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Exchange Rules

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1031 Exchange-TIC Info
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Exchange Rules

Exchange rules require a property investors to identify potential replacement commercial properties within 45 days of the close of escrow and acquire the replacement commercial property (or commercial properties ) within 180 days of close of the relinquished commercial property. Furthermore, when choosing a replacement exchange commercial property for the exchange, the property investor must follow one of the following exchange rules:

  • The Three-Commercial Property Rule - Any three commercial properties regardless of their market values may be identified by the exchanger as potential replacement commercial properties for the like kind exchange, however no more than 3 commercial properties may qualify.

  • The Two Hundred Percent Rule holds that, if three or more commercial properties are identified as replacement commercial properties, their aggregate market value must not exceed 200% of the value of the commercial property sold.

  • The Ninety-five Percent Exception is used in the event that rules 1f and 2 do not apply. In such a case, the aggregate market value of the commercial properties acquired in the exchange must comprise at least 95% of the closing value of the commercial property relinquished.

    Many exchangers prefer buying 1031 property as TIC because of the ease of completing the transaction and closing on commercial properties. This is due, in large part, to many pre-arranged financing deals available.




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