Discover how other agency owners get things wrong when they prepare to sell a rent roll and why these mistakes can end up costing thousands.
Whether you are doing it to free up cash, change direction or prepare to exit your business, selling a rent roll is a big milestone for your agency.
Unfortunately, many agency principals make one crucial mistake when they sell this asset—using a generalist commercial lawyer instead of a professional who specialises in this area.
A rent roll transaction is different from standard property or business exchanges. It requires legal expertise beyond a typical conveyancing or business sale agreement. Using a generalist lawyer can result in delays, additional expenses or money left on the table.
Why a rent roll sale is different from other transactions
Selling a rent roll is nothing like selling a residential or commercial property, but many principals attempt to use their usual legal firm or a standard commercial lawyer to finalise the transaction. The problem is generalist lawyers lack the industry-specific knowledge needed to navigate the more complex elements of this transaction.
Unlike a simple property or commercial exchange, a rent roll sale is based on:
Number of PuM: The properties under management and the fees they generate.
Client relationships – Contracts with rental property owners must be transferred smoothly to avoid revenue loss.
Retention periods and clawback provisions – Rent roll buyers often require protection and special clauses which come into effect when clients end their contracts as a result of the exchange.
A lawyer who is unfamiliar with rent roll sales may focus on the wrong issues, make rent roll value calculations incorrectly or insert unnecessary legal conditions, which can stall or even derail the deal.
The risks of using a non-specialist lawyer
Many agency principals assume their regular business or property lawyer can handle a rent roll transaction. However, a lawyer who does not specialise in rent roll transactions may:
Take over too soon: It makes sense to work through a Heads of Agreement or Term Sheet with an experienced rent roll broker before a lawyer is formally involved.
Negotiate unnecessary or impractical terms – A lawyer unfamiliar with industry norms may push for clauses which are unworkable in practice, causing unnecessary disputes.
Overlook crucial protections – Key elements such as clawback provisions, restraint clauses, and settlement structures require careful negotiation during a rent roll transaction. A generalist may not fully understand their significance.
Slow down the deal – Without industry experience, a lawyer may take excessive time reviewing and amending contracts, which is frustrating for both parties.
Jeopardise lender approvals – Many financiers have specific requirements for funding a rent roll purchase. A lawyer unfamiliar with these conditions may not structure the contract appropriately.
Read more: How not doing due diligence crashed rent roll transactions
Ask your rent roll broker for legal referrals
An experienced rent roll broker understands the legal intricacies involved and can recommend specialist lawyers who have successfully handled similar transactions. These experts are across industry best practices and can focus on protecting your agency’s interests without unnecessary complications.
Choosing a lawyer who understands the specifics of a rent roll exchange means:
Smoother negotiations – A specialist knows how to structure the deal to protect both parties.
Faster settlements – They anticipate lender and buyer requirements, reducing delays.
Stronger contractual protections – They ensure the right retention terms, warranties, and legal safeguards are in place.
Better teamwork – An industry-specific lawyer will work well with an industry-specific broker and accountant.
Speak to a rent roll exchange lawyer from BDH Solutions
BDH Solutions has now expanded to include legal services for rent roll exchanges. Reach out to access the right legal guidance from professionals who understand both the legal and commercial requirements of rent roll transactions.