16 July 2018
Considering buying a rent-roll?
Buying a rent-roll can be an attractive way to grow your business. However, it can be a complex undertaking and a source of headaches down the road if not done carefully.
Let us help you navigate some of the common pitfalls. Please note that it’s always also a good idea to consider obtaining independent legal and financial advice before making the decision to acquire a rent-roll, even if you already have one.
Management authorities
Prior to undertaking any property management work regarding your new rent-roll, make sure you hold a valid appointment to act on behalf of the owner. You achieve this by having the owner sign a new management authority with your agency. Alternatively, a deed of assignment may be acceptable, provided that the original management authority is annexed and the owner has re-initialled all the relevant clauses on the contract.
Without a valid management authority in place, you are not entitled to any commission or reward for managing the property and you may need to return money to the owner. Even if you're certain the owner is going to sign, wait until the process is complete before providing any services or charging fees.
There is no obligation for an owner to agree to transfer management to you if you are buying the rent-roll. At Consumer Protection, we receive complaints from owners who have been told they must agree to transfer management to a new agency. This is incorrect and could result in legal action down the track.
Rent in advance
In some cases, the previous agent may be entitled to deduct fees as a percentage of the full amount paid, even if they are not managing the property for the full period covered by the payment. This could leave you managing the property without payment until the advance rent runs out. Check whether any tenants have paid substantial amounts of rent in advance to the previous agency. Check whether the management agreement specifies at which point the agent can deduct management fees.
Avoid missing documents
The selling agent should provide copies of any relevant documents and other information that you will need to manage the properties effectively. Use our handy transfer of management checklist to make sure nothing is left out.
Consumer Protection’s Proactive Compliance program helps real estate and business agents understand the law by assisting with information on areas of risk and providing general advice.
Call Leanne Reimers on 6552 9273 to book in your free visit.