What is a retention and how does it work? Historically, retention was for a 3-month period after the settlement of a rent roll sale.

The split would typically be 90/10 i.e. 10% deposit, 80% at settlement, then 10% held in the lawyer’s trust account until the end of retention.  More recently (say the last 24 months) an 80/20 split with a 3-6-month retention period has been quite common in the high majority of cases.

So, what happens post-settlement with any new clients?  It is very common for these to be part of the goodwill of a transition and not to be counted as a credit against loses or attrition during retention. Technically, with a restraint of trade in place (typical), the vendor cannot act and therefore cannot actually work towards credit new properties to offset attrition. 

Losses or attrition during retention is for the most part properties that have sold or going on the market or management being transferred to another agency or to the owner client to manage. There are a lot of variables, so it can pay to clarify with the vendor and purchaser what constitutes termination or loss.

Historically, attrition was around 5-10% loss rate during retention. Nowadays, purchasers are a lot savvier when it comes to transferring rent rolls and this loss rate has been reduced substantially. Factors that reduce loss rate include but are not limited to:

– Taking on the vendor’s property managers and support staff.

– Not just sending letters, but picking up the phone and speaking to owner clients.

– Using vendors branding, website, IP etc. on transition as an affiliation of sorts.

– Keeping commercial premises rent roll is being run out of.

– Working with vendor to communicate per, during and post-acquisition, ensuring client and staff confidence is held at its maximum.