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TIC Real Estate Arbitration in Lightfoot vs. Pacific West

Tuesday, March, 13, 2012

If there is a specific real estate arbitration type that keeps FINRA busy and brokerages cringing, Tenants-In-Common, or TIC investments have a stronger claim than most. Claims of this type are becoming increasingly common in the aftermath of the Great Recession. It has also become common that investment firms have had to pay hefty arbitration awards because they fell short of “due diligence.”


Details About the Lightfoot Legal Arbitration


In FINRA Arbitration 11-00230, March 6, 2012, or “In the Matter of the FINRA Arbitration Between Joseph F. Lightfoot, et al, Claimants, vs. Pacific West Financial Group, et al, Respondents,” the Lightfoots were awarded $2 million in damages. Their central claim was that the TIC investments that the Respondents sold them were unsuitable for a variety of reasons, including the clients' age, risk tolerance, financial situation and cash flow needs. Along with this, they included claims of negligence, breach of fiduciary duty and failure to supervise. The Respondents denied the allegations and requested the record be expunged from the Central Registration Depository.


Essentially, the FINRA panel agreed that these investments were unsuitable for the Claimants, and further concluded that these investments were in direct violation of the Securities Act of Washington. Several factors played into this along with the original claim. The timing of the sale, omitting of certain data and other acts were included.


Significant Points in This Civil Arbitration


Like many other TIC cases, this case is an example of how a formerly “hot” investment strategy went wrong. By buying into a concurrent estate, all investors need to be notified of what other investors are doing with their shares. This, along with due diligence in arranging the sale are the duties of the brokerage firms. These two points are all too often where brokerages fall short. Big firms such as JP Morgan, Citi and Bank of America have been prominent in the news for being brought to task for their mistakes. This real estate arbitration, on the other hand, shows that smaller firms are in no wise immune to complaints.