New factors to consider that are affecting rent roll sales

50% of the rent roll sales I have overseen this past 6 months have seen varied “new terms” that historically I have not seen. What are these new terms?

The terms I am referring to relate to smoke alarm compliance and insulation predominately. The contracts being entered into have been varied and in each instance has been dramatically different where expectations levels have been. The variance range has seen some buyers requiring absolutely nothing during due diligence and at settlement all the way through to requiring varied lists documenting or confirming what action has taken place and what is outstanding. These 2 items themselves differ in as much that legislation has come to pass (smoke alarms) whilst the other (insulation) has legislation that is in place with a deadline date being July 2019.

Varied buyer terms have meant buyers requiring

  • Nothing at all or
  • Detailed lists affirming the status or
  • Discounting on capital being paid if certain properties status is not adequate

So what does this mean for you as a business owner or as a buyer of a rent roll? Certainly, you should have the status of properties up to date where required/per legislative requirements. And when selling your rent roll, what it means is that whatever terms you agree to should be thought through in terms of what resources are required to complete terms agreed to, together with potential capital value loss if it is not.

Historically retention, deposits and restraint of trade have been some of the primary terms seen in the sale of a rent roll. I believe based on the number of acquisitions I am seeing with these “newer terms” that legislative requirements are very much going to become a primary term consideration in addition to these more historical terms that we tend to expect on the sale or acquisition of a rent roll.

 

Published on 11/22/2018

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About the author

Hamish has over 17 years of experience within the property management industry and has experience throughout New Zealand and Australia as a manager, principal and consultant. He utilised all of this experience to form a property management business that he expanded between 2009 and 2016 into 7 locations around New Zealand.

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