Buying Rent Roll Legal Guide

Buying A Rent Roll

BUYING A RENT ROLL FOR YOUR BUSINESS: LEGAL GUIDE

The buying process isn’t simple, and without careful consideration you may just be end up jeopardising your greatest asset - you real estate business. That’s why we’ve put together this legal guide to ensure you know exactly what to do when it comes to buying your next rent roll.

About O*NO Legal: We help real estate agency principals to buy their rent roll the right way so that they can increase the value of their agency and know their a*rse is actually covered.

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Introduction.

When it comes to expanding your real estate business, buying a rent roll is unquestionably one of the most effective ways to do this. A rent roll purchase can easily improve your business growth and revenue. However, the buying process isn’t as simple and without careful consideration of several factors you may just be end up jeopardising your greatest asset – your real estate business. That’s why we’ve put together this legal guide to ensure you know exactly what to do when it comes to buying your next rent roll.

A SMART RENT ROLL ACQUISITION TODAY MAY BE THE KEY TO A SUCCESSFUL AGENCY TOMORROW.

CONTENTS.

Rent Roll Purchase Process Overview
Buying Rent Roll Legal Guide E-book

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WHO WE ARE.

O*NO Legal are Australia’s leading business lawyers who help real estate agencies like yours to shield your assets, future proof your business relationships, expand faster and plan your exit so that you can increase the value of your real estate agency and have peace of mind knowing your a*rse is actually covered.

Our team is dedicated to helping real estate agencies expand and shield their assets. As a specialized firm, we provide advice tailored to our clients to achieve their objectives effectively and efficiently. We are genuinely interested in helping our client’s future proof their relationships with their clients, partners, and staff to create a legally unbreakable agency.

OUR FOUNDING DIRECTOR

Rent Roll Purchase Expert

Kristen Porter, has real estate in her blood. As third generation, she was born into the industry and has a passion for it that no other lawyer has. Servicing almost exclusively real estate industry clients across Australia, she understands the pressures and pain points of the industry. With her unique industry insight, Kristen is dedicated to providing clients with solutions that are timely, flexible, and innovative.

What are the benefits of buying a rent roll?

What exactly do we mean by rent rolls? Essentially, a rent roll refers to a real estate agency’s portfolio of rental properties. This portfolio details the rental division of the business, including information about the properties, tenants, leases, rent amounts, and landlords. Rent rolls are more than just documents though, they are an important business asset that can be sold, bought and borrowed against. Buying a well-managed and profitable rent roll could be the solution to maximising the value of your agency. There are several ways a rent roll purchase can benefit your real estate business.

The main benefit of a rent roll? It acts as an injection of income to your business, and over time, provides a stable, recurring income stream. This consistent cashflow means your agency has a fallback when it comes to emergencies and tough times. According to research from the Macquarie Bank, more than 40% of agency revenue in Australia is now dependent on residential property management.[1]

Rent rolls are also an effective way to grow your agency. Buying a rent roll will lead to an increase in your database. This can result in opportunities to increase sales volumes, specifically when owners in the rent roll want to sell. This can be further maximised if your agency’s sales and property management departments are operating well together and referring these opportunities between departments. Beyond this, it will grow your marketing base – meaning greater reach, and more potential clients/work.

Best of all, your rent roll will become a valuable business asset for you. When it comes time to exit your agency or sell it down the track, a sales only business may not be worth as much as you think it is. Your main selling point will be your rent roll – especially if you’ve managed it well and expanded it. Your rent roll can also be an asset that can be borrowed against. This way, your rent roll can act as a security, making it easier to borrow money to fund your growth or investment plans.

[1] Macquarie Bank, 2020. Real Estate Pulse Check Report. [online] Available from: <https://www.macquarie.com.au/assets/bfs/documents/business-banking/bb-real-estate-industry/2020-Macquarie-Real-Estate-pulse-check-report.pdf> [Accessed 10 Oct 2022].

WHAT ARE THE RISKs OF BUYING A RENT ROLL?

