Non-Traded REIT Fraud Lawyer
Non-traded REITs have raised tens of billions of dollars from investors over the past two decades, yet many of these investments have caused devastating losses due to broker misconduct, undisclosed fees, and unsuitable recommendations. If your broker sold you a non-traded REIT without properly explaining the risks, you may have grounds to recover your losses through FINRA arbitration.
At Varnavides Law, we represent investors who have been harmed by non-traded REIT fraud and broker misconduct. Our founder, Gary Varnavides, spent 10 years at Sichenzia Ross Ference LLP defending broker-dealers, which means he understands exactly how these firms operate and where their defenses are weakest.
Key Takeaways
- High fees hidden: Upfront costs often consume 9-15% of your investment before any returns
- Illiquidity trap: Most non-traded REITs lock up your money for 7-10 years with limited redemption options
- Recovery available: FINRA arbitration offers a path to recover losses caused by broker misconduct
- Time limits apply: Most claims must be filed within 6 years of the investment or misconduct
- Contingency basis: You pay no attorney fees unless we recover money for you
What Are Non-Traded REITs?
Non-traded Real Estate Investment Trusts (REITs) are securities that pool investor capital to purchase and manage income-producing real estate properties. Unlike publicly traded REITs that trade on stock exchanges like the NYSE, non-traded REITs do not have a public market and cannot be easily bought or sold. They are one of many complex investment products that require careful due diligence.
According to the SEC’s Investor Bulletin on Non-traded REITs, these investments carry significant risks that brokers often fail to adequately disclose:
Non-Traded REITs
- Registered with SEC
- Not traded on public exchanges
- Typically 7-10 year holding periods
- High upfront fees (9-15%)
- Limited redemption options
Publicly Traded REITs
- Trade on stock exchanges (NYSE, NASDAQ)
- Can be bought or sold any business day
- Transparent pricing
- Lower transaction costs
- Easy to diversify
Common Non-Traded REIT Fraud Schemes
Non-traded REIT fraud typically involves brokers and financial advisors who prioritize their commissions over their clients’ best interests. This type of broker misconduct is unfortunately common because broker commissions on non-traded REITs can reach up to 15% compared to standard securities transactions, creating a substantial financial incentive to sell these products.
Unsuitable Recommendations
FINRA requires brokers to recommend only investments that are suitable for their clients’ financial situation, investment objectives, and risk tolerance. Non-traded REITs are rarely suitable for investors who may need access to their funds, yet brokers frequently sell them to retirees and others who cannot afford to have their capital locked up for years.
Warning: FINRA has stated that non-traded REITs are “rarely, if ever, suitable for short-term investors.” If your broker recommended a non-traded REIT when you needed liquidity, this may constitute a suitability violation.
Misrepresentation of Fees
Many investors are shocked to learn that 9-15% of their initial investment went toward sales commissions and upfront offering fees. The SEC notes that these costs significantly reduce the value of the investment from day one. Brokers who fail to clearly disclose these fees may be liable for misrepresentation.
False Distribution Promises
Non-traded REITs often advertise attractive distribution yields to entice investors. However, the SEC warns that these REITs “frequently pay distributions in excess of funds from operations” by using offering proceeds and borrowed funds. This practice reduces share value and available capital, meaning investors may actually be receiving their own money back while their investment erodes.
Failure to Disclose Illiquidity Risks
According to the SEC, non-traded REITs are illiquid investments that cannot be sold readily in the market. Investors generally must wait until the REIT lists its shares on an exchange or liquidates its assets, which may not occur for more than 10 years. Share redemption programs are typically subject to significant limitations and may be discontinued without notice.
| Fraud Type | Description | Potential Recovery |
|---|---|---|
| Unsuitable Recommendation | Selling non-traded REITs to investors who need liquidity | Full investment losses plus interest |
| Fee Misrepresentation | Failing to disclose 9-15% upfront costs | Undisclosed fees and related losses |
| Distribution Fraud | Presenting return of principal as income | Lost principal and diminished returns |
| Concentration | Overweighting portfolio in illiquid investments | Losses attributable to overconcentration |
| Failure to Supervise | Brokerage firm not monitoring broker conduct | All related investment losses |
Warning Signs of Non-Traded REIT Fraud
If you invested in a non-traded REIT, review your investment experience for these red flags that may indicate fraud or broker misconduct:
Before Investment
- Broker emphasized high yields without discussing risks
- No clear explanation of illiquidity
- Fees were minimized or not disclosed
- Rushed into investment decision
During Holding Period
- Unable to access your money
- Distributions reduced or stopped
- Share value declined significantly
- Redemption requests denied
Documentation Issues
- Missing or incomplete prospectus
- Account statements showing inflated values
- No risk acknowledgment signed
- Broker ignored suitability questionnaire
Your Legal Options for Recovery
Investors who suffered losses from non-traded REIT fraud have several legal avenues to pursue recovery. The most common and effective method is FINRA arbitration, which is typically required by the brokerage agreement you signed when opening your account. An experienced investment fraud lawyer can evaluate your situation and determine the best path forward.
