Will my current management agreement hinder the sale of my rent roll?

O*NO! Will my management agreements hinder or help my rent roll sale?
With more agents breaking out on their own, they will be hungry for steady income. Now is the time to be getting your rent roll sale ready.

Management Agreements
Yes, paperwork can be boring, but we have it for a reason! Your management agreements with your landlords are your biggest asset and are the foundation for the valuation of your rent roll. Have you thought whether or not you can assign that landlord to a new buyer? Can you transfer them across? Most agents think that once an agreement is signed, it’s a valuable asset that can be transferred on a sale. This is true in some cases, but only if your management agreements have the right clauses.
Have you carefully reviewed the terms of your management agreements? Have you thought about how that will affect your relationship with the future buyer of your business? Not only will your management agreements affect your relationship with a buyer, they will also affect your relationship with your banker if you wish to refinance.

Getting ready to sell your rent roll
Take a look at your management agreements and ask the following questions:

• Are the agreements personal to you or can you transfer them?

• If you can transfer them, do you need the consent of the landlord?

The sale of a rent roll is emotionally draining and time consuming. You would not want to add the additional frustration of your management agreements not being easily transferable. Not only do the agency agreements need to be easily assignable, but they must comply with the legislation. Making sure the agreements are legally compliant will ensure a better result when it comes to a sale. In some states, you will need new agreements, so you will need to check your legislation.

Increasing the Value of a Rent Roll
The more management agreements you can transfer to the buyer, the higher the sale price you will achieve. You will also need to ensure that lost managements are kept to a minimum during your retention period. Apart from having your management agreements in order and a high multiplier, a strong sale price can be gained through other ways. 3 Hot Tips to maximise the value of your rent roll

Selling shares in the company that owns the rent roll vs selling the business assets of the rent roll will also assist in achieving a higher sale price as managements do not need to be transferred at all, instead they are ‘inherited’ by the buyer as the new owner of the company. There are many issues which are unique to the sale of a rent roll and you should seek specialist advice from a business lawyer who specialises in real estate agency law and rent roll sales.  

Your next steps
Looking at selling a rent roll in the next 18 months? To achieve maximum value, it is important that you start as soon as possible getting your ducks in a row – you can’t leave it until you decide to sell if you want the best price possible. Book a FREE 10 minute chat with our legal rent roll sale experts today.

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.