Like any major purchase, there are also risks associated with buying a rent roll, including:

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Most commonly, you may fall victim to misleading or deceptive conduct. This can include buying a rent roll business that has been misrepresented to you, has properties in the portfolio with pending issues, including legal proceedings, caveats, and maintenance issues.

The seller may employ methods of deception and untruth to get the best sale price for themselves. This can be harmful to your business and your bank balance. Like when a vendor sells a house, the seller of a rent roll may exaggerate the value or condition of the rent roll. So, it’s your job to figure out whether you’re making the right decision or not.

There is also greater risk associated with buying shares in the company than just buying the rent roll outright. Buying shares means you will be inheriting the company’s skeletons in the closet, and in the worst-case scenario, these can be so damaging they could bring your agency down.

HOW CAN THESE RISKS BE AVOIDED?

The main way to avoid risks when buying a rent roll is to perform a due diligence check. But what does due diligence mean in relation to a rent roll? Essentially, due diligence refers to checking whether the vendor’s claims as to the state of their rent roll are true, so you can determine if the asking price is fair. Just like you wouldn’t buy a second-hand car without having a mechanic look over it first, you should never buy a rent roll without first looking under the hood. For this reason, contracts for sale will often have adequate due diligence periods giving the buyer the ability to either pull out of the deal or make a new offer of price/multiple.

Another important step to take to avoid risks is to consider the purchase price and level of investment required for the rent roll. This includes determining the current and future profitability of the rent roll – because there’s no value in buying an asset that won’t be valuable in the long run. This may require a financial due diligence check, which is best undertaken by a professional such as your accountant or business advisor.

Warranties are another way to mitigate risks when buying a rent roll. Warranties are promises provided by the seller to you in relation to the state of the asset. These warranties are governed by industry standards and contain indemnity mechanisms to protect you. Therefore, if the vendor warranties turn out to be false or misleading, you are given the ability to take action against them for the breach.

Warranties can also protect you when buying shares. As a rule of thumb, buy the asset and not the share. However, if you do buy shares then ensure you perform a thorough due diligence check and obtain adequate warranties from the seller – this way you can uncover any hidden issues and ensure that any problems that occurred before will not pass onto you with the purchase.

The Buying Rent Roll Expert

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To perform a due diligence check that is effective and thorough, there are several considerations that must be remembered, such as:

  • You need to be aware of the total number of properties, and their details, in the rent roll this is best if it is catalogued for easy access.

  • The fees and weekly rent amounts this is important because it can help you evaluate the rent roll, whether you are buying or selling.

  • Details about vacancies this includes knowing how many properties are currently vacant and how many will become vacant, such as those set to become vacant due to fixed term leases.

  • Details about rental arrears if rents are in arrears then so too will be the collection of management fees which turns to the profitability of the rent roll.

  • The business and operational aspects of the rent roll you intend to purchase eg. what property management software is being used, if you are taking on staff what are the terms they are employed under and their leave balances etc?

  • The outstanding issues any properties may be facing whether it be maintenance or legal in nature.

  • Details about inspections and whether they are up to date this is important as they help you towards identifying outstanding issues.

  • The ratio of landlords to properties this could be risky if you have owners with multiple properties on your rent roll, because if they leave this could result in a big hit for your overall rent roll.

  • The geographical location of the rent roll properties this is important as you may not have the capacity or ability or desire to manage properties that are too widespread.

CONSIDERATIONS WHEN BUYING YOUR RENT ROLL.

The following will detail the various factors you should be considering making an informed, profitable, and safe rent roll purchase.

Multipliers and valuing: Do you know what you should be paying for your rent roll?

When buying your rent roll, and any big purchase really, it is important you aren’t overpaying. Therefore, it is best to determine the value of the rent roll before you agree to buying it. The value of a rent roll is usually determined by applying a multiplier to the annual management fee income. The multiplier is the magical number that determines the value of the rent roll. You then times the gross annual management fees by the multiplier to get your purchase price.