FINRA Arbitration Claims
FINRA arbitration is a streamlined dispute resolution process designed specifically for securities-related claims. According to FINRA’s published dispute resolution statistics, the average case duration was 12.5 months in 2024 (13.4 months in the most recent full-year data).
FINRA Arbitration Statistics (2024): Of the 2,469 arbitration cases filed in 2024, customer-related claims made up 65% of filings. Customers received awards in 28% of cases decided by arbitrators in 2025.
Claims You May Be Able to Pursue
Depending on the circumstances of your non-traded REIT investment, you may have grounds to file claims based on:
- Unsuitable Investment Recommendation: Your broker recommended a non-traded REIT that was inappropriate for your financial situation, investment timeline, or risk tolerance
- Misrepresentation or Omission: Your broker made false statements or failed to disclose material facts about fees, risks, or liquidity
- Breach of Fiduciary Duty: Your advisor put their financial interests ahead of yours
- Failure to Supervise: The brokerage firm failed to adequately monitor and supervise your broker’s recommendations
- Violations of FINRA Rules: Your broker violated suitability rules, due diligence requirements, or disclosure obligations
- Securities Fraud: Intentional misrepresentation or fraudulent conduct in connection with the sale
The FINRA Arbitration Process
FINRA arbitration provides a more streamlined alternative to traditional court litigation for recovering investment losses. Here is what to expect if you pursue a claim:
Filing and Discovery
- Statement of Claim filed with FINRA
- Respondent has 45 days to answer
- Document requests and exchanges
- Arbitrator selection process
- Typical duration: 3-6 months
Hearing and Award
- Pre-hearing conference
- Evidentiary hearing (1-5 days typical)
- Written and oral testimony
- Arbitrator deliberation
- Award issued within 30 days
Most FINRA arbitration cases involving non-traded REITs settle before reaching a final hearing. Brokerage firms often prefer to resolve valid claims rather than risk an adverse arbitration award.
Why Choose Varnavides Law for Your Non-Traded REIT Claim
When you are fighting to recover losses from a non-traded REIT investment, you need an attorney who understands how brokerage firms think and operate from the inside.
Gary Varnavides: The Insider Advantage
Gary Varnavides spent 10 years at Sichenzia Ross Ference LLP defending broker-dealers in securities litigation and arbitration. This decade of experience representing the other side gives him unique insight into:
- Defense strategies: He knows the arguments brokerage firms will make before they make them
- Compliance weaknesses: He understands where firms cut corners and how to expose it
- Settlement negotiations: He knows what motivates firms to settle and at what amounts
- Arbitrator preferences: He has appeared before arbitrators across the country
Recognized Excellence: Gary Varnavides has been named a Super Lawyers Rising Star from 2015-2023, a distinction awarded to only the top 2.5% of attorneys in the New York Metro area. He is licensed to practice in California and New York.
Contingency Fee Representation
We handle most non-traded REIT fraud cases on a contingency fee basis. This means:
- No upfront attorney fees
- We only get paid if we recover money for you
- Fee percentage discussed during your free consultation
You remain responsible for case costs, which may include filing fees, expert witnesses, and deposition transcripts. We can discuss cost estimates and payment arrangements during your consultation.
Statute of Limitations for Non-Traded REIT Claims
Time limits apply to non-traded REIT fraud claims, making it critical to act promptly. The applicable deadlines include:
| Claim Type | Time Limit | Starts From |
|---|---|---|
| FINRA Arbitration | 6 years | Date of alleged misconduct or event giving rise to the claim |
| Federal Securities Claims | 2 years / 5 years | Discovery of violation / Date of violation |
| State Securities Claims | Varies by state | Typically 2-4 years from discovery |
| Fraud Claims | Varies by state | Often from discovery of fraud |
Do Not Delay: Even if you believe you are within the statute of limitations, evidence can deteriorate and witnesses may become unavailable over time. Contact a non-traded REIT fraud lawyer as soon as you suspect broker misconduct.
