What are adjustments?
There are certain outgoings and incomes involved in property ownership. These include rates levied by the local council and the water and sewerage authority such as Council rates, Water rates or income such as rent.
These rates are usually recurring and are often calculated annually and paid in quarterly instalments. Therefore, depending on the date of settlement these outgoings and income may be pre-paid or owing.
Adjustments are the process of splitting such fees and income between the two parties based on the settlement date.
Why do I need to pay the adjustments?
These fees and income are adjusted at the time of settlement to ensure that neither party bears the expenses of outgoings nor gains the benefits of income for a time when they were not the owner of the property. This ensures that the rates are always paid in full immediately after settlement and that the parties have each paid their fair share of the rates.
For Council rates, the purchaser's portion is added to the purchase price so that the payment can be made at settlement.
If the property sold is subject to a lease, rent will be adjusted. The Vendor is entitled to the rent up to the day of settlement and the purchaser is entitled to the rent for the remainder of the lease period.
The purchaser is entitled to insist upon all annual rates being paid in full and payment for the whole outstanding amounts, including any water usage up to date of settlement. These amounts are then deducted from the balance due to the vendor and paid to the relevant authority on settlement.
Why do I need to pay the adjustments?
The statement of adjustments shows the calculations that determine the amount the buyer needs to pay the seller at settlement.
The statement can also include other fees such as Owners Corporation fees (applies to apartments), Land tax, GST, and other allowances.