Example: $148,680 (annual management fees) X 2.85 (multiplier) = $423,738 (rent roll value)

Now you may be asking, how is the multiplier determined? In a nutshell, the multiplier is determined by way of valuation and takes into consideration many factors, such as:

Beyond this calculation, there are also other factors that may influence the total purchase price of your rent roll. The main one to consider is the exclusion of some managements from the calculation, such as vacant properties, properties that are uninhabitable, or circumstances where the tenant is in arrears and there is no payment plan. Often, these are excluded from the calculation of the price on settlement. However, if they are made good’ in the retention period, then they are added back into the purchase price and adjusted for at the same time as the lost management in the retention period.

  • Averages of annual rents and management income.

  • Terms left to run on any management agreements.

  • The geographical location of the rent roll properties especially in relation to the desirability of the area, distance from you and/or your office and other properties.

  • The ratio of landlords to the number of properties under management.

  • Relationships between the vendor and their landlords especially if there are special circumstances/allowances.  The types of properties, for example whether they are houses or units or a mix, and their condition.

  • Operational details, such as the systemisation of rent collection or other management tasks.

  • The type and duration of the leasing authorities.

  • It may also be influenced by regular supply and demand principles.

Beyond this calculation, there are also other factors that may influence the total purchase price of your rent roll. The main one to consider is the exclusion of some managements from the calculation, such as vacant properties, properties that are uninhabitable, or circumstances where the tenant is in arrears and there is no payment plan. Often, these are excluded from the calculation of the price on settlement. However, if they are made good’ in the retention period, then they are added back into the purchase price and adjusted for at the same time as the lost management in the retention period.

NEED HELP WITH SORTING OUT ALL THE DIFFERENT
CONSIDERATIONS FOR YOUR RENT ROLL TRANSACTION?
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Unlike other law firms, we specialise in serving real estate businesses, where we help Real Estate Agents like you buy rent rolls the right way without jeopardising your Agency. So if you are in the market to purchase a rent roll, click on the link below to schedule a free 10-minute chat with one of our Senior Rent Roll Lawyers.

WHAT HAPPENS TO EMPLOYEES AND THEIR ENTITLEMENTS WHEN I BUY A RENT ROLL?

To assist in the transition process as well as reduce churn and lost managements, it may be a good idea to take on some of the seller’s employees. However, before doing so there are a few factors you need to consider. It must be noted that you can refuse the transfer of employees when buying the rent roll if your contract for sale is set up correctly.

Employees in Australia are afforded various leave entitlements and denying them these, whether unintentionally, could land you and your real estate agency in legal hot water.

The first is annual leave, also known as holiday pay leave, and are days/time employees can take off whilst still being paid. All employees, except those that are casuals, are entitled to annual leave. Generally, your staff are entitled to 4 weeks annual leave per year (pro-rated for part-time employees) unless you have been more generous in your employment contracts. The second is long service leave which an employee who has worked for a long period for the same employer is entitled to.

As a rule, when you take staff on, you will inherit their leave balances and other entitlements if the employees transfer across. Therefore, the transferring employees won’t be considered new employees, and this also means they won’t have a probationary period. However, if you want to take on these employees and also include probationary periods it can be done. This involves the seller first terminating the employee, paying out their entitlements, making them redundant, and then you are able to give them a letter of offer and contract. With this you must be very clear on the terms on which these staff members are being employed by you.

In addition to this, when employees transfer with the purchase of the rent roll, their service to the seller will count towards their service to you. This means that, even if you give the old employees new offers of employment in the same business, their employment period does not reset back to the start. Therefore, when calculating the long service leave of an employee, the duration of employment must include the time up to and after the purchase of the rent roll.

There are some exceptions to this. If the seller has already settled the employees leave balances before the transfer, then the employees old service will not be counted towards the entitlements owed by you so they start afresh. This will also allow you to reset their probationary period. However, this can only be done if you, as the buyer, have notified the employees of this in writing in their letter of offer and contract. Notably, this also means that the unfair dismissal period will also reset as the purchaser will not recognise the service the employee has provided the old employer. Unfair dismissals refer to employees who have been let go from the agency in a manner that is unjust, harsh, or unreasonable, this includes if the dismissal was unlawful or a breach of general protections.

