Don’t Let Your Rent Roll Transaction Get Snagged With This detail

As minimum rental standards move from rollout to routine practice in Victoria, there is a flow-on effect for rent roll sales. 

At BDH Solutions, we are noticing a red flag showing up in a number of transactions, where a non-compliant property is handed to a new rent roll manager as part of an exchange. This results in disputes during the retention period because the buyer can technically claim the property is worth nothing. 

A single non-compliant property can trigger a dispute over value and responsibilities, and this costs everybody. Find out how to avoid the issue. 

Rental property non-compliance and the problems it causes in a rent roll exchange

Victorian rules treat a non-compliant rental property as having no income value until rectified. As explained by Consumer Affairs Victoria, non-compliance might relate to factors such as smoke alarms, electrical safety, heating standards or locks. It can occur because a property owner has been reluctant to make upgrades, or the property manager has failed to take note of recent changes to legislation. 

For a rent roll buyer, this creates uncertainty around cash flow and adds workload, since urgent checks, trades, and communication with renters are required to bring the dwelling up to a lease-ready standard. 

For a seller, exchanging a rent roll with one or more non-compliant properties can mean a price reduction or removal of the property from the roll count used in the final adjustment.

The fine for non-compliance can extend to $59,000 and a listing on a non-compliance register for property managers and $11,000 for individuals. This is a hefty penalty and explains why compliance is such an important matter in a rent roll exchange. 

The importance of due diligence ahead of a rent roll exchange

Due diligence should include lease reviews, certificates, maintenance logs and owner declarations, and responsibility falls to the seller and their property managers to confirm the necessary checklist is taken care of. 

However, there are times when even best efforts result in issues being overlooked. A property manager may rely on verbal assurances, or records may be inaccurate. Because of this possibility, it’s best for both parties to plan ahead and agree on what to do if a non-compliant issue becomes evident during a transition period. 

What to do about non-compliant properties during the retention period
If a non-compliant property is uncovered in retention, the stakeholders have two options.

1. Remove the property from the sale

A property with zero current income value can be excluded from the transaction. In practice, the buyer drops it from the rent roll count, the retention is adjusted, and the management agreement is ended or returned.

2. Keep the property under an agreed compliance plan

If both parties agree, the buyer may retain the property and follow a written plan to complete required works. Once standards are met, the property resumes at normal value within the portfolio. However, compensation will be required for the costs involved with ensuring the home complies with minimum rental standards. 

Both options are workable, but problems arise when parties disagree about what to do and there is no clause in the contract. 

When a non-compliant property becomes evident, the buyer may prefer removal to avoid risk and admin load, but the seller may push to keep the property in count, arguing compliance is close or the changes required are minor. 

Without a pre-agreed rule, retention becomes a tug-of-war and can spill into legal action, which will have one guaranteed result: everyone spends money.

In this situation, prevention is the cure. Both parties should take the time to add a clause in the MoU or contract of sale confirming the course of action if non-compliance is found in retention. 

The clause can say

• the property is removed, with price and retention adjusted, or

• the property stays if the owner signs a compliance plan within a set period, with costs allocated clearly.

Either route works. What matters is certainty before exchange. If both parties agree on the response to a non-compliant property, it won’t be a major issue. 

A small clause now can save a major headache later. Let BDH Solutions work with you to prepare a pre-sale agreement covering every element so your exchange is trouble-free. 

Non-Compliant Rent Roll Property FAQs

• What counts as a ‘non-compliant’ property under Victoria’s minimum rental standards?

  A property is non-compliant if it doesn’t meet any of the minimum standards which apply before a home is advertised or leased. These cover safety, security and basic amenity items such as working smoke alarms, electrical safety switches and compliant switchboards, secure locks on doors and windows, and safe, energy-efficient heating in the main living area. Since 1 July 2025, Victoria has also introduced additional energy-efficiency requirements (like insulation and draughtproofing), so compliance checks now need to include those upgrades too. 

• Who is responsible for proving compliance in a rent roll sale?

