Selling a rent roll is a significant step, and the contract is at the heart of ensuring a smooth and successful transaction. It’s not just about the sale price—it’s about protecting your interests and setting clear expectations for both parties.
Here are the key contract clauses you should consider when selling a rent roll in New South Wales.
1. Retention Clause
The retention clause outlines how much of the sale price will be held back to cover potential issues, such as landlords or properties leaving the portfolio during the transition period.
Why it matters:
- Protects the buyer if management agreements aren’t retained.
- Ensures the seller is incentivized to maintain landlord relationships through the transition.
What to check:
- How much of the sale price is retained?
- How long is the retention period? (Typically 3–12 months.)
- What conditions must be met to release the retained funds?
2. Handover Obligations
This clause specifies the seller’s responsibilities in transferring the rent roll, including providing documentation such as:
- Management Agency Agreements (MAAs)
- Proof of Identity (POI) documents
- Financial and tenancy records
Why it matters: A smooth handover ensures landlords and tenants experience minimal disruption, which protects both the buyer and seller’s reputation.
3. Warranties and Representations
These clauses guarantee the accuracy of the information provided by the seller, such as:
- Rent roll income figures
- Property details
- Landlord and tenant contracts
Why it matters: Warranties protect the buyer from unexpected discrepancies and ensure the seller is accountable for any misrepresentation.
What to check:
- Are income projections based on actual figures?
- Are there any hidden liabilities, like unresolved disputes or overdue maintenance?
4. Transition Period
The transition period clause defines how long the seller will assist the buyer post-settlement, including:
- Answering questions about the portfolio
- Introducing the buyer to landlords and tenants
Why it matters: A clear transition plan can reduce landlord churn and ensure the buyer hits the ground running.
5. Staffing Clauses
If staff are attached to the rent roll, the contract should address:
- Whether the buyer is required to take on existing staff.
- The terms of employment for those staff members.
Why it matters: Avoiding ambiguity here protects both parties from future disputes.
6. Indemnity Clauses
This clause determines who is liable for issues that arise post-settlement, such as disputes with landlords or tenants that stem from actions taken before the sale.
Why it matters: Clear indemnity terms protect the seller from being held responsible for problems they no longer control.
7. Termination Clause
This clause outlines the conditions under which the contract can be terminated, such as a failure to meet key obligations.
Why it matters: Termination clauses protect both parties if unforeseen circumstances arise, ensuring a clear exit strategy is in place.
Why These Clauses Matter
Understanding and negotiating these key clauses ensures you’re protected and that the sale of your rent roll is smooth, transparent, and mutually beneficial. At MC Broking + Advisory, we specialise in helping sellers navigate the intricacies of rent roll sales contracts, ensuring you achieve the best results with minimal stress. Ready to sell your rent roll? Contact Matt Ciallella at 0404 668 972 or email matt@mcrrb.com.au to start the conversation.