In some circumstances you may also be required to honour work arrangements employees have made with the seller, such as those with carer responsibilities having flexible working conditions.

With all of the above to consider, how does this impact the rent roll purchase price/value? Well, the smart thing to do would be to consider adjustments for employee entitlements. For example, adjustments are usually made for long service leave, if the employee has at least five years services, but this differs between states, and annual leave. Adjustments are usually done to take into account the company tax rate and not adjusted at 100%, usually 72.5%. Generally, adjustments are not made for sick/personal leave.

HOW DO I DEAL WITH LOST MANAGEMENTS? WHAT ARE RETENTION PERIODS AND SUMS/AMOUNTS?

We all know that relationships are central to real estate agents and property managers. Many clients of ours do not do business with the brand, but the person. Buying a rent roll essentially means buying these relationships.

When buying a rent roll, not all landlords will want to stay in your portfolio. To address this churn, commonly known as lost managements’ you should put in a recourse mechanism by which you are given a refund’ for the managements lost. This is done by way of a retention period and a retention amount. If you lose managements in the retention period, you will be refunded part of the purchase price, generally up to the capped retention amount. This amount should be negotiated early to ensure there are no problems when it comes to the transfer of authority to you. This amount can be adjusted if properties are lost at settlement. This amount may also be required by your bank if you are planning to obtain finance for your rent roll purchase.

The retention amount will vary for every transaction and will be influenced by the type of rent roll and your area. However, as a rough guide a 3 6 month retention with 5% 20% of the purchase price at risk’ will form the retention amount. Currently though, retention rates have become increasingly high at 30%!

So, how do you go about ensuring you’ve addressed the issue of retentions and lost managements? Through your contracts! It is essential you have adequate retention periods and retention amounts stipulated in your contract, and this should include detailed rules around the process of how retention amounts will be released.

Also, it is important your contract clearly outlines what constitutes a lost management, as not all managements that leave the rent roll are generally considered lost’ with a refund available in the retention amount. As an example, if an owner moves back in, or the buyer sells the property and receives a commission for the sale then these aren’t considered lost’. The determination of what circumstances constitute a lost management need to be negotiated with the seller. As an example, other circumstances that are commonly negotiated to mean lost managements include buyer negligence, or any change in management fees or terms that make an owner leave. Your contract should also detail what happens if a dispute does arise when it comes to determining if a management has been lost.

HOW DO I PROTECT MY NEW RENT ROLL FROM THE SELLER & THEIR ASSOCIATES LATER?

A rent roll is an expensive purchase so you need to ensure you’re protecting it. Your first step? ensuring that the vendor won’t compete against you. Imagine paying for your shiny new toy, then having the former principal swoop in and take it from underneath you. Knowing that relationships are essential to the real estate business, you need to protect the new ones you’ve purchased. To do this you must ensure that the vendor will not steal their clients back. Following this, you’ll also want to stop the vendor from taking your new staff and luring them over to their new venture. You can do this with a restraint of trade in your contract.

What is a restraint of trade? Essentially, it is provision or clause, usually found in contracts, restricting the other party’s ability to perform a specific work activity for a specified time period. When buying a rent roll, a restraint of trade clause can restrict the seller from stealing back any managements they have sold to you. A restraint of trade clause is the best way to protect the goodwill of the rent roll after settlement.

If the seller is a company, then you will want the restraint of trade to apply to all the principals, directors, and other key staff members to ensure the seller doesn’t have a work around to your restraint clause. Remember to also consider any employees and contractors of the seller as they can also steal your new clients. To avoid this, ensure your contract obligates the seller to ensure their employees and contractors will not compete with you. However, before buying your rent roll it is always a good idea to check if the sellers employment contract will allow them to enforce a restraint of trade against their people once you take over.

There is always a possibility that the vendor will act in bad faith and ignore the restraint of trade provisions. What can you do about this? Your contract should include a damages provision which details how you will calculate the value of any restraint of trade breaches and obtain this from the vendor.

CAN I STILL BUY THE RENT ROLL IF I DON’T HAVE FINANCIAL APPROVAL?

