Disclaimer: The information provided in this article is for general guidance only. It does not constitute legal advice and should not be relied upon as such, as it does not take into account the specific circumstances of your agency.
This is for your guide only.
In transactions, compliance is not just about ticking boxes; it’s about protecting both the purchaser and vendor during and after settlement. While Verification of Identity (VOI) safeguards against fraud, and ingoing condition reports establish a tenancy baseline, the retention period is where disputes sometimes arise.
Disagreements about lost managements can cause tension between buyer and seller—particularly when there is no clear definition of what counts as a genuine lost management, when notice should be provided, or how mismanagement should be determined or demonstrated.
To help shed light on these issues, solicitor Sarah Heuvell of Swaab, who has more than a decade of experience advising on property and rent roll transactions, shares her expertise and real-world insights in Part 3 of our series on POI, Ingoing Condition Reports & Lost Managements – Retention.
What is the Retention Period?
The retention period is the contractually agreed timeframe after settlement when the purchaser may claim against the vendor for lost managements.
The purpose is to balance risk: if a management is lost due to issues that were present prior to or at settlement, the purchaser should not bear the financial loss. Conversely, the vendor should not be penalised for circumstances outside their control or for losses caused by the purchaser’s own mismanagement.
Sarah Heuvel Insight:
“Retention clauses act as a safety net. They prevent disputes from escalating to litigation by providing a clear mechanism for adjustments if managements are lost. But the clauses only work if the contract is very clear on definitions, timeframes, and evidence requirements.”
When a Lost Management Cannot Be Claimed
Not all management losses are claimable. For instance:
- If the purchaser sells a property on the rent roll, then it cannot be claimed as a lost management.
This type of loss is a direct consequence of the purchaser’s decision, not the vendor’s prior conduct.
A sale of the property removes the very basis for the management agreement, and therefore the vendor cannot be held responsible for the resulting termination, but only when the purchaser sells the property. If another agency/agent sells the property other than the purchaser then it is considered a lost management.
When a Lost Management Can Be Claimed
By contrast, some losses can be claimed:
- If the landlord moves back in, it CAN be claimed as a lost management.
- If they move to another agency, it CAN be claimed as a lost management.
These situations represent a direct withdrawal of the management agreement that existed at settlement, which has a measurable financial impact on the purchaser.
Important: The notice from the landlords needs to be provided during the retention period for the claim to be valid. A landlord’s termination notice outside that period cannot be attributed back to the vendor. Also important is the timeframe in which this notice is provided. Some contracts allow for 1 month, some 3 months and some in rare circumstances 6 months.
The Bigger Picture: Compliance as Protection
When combined with VOI and ingoing condition reports, retention clauses complete some of the compliance measures that underpin a secure rent roll transaction. They may feel procedural, but they prevent commercial disputes from spiraling into costly litigation.
Sarah emphasises:
“Proof of identity, ingoing condition reports, and retention clauses aren’t just boxes to tick. They’re the structures that keep deals enforceable, protect relationships, and prevent costly disputes.”
Final Word
Lost managements and retention clauses are often overlooked until problems arise—but by then, it is usually too late.
To summarise:
- If the purchaser sells a property on the rent roll, then it cannot be claimed as a lost management.
- If the landlord moves back in, it CAN be claimed as a lost management, or if they move to another agency, it CAN be claimed as a lost management.
- The notice from the landlords needs to be provided during the retention period.
- There has to be clear evidence of mismanagement.
By setting clear expectations and documenting every step, including a defined notice period to the vendor when a landlord terminates, both vendors and purchasers can protect their commercial interests, reduce disputes, and complete transactions with confidence.