Overlooking the correct way to process assignment letters or failing to have them issued within the required timeframe means your rent roll is potentially at risk of being voided.
Assignment letters play a critical role in rent roll transactions because they are the formal authorisation for the new real estate agency (REA) to manage the properties on the rent roll it has purchased. They represent the formal method of transferring the management rights of a property from the vendor to the purchaser
If these documents are issued incorrectly, or there is no record of them being sent, an agency has no legal standing to manage a property. This means the buyer is technically paying for nothing.
It should also be noted banks will also have an interest in confirming Authorities and Assignment Letters are in place if they are lending against the value of the rent roll asset that is being traded. Incomplete documentation means the bank is potentially left holding a devalued asset, which would make it more difficult to secure finance.
The correct way to issue an Assignment Letter
Done correctly, an Assignment Letter is attached to the Authority to create a chain of ownership from the vendor to the purchaser.
The assignment letter must satisfy the following criteria to be deemed valid:
It must be issued no less than 14 days before the completion of the rent roll transaction. This gives property owners enough time to respond if they wish to remove their property from the rent roll (meaning neither the vendor nor the purchaser will manage the property)
The letters must be issued by the legal entity who is selling the property. This is not the trading name, but the company name of the vendor, and must state the purchaser’s legal entity. The trading names can also be mentioned
The assignment letters must be addressed by name, to the individual owner of the property, and clearly state the address of the managed property.
The property owner is not required to respond to the letter unless they wish for their property to not be managed by the purchaser - therefore removing the property from the rent roll.
Best practices for assignment letters
To avoid setbacks, frustration and legal issues, assignment letters should be handled with the same diligence as any other document in the sale process. Best practices for assignment letters include:
Send letters well in advance – Allow enough time for property owners to receive their letter, read it and respond if they wish to.
Use personalised communication – Address each owner by name and ensure the content is clear, professional and legally sound.
Follow up – Make a note of any instances where property owners do not consent to the new ownership and share it with the new owner within 72 hours.
Make records accessible – All Authorities and assignment letters need to
What happens if a property owner withdraws a property after completion
Completion marks the beginning of the retention period which usually lasts for between three and six months.
During retention a property owner still has the option to remove their property from the rent roll.
They may not wish to continue to rent the property and therefore no longer need the services of a leasing agent.
They may decide to sell the property - in this case they are free to sell in whatever way they wish and are not tied to either the vendor or the purchaser.
In either of these cases the vendor is able - by mutual agreement with the purchaser - to substitute the lost property with another property of similar value and location in order to maintain the value of the rent roll.
If a property owner withdraws a property during retention due to dissatisfaction with the service the purchaser is giving them, the property may still be counted on the rent roll and the purchaser will still have to pay for that property, as the loss of the property is due solely to the actions of the purchaser.
At the end of the retention period, the purchaser should be fully aware of any properties which have been removed and agreed to any substitutions for the final number of PUM.
There are no shortcuts in rent roll exchanges
A rent roll transaction involves more than simply transferring a list of properties from one agency to another for a set price. These transactions require careful planning and preparation to protect the value of the roll and maintain compliance with legal regulations. Assignment letters are a fundamental part of this process, contact us to find out what else makes a seamless rent roll transaction.