  In practice, the seller carries the burden of confirming all managed properties are compliant at exchange, because the buyer is purchasing an income stream from lease-ready homes. This is why due diligence should include up-to-date certificates, maintenance logs and a completed minimum standards checklist for every property. Buyers should still verify high-risk items during due diligence, but solid reviews and documentation from the seller is what minimises retention disputes later. 

• What happens if a non-compliant property is discovered after a rent roll exchange?

  If non-compliance shows up during retention, the safest path is to follow what the contract already says. Most transactions handle this one of two ways:

  • Remove the property from the sale, with the roll count, retention and price adjusted.

  • Keep the property under a written compliance plan, with clear timeframes and cost allocation so the buyer isn’t left funding urgent works for a non-compliant and unleasable property.

  The approach should be agreed on upfront in the MoU or contract to avoid disputes during the retention period.Description text goes here

The rise of lifelong renters: What it means for your rent roll

The Australian housing market is shifting, with recent research showing 59% of renters never expect to own a home. While homeownership has long been the national dream, this growing cohort of ‘forever renters’ points to a future where long-term renting is a way of life. 

This is good news for property managers, who now have an opportunity to build a more sustainable, predictable business.

Why Australia is trending towards lifelong renting

Affordability is the most obvious driver in people giving up on the idea of homeownership. According to the Australian Housing and Urban Research Institute (AHURI), over half of private renters say they can't save enough for a deposit, and nearly 60% don't believe they’ll ever be able to afford to buy. While people still want to own a home and understand the value of it, the reality, in the current market at least, is the imbalance of supply and demand, making it an impossibility.

Beyond financial constraints, renting is increasingly a lifestyle choice. From younger Australians priced out of ownership to retirees downsizing into rental properties, the profile of renters is expanding. In capital cities, for example, the number of older renters is rising. Meanwhile, ‘rentvestors’ are redefining the notion of property investment by renting where they want to live and buying in more affordable locations.

International trends

While home ownership is still seen as a rite of passage in Australia, long-term renting has been the norm for decades in many parts of Europe. In Germany, for example, around 50% of the population rents long-term. In Switzerland, it’s closer to 60%. 

In these countries, renting is well-regulated, tenant rights are strong and longer-term leases are common. These models demonstrate how a different approach to renting can lead to better renter/owner relationships (not to mention more sustainable property management businesses).

Leveraging the potential of lifelong renters

If you're managing a rent roll, this trend towards long-term renting presents practical opportunities to grow your footprint, stabilise your revenue, boost your reputation and reduce churn. Here are some strategies to consider:

Target renters who are likely to stay for the long term

Older singles and couples tend to stay in the same place for longer. Tailoring services for this demographic, for example, by creating more accessible properties, sticking to a clear and reliable maintenance schedule, or ensuring the property is an easy distance from local amenities, can attract loyal renters. A consistent, long-term renter means fewer vacancies, more predictability and reduced turnover costs. 

Offer long-term leases

Traditional six or twelve-month leases may no longer fit the market as it evolves. Longer-term agreements provide security for both the property owner and the renter. They also allow your team to build stronger relationships with occupants, which in turn reduces the likelihood of disputes and disagreements. In markets where renter protections are improving, this is a logical evolution.

Invest in renter experience

With more people seeing rental properties as their permanent home, expectations are higher. Property managers who offer prompt communication and seamless interactions will stand out. A positive experience increases retention and encourages renters to treat the property as their own, which benefits property owners as well.

Support your renters

Not all long-term renters are financially constrained. Some are rentvestors or downsizers with property assets elsewhere. They expect a high level of professionalism from their property managers. Treating renters as valued clients rather than transient occupants is essential as people settle in for the long term.

Strategise with your property owners

Having good renters is important, but you need property owners as clients as well. Seek to add value to these clients by providing outstanding customer service and helping them find ways to expand their portfolio. This can be achieved through partnerships with financial planners and brokers, and by sharing regular information about investing. 

The future is ‘two-tenure’

Australia’s housing system is evolving into what researchers are calling a ‘two-tenure’ future – one where renting and owning exist side-by-side as valid long-term choices. 

For a property management agency, this shift is an opportunity to tap into an exciting client base. Consider how you can establish your brand as the leader in this area and start setting new standards which will set you up as the provider of choice for ‘lifers’ who will call their rental property home for many years to come.