What is a Lock-Up Period?

A lock-up period is the contractual or statutory window during which; transfers of an ownership interest are restricted. It prevents investors from selling or transferring their securities until the specified period expires, with Node's Reg D 506(c) offerings carrying a 12-month statutory lock-up.

How Does the Lock-Up Period Work?

A lock-up period begins at the date of issuance and runs for a specified duration during which the investor cannot sell, transfer, or otherwise dispose of their ownership interest. The restriction may be statutory (required by law) or contractual (imposed by the offering terms). In many cases, both apply simultaneously.

For securities issued under Reg D 506(c), the 12-month holding period is a federal statutory requirement. The investor cannot transfer the securities during this period regardless of the terms in the operating agreement.

This is not a platform policy; it is a condition of the exemption under which the securities were issued. Lock-up periods represent fundamental liquidity constraints reflecting underlying asset holding periods and capital deployment timelines.

Why Lock-Up Periods Exist

Statutory lock-up periods exist to prevent the immediate resale of privately placed securities into the public market. It would effectively convert a private offering into an unregistered public offering. The holding period creates a separation between the private placement and any subsequent transfer, ensuring that the securities remain within the regulated framework.

Contractual lock-ups may extend beyond the statutory period. A sponsor may impose a longer lock-up to align investor holding periods with:

the asset's business plan,

prevent early liquidation pressure, or

maintain cap table stability during the asset's stabilization phase.

Lock-Up Period and On-Chain Enforcement

In tokenized real estate, the lock-up period is encoded into the on-chain factory contract layer. The smart contract records the issuance date for each ownership interest and automatically blocks any transfer attempt before the lock-up expires. This removes the possibility of early transfer through administrative error or manual override.

Once the lock-up period ends, the secondary eligibility window opens, and the ownership interest becomes eligible for compliant transfer through registered broker-dealer and ATS partners. Secondary market mechanisms have evolved providing liquidity despite lock-ups through secondary funds and continuation vehicles, though typically at discounts reflecting remaining performance uncertainty. Exit mechanics during lock-up periods including secondary sales, continuation vehicles, or partner buyouts significantly impact investor flexibility and should be explicitly negotiated.

The smart contract verifies both the holding period and the buyer's eligibility before permitting the transaction.

Lock-Up Period at Node Proptech

Every Node Reg D 506(c) offering carries a 12-month statutory lock-up aligned with the Reg D holding period. The lock-up is enforced at the smart contract layer. Investors cannot initiate secondary transfers until the full 12-month period has elapsed from their issuance date. Sophisticated investors evaluate lock-up provisions carefully in context of capital deployment and liquidity requirements, recognizing that institutional investors with multi-billion dollar portfolios tolerate locked capital differently than smaller investors.

The lock-up terms are disclosed in the Private Placement Memorandum for each offering.