Before buying your rent roll it is best to ensure you have unconditional financial approval. However, this may not always be the case. This means you may need to pull out of the purchase if your approval doesn’t come through. To do this legally, ensure your contract is subject to finance’. Not doing this can then mean you will be liable to go through with buying the rent roll, and when you can’t do it, dependant on the terms of the contract for sale, you may lose your deposit, be sued by the seller, or if the seller later sells the rent roll at a lower price, be obligated to pay them the difference.

It is also important to note that in recent times, financial approvals have become increasingly hard to get and the process longer. So, if you’re not careful with the financial terms of the contract you will end up losing a significant amount of money for nothing.

WHAT ABOUT SECURITY INTERESTS ON THE RENT ROLL PROPERTIES?

When buying your new rent roll, it is best to ensure that there are no security interests over it. Just like if you are buying a house you want to make sure that the vendor’s mortgage is discharged, the same happens with charges, or security interests’ over a rent roll. If there is a security interest over your new purchase, you could potentially lose the rent roll if the assets need to be called in. This can happen if the vendor has a loan and defaults. In this situation, the bank will seize the rent roll, regardless of who owns it. To avoid this, you need to conduct a Personal Properties Securities Register (PPSR) check. Through a PPSR check you will be able to identify if there are any charges or securities on the rent roll. This will allow you to either reconsider your deal or include a condition precedent in your contract that the purchase price will not be handed over and settlement will not occur until the securities over the asset have been cleared.

WHAT HAPPENS IF THE RENT ROLL IS OPERATING UNDER A FRANCHISE?

If the rent roll was operating under a franchise, and you wish to continue to do so after you have purchased it, then franchisor consent will be required. Remember, if you are taking this route, then adequate time needs to be included in the settlement process to allow for the consent to be granted. You will also need to ensure your contract for sale has provisions that cover this.

Example: Condition precedent for settlement is franchisor consenting to the assignment of the franchise agreement and associated rent roll to the purchaser.

WHAT HAPPENS IF THE RENT ROLL IS OPERATING FROM A PREMISES THAT IS LEASED OR VENDOR OWNED?

The premises, where the business is conducted, can sometimes form part of the asset being sold. This premises may be owned by the vendor, in which case, if you want to continue to operate from it you may have to purchase it, or include it in the rent roll transaction, or you may have to lease it from the vendor. To do this, the purchase or the lease, should happen in conjunction with the main rent roll transaction.

However, in some instances the vendor is leasing the premises from someone else. So, what happens with this existing lease if you buy the rent roll? If there is still time remaining on this lease then the lessor or owner of the premises can assign the lease to you, the purchaser. To do this, the lessor must grant consent, and this is usually a matter the vendor deals with, with the assistance of the buyer. As the lease will form part of the purchase asset and is being assigned, you will need to comply with the existing terms of the lease. However, variations to the lease may be permitted if the lessor allows/ accepts it. If the vendor’s lease has ended or near finishing, then you may have to enter into a new lease with the lessor. As this will be a new lease, you may be able to negotiate the terms with the lessor. You will also need to ensure your contract for sale has provisions that cover this.

Example: Condition precedent for settlement is the lessor consenting to the assignment of the lease the purchaser.

The Buying Process: What to do, what you need, & what you Shouldn't forget.

Step 1.
Terms
Sheet

First you need to prepare your pre-contractual document your term sheet. A term sheet is a document which highlights the basic terms and conditions of the rent roll transaction you and the seller have agreed to. The term sheet can be binding or non-binding, but essentially covers the most important elements of the deal.

Sounds simple enough, right? However, the biggest mistake we’ve seen in this space is clients who, prior to working with us, agreeing to high level terms, and signing the term sheet without receiving advice. Generally, after this, we are given the executed term sheet and asked to then help review the rent roll contract for sale. In most instances we end up finding unfavourable terms for the purchaser, especially if they are a first time rent roll buyer. However, since these terms have already been agreed to in a term sheet it is very hard to then try and change them in the contract. This is true even if the term sheet is not binding. It is always hard to back away from something once you have agreed to it in writing.

