase the annual net income and net worth thresholds in the suitability section to account for inflation since they were last updated in 2007; and
  • Introduce a default concentration limit within the suitability section.

These amendments are intended to strengthen investor protection guardrails while acknowledging evolving market dynamics over the last decade and a half.  Below we summarize each of these consequential changes.

New Conduct Standard to Incorporate Reg BI

New Subsections I.B.8 and III.C.1. define “Conduct Standards” that apply when selling REIT shares to include obligations under Reg BI.  As noted in III.C.1, the Conduct Standards only apply to the sponsor or persons selling shares on behalf of the sponsor of the REIT.  Notably, III.C.1 also imposes heightened oversight obligations for sponsors and sellers selling REIT shares by requiring that they “make every reasonable effort” to determine that the purchase complies with applicable Conduct Standards.  While the requirement to assess investor suitability is longstanding, the explicit obligation to assess compliance with Conduct Standards is new.  In practice, sponsors and sellers will need to evaluate how to evidence this effort, potentially through enhancements to distribution partner diligence, contractual undertakings in selling agreements, attestations, and periodic testing of sales practices and documentation.  The revised REIT Guidelines do not prescribe a single approach, but they increase the expectation that sponsors and sellers take proactive steps to oversee compliance in offerings subject to state qualification.

New Subsection I.A.3 clarifies that registration or qualification of a REIT security by any securities regulatory authority does not imply that any sale or offering was made in compliance with the Conduct Standards, and Subsection II.G.2 was revised to prohibit indemnification by a REIT of broker-dealers, associated persons, investment adviser or investment adviser representatives for violations of the Conduct Standards unless there has been a successful adjudication on the merits as to the indemnitee.  These clarifications have practical consequences.  In examinations, enforcement actions, or private disputes centered on sales practices, pointing to a REIT’s compliance with REIT Guidelines will not be dispositive of a registered representative’s or adviser’s compliance with Reg BI or fiduciary duties.  Further, product-level eligibility and disclosure do not substitute for the seller’s duty to determine that a recommendation is in a client’s best interest or otherwise satisfies the applicable standard of care.

Inflation Adjustments to Net Income and Net Worth Thresholds

The revised REIT Guidelines increase the net income and net worth thresholds contained in Subsection III.B.1 that those selling REIT investments must ensure are satisfied by investors.  Unless a state administrator determines otherwise based on offering risk, investors must now satisfy either: (a) a minimum annual gross income and net worth of at least $100,000 (previously, $70,000), or (b) a minimum net worth of $350,000 (previously, $250,000).  The amendments also added that every five years, the NASAA will publish an addendum to update these thresholds to adjust for the effects of inflation rounded to the nearest multiple of $5,000 according to the Personal Consumption Expenditures Chain-Type Price Index published by the U.S. Department of Commerce.  The use of this index is consistent with the Securities and Exchange Commission’s use thereof for making inflation adjustments to the “qualified client” definition in Rule 205-3 under the Investment Advisers Act of 1940, as amended.

New Concentration Limits

New Section III.D requires that sponsors establish a reasonable concentration limit for investors in non-traded REITs where no substantial and active secondary market is expected.  As a default rule, an investor’s aggregate investment in the REIT and other non-traded direct participation programs, including other non-traded REITs, BDCs, oil and gas programs, equipment leasing programs, and commodity pools, may not exceed 10% of the investor’s liquid net worth at the time of investment. “Liquid net worth” consists of cash, cash equivalents, and readily marketable securities.  Crucially, under new Subsection III.B.4, accredited investors are generally exempt from the concentration limit, though state administrators retain discretion to apply the limit to accredited investors.

The amendments also include an explicit comment that compliance with a concentration limit standard where the purchaser has other investments with similar risks or businesses of the issuer does not ensure compliance with Conduct Standards.  These provisions will require more granular diligence by sellers into an investor’s liquid net worth and comparable product exposures and may lead sponsors and distributors to reevaluate whether to include non-accredited investors in offerings given the operational complexity of monitoring compliance.

Effective Date, State Adoption and Scope

The amended REIT Guidelines will become effective on January 1, 2026. Because NASAA is an association rather than a governmental agency, individual states will determine whether and how to adopt the amended REIT Guidelines. Historically, however, NASAA’s REIT Guidelines have heavily influenced state qualification reviews for non-traded REITs. As a reminder, offerings by exchange-listed REITs, registered investment companies, and many private placements under Regulation D are generally outside the scope of these state-level guidelines.

Practical Implications for Market Participants

For sponsors of non-traded REITs subject to blue sky review, now is the time to recalibrate offering and distribution practices. Prospectus disclosure should be updated to address concentration limits, revised suitability thresholds, and the role of Conduct Standards in sales processes. Subscription materials will likely need to collect additional data about liquid net worth and direct participation program exposures. Broker-dealers and advisers distributing non-traded REITs should map their Reg BI or fiduciary duty procedures to the product’s complexity and illiquidity, reinforce documentation of investor-specific analyses, and ensure sales supervision and surveillance align with the tightened guardrails. Finally, given the resource intensity of satisfying concentration controls for non-accredited investors, market participants may reassess target investor profiles and distribution channels, including increased emphasis on accredited and institutional allocations or structures not subject to state qualification.

NASAA’s 2025 amendments will raise the bar on investor protection in non-traded REITs by combining higher eligibility thresholds with explicit sales practice standards and oversight expectations.  While adoption will proceed state by state, sponsors and distributors should prepare now for a regulatory environment that demands more robust front-end diligence, clearer disclosures, and stronger supervision over the sale of non-traded REIT shares.