Last month, we discussed how to get ready to sell your rent roll and the key difference between a POA Form 6 and PAMDA Form 20A here. Now we want to turn your attention to another key part of a rent roll transaction – the retention period. In every rent roll transaction, there is a period post settlement in which if you lose the management rights to a property (i.e. the property is sold, the owner terminates the management agreement, etc), you can claim a refund for that property from the 20% of the purchase price that was set aside, typically, in the seller’s lawyer’s trust account at settlement.
Retention periods are usually 90 days long, but this can be negotiated between the parties for shorter or longer terms if need be. Once settlement has occurred, here are three simple things that a rent roll buyer should not miss to get ready for their retention dates:
1. set reminders
You definitely do not want to wait until the last minute to try and address any retention concerns. The best thing to do is set reminders in your calendar on your phone or computer. We also recommend setting more than one. Be it one week away, two weeks, a month, whatever works for you. Just as long as you do not forget about the retention date and miss the opportunity to be reimbursed for properties you have lost.
Reminders will be most important especially when you have multiple settlement dates as each one will have its own retention date.
2. build a list
As mentioned above, each settlement will have a retention date applied to it. For example, if you have three settlements, you will have three retention dates 90 days from each settlement. That means that you cannot claim a property that you received at a second or third settlement if it is only the first retention date. But it is important that you keep track of these properties. We recommend setting up an excel spreadsheet or a word document table which will clearly indicate which settlement the lost property is from. If you are working with a lawyer, make sure to email them as soon as you are notified of losing a property so that they are also aware of the situation.
3. collect written evidence
Most, if not all, rent roll contracts will require written evidence supporting a claim that a property is lost. Whilst it is quite normal for agents to have many conversations either in person or over the phone with their clients when it comes to claiming a lost property, a verbal agreement is not enough. You will need to provide written evidence stating the termination of the management agreement. This can be done by making sure you send a simple email to the property owner where they can provide their confirmation of the termination and the reason as to why they wish to do so. This way, when the relevant retention date is due, all you need to do is to forward the email from the property owner stating their desire to terminate the management agreement to confirm that the property has been lost.
Give yourself enough time to gather all the evidence confirming the loss of a property by the relevant retention date and you will be able to complete your retention claim and be reimbursed for the value of that lost property or properties within a day.
It is all too common that people who buy rent rolls do not observe these three important points and forget their retention dates forcing them to gather evidence to support their claim in such a short period of time.
To avoid missing out on being rightfully reimbursed for lost properties, feel free to give us a call on 07 3193 3000 to discuss how to best plan for your rent roll acquisition.
General Advice Disclaimer
Information provided on this website is general in nature and does not constitute financial or legal advice. Every effort has been made to ensure that the information provided is accurate, but information may become outdated as legislation and new government announcements are made. Individuals must not rely on this information to make a financial, investment or legal decision as it does not take into account their personal circumstance. Before making any decision, we recommend you consult a licensed adviser or legal practitioner to take into account your particular objectives, circumstances, and individual needs.