Our tips to avoid O*NO! moments:

  • Put a fail-safe clause in your term sheets.
    Always include a clause making the document subject to due diligence requirements and proper legal contracts and review.

  • Ensure you are not signing term sheets without professional advice -
    so you can avoid getting locked into certain terms that you may later find out aren’t usual’ or are unfair’.

  • Work with an expert in the area for advice like a rent roll lawyer who specialises in rent roll purchases and get advice before signing anything

Before you sign your term sheet, book in with us for a Slice of Advice today and we can not only check your term sheet with you in the online consultation, but we will advise you whether what you are signing is in line with current industry norms or whether you are signing up to a bad deal.

Step 2.
DUE
DILIGENCE

As noted before, due diligence allows you to check whether the claims the vendor has made about their rent roll are true, allowing you to determine if the purchase price is fair. This step usually occurs before contracts are signed so you can make an informed decision before taking the leap. It may also take place after exchange if the contract is made subject to due diligence’.

This is the time to test the price/multiplier that you have agreed to this allows you to determine if the rent roll/business is worth what the vendor has said it is worth. You should check if the rent roll is clean’ by reviewing the trust account and trust account audits. Always check the books so you know what it costs to operate the rent roll and if these numbers align with your expectations.

Whether you’re taking on the seller’s staff, ensure you are checking their employment contracts. When taking on staff you need to know what entitlements you may be expected to pay, and you may need to have them sign new contracts. If you’re not taking on staff, you need to inform yourself about the employees’ restraint clauses to protect the goodwill of your potential rent roll.

Consider whether you will be running the rent roll from the premises the seller was or if you’re going to bring it into your own office. If you do decide to take over the sellers premises you need to check the details of the premises, specifically its leasing status, the rent, renewal terms, and the contractual obligations you’ll inherit once the lessor has consented to the assignment of lease to you. These considerations will similarly apply to rent rolls under franchise agreements.

Our tips to avoid O*NO! moments:

Engage a consultant to do this for you. Unless you have bought many rent rolls before, not only is a due diligence check extremely time consuming, but this is where you find out if you are buying a good business or a lemon you don’t want to make a mistake in this step!

Want to try your hand at a due diligence check? Our legal experts have made a rent roll specific due diligence checklist for your next purchase download your FREE copy here!

Step 3.
CONTRACT FOR
SALE TO EXCHANGE

The contract for sale will set out all the terms of the sale such as price, multiplier, retention amount and period, what constitutes a lost management, how employees are dealt with, securities to be released, if there is a lease or franchise to be taken over, if there is a sales part of the agency being sold, how commissions and listings are to be handled, plus other legal elements to ensure a smooth transition. The preparation of this contract is usually done by the vendors lawyers, whilst your lawyers, as the purchaser, are responsible for reviewing it. Much like what happens in a conveyance, you will first enter into a contract, then there will be a period between exchange and settlement. A deposit is paid on exchange, usually around 10% of the purchase price.

Most importantly, you should ensure the agreement contains seller warranties – these could include warranties pertaining to full disclosure, accurate information, the businesses assets, its accounts, compliance with the relevant Real Estate Agents legislation and the property management records. Following this, you should also include an indemnity clause in the contract – this way the seller can be held liable for the damages/loss that result from a breach of the seller’s warranties.

High priced purchase dealings can be rife with tension and stress, and this can unfortunately lead to disputes. This is more so because part of the purchase price may be held back due to settlement and retention periods. To mitigate any fall out from this, your agreement should detail processes to be taken for dispute resolution – usually including provisions for negotiations, at first, and then referral to arbitrations or mediations, later.

Our tips to avoid O*NO! moments:

Buying business assets can be difficult to get right and buying rent rolls are even more complicated – especially with all the moving parts you need to consider. So, make sure you use a rent roll lawyer who is familiar with rent roll purchases so they can advise you if something is ‘unusual’ or off about the deal and protect the rent roll you are buying.

Before you sign your contract, book in for a free 10 minute chat with us today and talk to us about whether we are the right rent roll lawyers to help review your contract and protect your rent roll purchase.

