When purchasing a rent roll, the retention period plays a critical role in protecting a Buyer’s investment. Almost all Rent Roll Sale Agreements include a retention clause, which ensures that a portion of the purchase price, known as the retention amount, is set aside for a specified period after settlement.
The purpose of this retention amount is to protect the Buyer from financial losses if Property Owners terminate their management agreements following the sale. Since a rent roll’s value is based on ongoing management agreements, losing properties immediately after purchase can significantly impact a Buyer’s expected revenue.
To minimise risk, Buyers need to understand the retention clause and take proactive steps to protect their interests throughout the retention period. Below are key strategies to help Buyers maximise retention benefits and secure their investment.
- Understand the Retention Clause
Before signing a Rent Roll Sale Agreement, Buyers must carefully review the retention clause in the Rent Roll Sale Agreement to understand:
- How much of the purchase price is retained
- How long the retention period lasts
- What conditions must be met to make a claim
- What evidence is required to support a claim
Each agreement varies, so legal advice is highly recommended. A well-drafted retention clause should clearly outline when and how the Buyer can access the retention funds.
- Maintain Clear and Detailed Records
Accurate record-keeping is essential for Buyers to support any retention claims. If a Property Owner terminates their management agreement, the Buyer must provide evidence that meets the contract requirements.
Key Records to Maintain during this period include:
- Property Management Agreements – Copies of all contracts for the properties in the rent roll.
- Communication with Property Owners – Emails, letters, or call logs discussing ongoing management.
- Termination Notices – Official notices from Property Owners confirming contract termination.
- Sales Listings – Evidence that a property has been listed for Sale.
Without proper records, even valid retention claims may be denied—resulting in financial losses for the Buyer.
- Be Aware of the Claim Submission Deadline
The retention period does not last forever—there is a strict cut-off date for submitting claims. If a Buyer misses this deadline, they could lose their right to claim retention funds. This could end up costing them tens of thousands of dollars. To avoid this mistake, we recommend that Buyers:
- Mark key dates in a calendar – Keep reminders of the final claim submission date.
- Prepare claims in advance – Don’t wait until the last minute to gather evidence.
- Submit claims in writing – Claims must be made formally and include all documentation strictly in accordance with the criteria in the Agreement.
At Ardor Legal, we encourage our clients to provide their claim details to us in advance for a thorough review. This allows us to identify any missing information and provide guidance before submission. Liaising with your solicitor is essential to ensure nothing is missed which would invalidate your claim.
Need Expert Legal Advice for Your Rent Roll Sale or Purchase?
At Ardor Legal, we specialise in rent roll sales and purchases, offering expert guidance through contract negotiations, settlement, and retention claims. Your success is at the heart of what we do. Whether you’re a Buyer protecting your investment or a Seller securing your full sale price, our dedicated legal team is here to support you. Contact Us today to discuss your next big move.