Regulatory Protections for Non-Traded REIT Investors
Several regulatory frameworks exist to protect investors from non-traded REIT fraud:
FINRA Rules
According to Investor.gov, investors should carefully research any REIT before investing. FINRA Rule 2111 requires brokers to have a reasonable basis to believe that a recommended transaction is suitable for the customer based on their investment profile. FINRA has also implemented Rules 2310 and 2340, which require client statements to reflect a “net investment” or “appraised value” per-share estimate rather than the initial offering price.
SEC Regulation Best Interest
Since June 2020, SEC Regulation Best Interest (Reg BI) requires broker-dealers to act in the customer’s best interest when making recommendations and to avoid putting their compensation ahead of the client’s needs. This heightened standard is particularly relevant for high-commission products like non-traded REITs.
NASAA REIT Guidelines
The North American Securities Administrators Association (NASAA) has established REIT Guidelines that provide basic protections from excessive fees, conflicts of interest, use of leverage, and unsuitable investment types. These guidelines also require sponsors and advisers to honor their fiduciary duties to investors.
Frequently Asked Questions About Non-Traded REIT Fraud
What is a non-traded REIT and why is it risky?
A non-traded REIT is a real estate investment trust that is registered with the SEC but does not trade on a public stock exchange. The primary risks include illiquidity (your money is typically locked up for 7-10 years), high fees (9-15% upfront costs), lack of transparent pricing, and the potential for distributions to be funded by borrowed money rather than actual income. These characteristics make non-traded REITs unsuitable for many investors, particularly those who may need access to their funds.
How do I know if I have a claim against my broker?
You may have a claim if your broker recommended a non-traded REIT without adequately explaining the risks, fees, and illiquidity, or if the investment was unsuitable for your financial situation and investment objectives. Warning signs include being told the investment was “safe” or “conservative,” not being informed about the 7-10 year holding period, or having a significant portion of your portfolio concentrated in these illiquid investments.
What damages can I recover in a non-traded REIT fraud case?
Recoverable damages typically include your investment losses (the difference between what you invested and what you received back), lost opportunity costs (what you could have earned in a suitable investment), interest, and in some cases attorney fees and costs. The specific damages available depend on the claims asserted and the evidence presented.
How long does FINRA arbitration take?
FINRA arbitration cases typically take 12–14 months from filing to resolution, though many settle through mediation long before a final hearing. Cases that proceed to a full hearing may take 15-18 months. The timeline depends on factors such as case complexity, number of parties, and arbitrator availability.
What is the statute of limitations for non-traded REIT claims?
FINRA arbitration claims must generally be filed within six years of the alleged misconduct or event giving rise to the claim. Federal securities law claims have shorter deadlines of two years from discovery of the violation and five years from the violation itself. State law claims vary. Because evidence can deteriorate over time, it is important to consult with an attorney promptly if you suspect fraud.
Do I have to pay upfront to hire a non-traded REIT fraud lawyer?
Most non-traded REIT fraud attorneys, including Varnavides Law, handle these cases on a contingency fee basis. This means you pay no attorney fees unless the firm recovers money for you. You remain responsible for case costs such as filing fees and expert witness fees, but these can be discussed during your free consultation.
Can I still pursue a claim if my broker has left the firm?
Yes. In most cases, the brokerage firm is liable for the misconduct of its registered representatives under a legal doctrine called respondeat superior. Additionally, brokerage firms have an independent duty to supervise their brokers. You can typically pursue claims against both the individual broker and the employing firm, even if the broker has since changed employers.
What if my non-traded REIT has not completely failed but lost significant value?
You do not need to wait for a complete loss to pursue a claim. If your non-traded REIT has declined significantly in value due to undisclosed risks, unsuitable recommendation, or broker misconduct, you may have grounds to file a claim for your current losses. An experienced securities attorney can evaluate your situation and advise on the strength of your potential claim.
Schedule Your Free Consultation
If you invested in a non-traded REIT and suffered losses due to broker misconduct, misrepresentation, or unsuitable recommendations, you deserve an attorney who will fight to recover what you lost.
Gary Varnavides brings a unique perspective to non-traded REIT fraud cases. His decade of experience defending broker-dealers means he knows their strategies, their weaknesses, and how to hold them accountable.
Get Your Free Case Evaluation
Contact Varnavides Law today for a confidential consultation about your non-traded REIT losses. We will review your investment history, explain your legal options, and discuss whether you have a viable claim for recovery.
Varnavides Law represents investors in California, New York, and nationwide through FINRA arbitration. Prior results do not guarantee a similar outcome.