Step 4.
EXCHANGE TO
SETTLEMENT

This is when we get the rent roll/agency ready to be handed over to the purchaser. This includes:

  • Having any employment agreements signed – only if you are taking on the seller’s employees.

  • If you are taking on a lease or franchise, then this is when consent for the assignment is obtained from the lessor or franchisor.

  • Having agreements signed for new managements or assigned, depending on the state or territory you are in – but only starting once the contract is exchangedunconditionally.

  • If there are any charges over the rent roll/agency (like a mortgage over a house), those need to be released so you do not inherit any of the debts of the agency.

  • Handing over all of the records and data that form part of the sale, usually via data migration between your CRM and the vendor’s, unless you are taking over their CRM or other software accounts.

  • The retention amount being put into trust on settlement for safe keeping to deal with lost managements at the end of the retention period.

Our tips to avoid O*NO! moments:

It is essential that you ensure authority to manage properties is transferred upon settlement – the efficiency of this will be dependent on the transfer provisions in your contract. In some states and territories, the managements and authorities are capable of assignment, in others, new management agreements and authorities will need to be signed Make sure all owners/landlords are called by the vendor introducing you before sending notices out about the sale – this will help with the transition and result in fewer lost managements.

After you’ve exchanged contracts, there’s still a lot to get done before you can reach settlement for your rent roll – ensure you’re considering all the essential details with our rent roll completion checklist!

PS if you have engaged us to assist with your rent roll purchase, this checklist will be included in your package with us.

Step 5.
RETENTION
PERIOD

This step deals with lost managements. As the purchaser you need to keep a record of the lost managements in your new rent roll and evidence form the owners/landlords as to the reasons why they have taken their managements away (remember from above, not all managements that leave the rent roll will be classed as ‘lost managements’ for the purpose of the retention calculation). At the end of the retention period, this list is sent to the vendor and an adjustment is made to the purchase price that takes into account lost managements. The retention amount is then released between you and the vendor as per the adjustment above.

Our tips to avoid O*NO! moments:

There can be multiple times you adjust for lost managements in the retention. If the retention period isn’t too long, only have one point for adjustment so you save on time, admin and fees.

Yes, I want to chat with a legal consultant about Buying a Rent Roll

Del Copeland is a Senior Legal Consultant and an expert at advising real estate agency principles on how to safely buy a rent roll. Have a chat and see how she can help you.

KEY TAKEAWAYS.

  • Get familiar with the rent roll process – so you know exactly what to do and what you need at each step.

  • Engage advisors and experts that understand and deal with rent roll purchases on a daily basis.

  • Do a thorough due diligence – this is the best way to ensure you’re informed and not being misled.

  • Don’t sign anything, including term sheets, without first receiving advice – it is always harder to backtrack once you’ve agreed to something in writing.

CONCLUSION.

It’s easy to see where things can go wrong with a rent roll purchase – whether it be a rent roll with hidden problems, an over exaggerated price you’ve only discovered is so after paying, an unfavourable term sheet you’ve signed thinking it’s not binding, a contract for sale that isn’t up to scratch and making the transaction complicated and drawn out, the vendor or employees stealing clients, and in turn profits, from your new asset because you forgot to consider restraint of trades.

As real estate agency law experts, we’ve regularly been engaged because the above have occurred. It may sound simple, however even a slight mistake with your rent roll transaction could cause an avalanche of issues for you and your real estate agency. The team at O*NO Legal provide legal services tailored exclusively to the real estate industry – it is for this reason we deal with rent roll transactions daily.

We understand the intricacies of your industry like no other lawyers will and will ensure the key aspects of your purchase are comprehensively addressed – making the process easier to navigate and stressless.

So, whether you’re looking to buy a new rent roll or are already in the process of acquiring one – why not talk it out with a legal expert?
Book a free 10 minute chat with us today to get started!

Boring legal stuff: This article is general information only and cannot be regarded as legal, financial or accounting advice as it does not take into account your personal circumstances. For tailored advice, please contact us.

PS - congratulations if you have read this far, you must love legal disclaimers or are a sucker for punishment.