Settlement takes place only a week after you notify your clients of the change. I recommend personal calls leading up to that but, either way, it’s a short window of time from you telling them what’s happening, to your landlords’ files being handed to a new agency. So unless they have an immediate adverse reaction (eg: “I’m not having my house managed by THAT #anker!”) the price for settlement is fairly predictable.
Then life gets more complicated.
There’s no “standard contract” in rent roll or agency sales, but there’s some accepted norms. Accepted by sellers and buyers and brokers. And expected by valuers and financiers (and let’s face it, without finance the party never starts). So here’s what usually happens:
Commonly 20% of the funds will be held by your lawyer for the retention period of 90 days. The legislation says the new agent must notify all clients of the assignment of their appointment within 14 days (Property Occupations Act 2014 Section 113) and, happily, there’s no requirement for the landlords to sign or formally consent. It’s a deemed consent.
But a landlord always has the right to sack their agent with 30 days’ notice. While a firm thumbs-up isn’t needed, a thumbs-down during retention could cost you as a refund. Dependent on your contract’s conditions.
If the new PM team mismanage or breach any of their obligations to the landlord, they don’t get their money back. They can’t change their fees or conditions. But a loss for a landlord moving back into their property usually means a refund to the buyer. A sale of a property might be the same – but not if the buyer makes the sale or benefits from a referral. A long term owner-instructed vacancy might be a claimable loss, as with a property deemed unfit to occupy. Your buyers expect to earn fees from a management they’ve paid for.
So here’s a strong recommendation when you sell – get a lawyer who understands these transactions inside out. (NB your local conveyancing experts probably don’t.) A really important condition for example says any claimed loss “must have attached to it written evidence of the termination which must state the reason.” So it won’t fly if they just have an email from the new (3rd) agent with zero explanation or signature from the landlord themselves. If the buyer wants their money back they have to justify the claim. Fair’s fair.
But here’s the rub for you as a seller. If the landlord sacks your buyer, deciding they really just don’t like them or their team, it will cost you in a retention claim. So finding the best match to be the new agent for your landlords is key to a great net price result.
I’ve heard too many stories of high prices at settlement that got chopped back 10 to 15% or even more through that critical 90 days that follows.
A final note: sometimes we think a competitor is likely to be a bad choice of buyer because we had a run-in over an expired auction listing 9 years ago and decided then we didn’t like/trust them. I’ve been guilty of that! But looking more objectively they could be a great match for your landlords. And conversely, that likeable fellow down the road who’s always up for a beer might be a hopeless property manager that costs you tens of thousands in retention losses.
It’s worth taking the time to proceed cautiously.
PS: I’ve worked with an expert rent roll lawyer for more than decade and he’s written my template contracts. They’re strong on clarity during retention. And I include them with my service.
If you’d like to chat confidentially about selling your rent roll or agency please call me on 0423 332 022.