Management Agreement Transfers – The Misunderstood Process in a Rent Roll Sale

Sellers continue to overlook the fundamental step in the sale process around their rent roll, and that is simply how to best facilitate the smooth transition and re-signing of Management Agreements to minimise slippage, maximise retention and preserve their sale price. Having facilitated over 200 rent roll and agency sales, we continue to see the sale suffer due to this part of the process being misunderstood.

The key to getting this right is to understand and implement the strategy prior to going to market.

Those Sellers who actively assist throughout the transition and take responsibility simply reap the rewards. Those who feel they don’t need to, in too many cases suffer the consequences – and these can be devastating.

In one recent example where the Sellers didn’t follow due processes, lost over $300,000 in the sale price due to slippage.

Examining the Management Agreement conversion rates from our most recent 28 rent roll sales highlights some interesting statistics have emerged:

  • The slippage rates at Settlement were in a band between 5% – 12%.
  • The lowest slippage rate was 4%
  • The highest slippage rate was 91%
  • 86% of our clients who followed our recommended structured conversion processes, had a slippage rates of between 5 – 12%.
  • Principals who proactively participated in the entire conversion process, as opposed to those who left most of the “heavy lifting” to Property Management staff, had much higher conversation rates.

It’s satisfying to see our clients who embrace the right processes achieve the desired results. In these instances, all stakeholders who are impacted as part of the rent roll sale process being the landlords, tenants, the selling agency, the buying agency, the staff of both agencies and the financiers, are the collective beneficieries.

It is unrealistic to expect 100% of your Management Agreements will convert. It can happen but only on rare occasions. The reasons for slippage vary, but typically at the point of a rent roll sale those landlords who were planning to sell the property, move back in, self-manage or are dissatisfied with the current service levels have a genuine reason not to transfer.

As this is such a vital part for both Buyer and Seller, and just as important as finding the right Buyer,  we’ve developed a comprehensive system to assist in converting the anticipated maximum number of Management Agreements. There are 25 stages in the process of our Management Conversion Strategy which cover:

  1. Initial Planning Tasks
  2. Asset Information Plan
  3. Management Conversion Plan
  4. Non-Converted Management Agreements
  5. Settlement Period
  6. Retention Period

While this may appear overwhelming, approached with the right mindset, and developing part of the sale strategy from the outset will result in a more seamless transfer process.

If you are looking to maximise sale price of your rent roll and still a bit lost when it comes to best practice for the successful transfer of Management Agreements, book a complimentary consultation with our team today.