Determining Your Payment Adjustments On Closing
When you reach the closing stage of your new purchase, there are a number of other expenses that need to be calculated before ownership changes hands, known as adjustments.
At Blackburn Lawyers, we make sure these expenses are calculated correctly, and you are only paying what was agreed upon and lawful. Based in Richmond Hill, Ontario, we will help you determine the following adjustments:
Adjustments On Closing
This term is found in all agreements of purchase and sale. When a deal is closed all costs with respect to the property are deemed to be the responsibility of the buyer commencing on the day of closing. The most common item requiring an adjustment is property taxes.
We make a determination of what the taxes are or are expected to be for the calendar year. We determine the number of days of the year that have passed up to the day prior to closing. We determine how much is charged for taxes per day and by multiplying the daily rate by the days the seller owns the property we determine what the seller’s share of taxes for the year will be.
We then compare this amount with the amount the seller has actually paid and if the seller’s payment is less than his share the buyer will receive a credit or reduction in the balance due on closing to cover the balance of the seller’s share. Conversely, if the seller has paid more than his share the overpayment will be added on to the purchase price.
Other Types Of Adjustments
If the property is a condominium the monthly maintenance fees or common expenses will be adjusted in the same manner as property taxes, except that the current monthly charge is used to calculate the adjustment.
If the property has a tenant, rent and last month’s rent (if paid) are adjusted in the same manner.
If the home is heated by fuel oil or propane the seller will have the tank topped up on the day of closing and the buyer will be charged for the cost of a full tank, plus HST, as the fuel is not included in the purchase price.
Utilities that are metered such as hydro, water and gas are dealt with by the seller having the meters read on the day of closing and paying the final bill for consumption to that date. Therefore, no adjustment is required.
Adjustments For New Build Homes And New Condos
If the property is a brand new home or condominium in addition to taxes (usually just the vacant land component) are adjusted in the same manner. However, builders typically use the term adjustment to include any charges that your contract states you will pay in addition to the purchase price. The items included in this category are limited only by the builder’s creativity. Typical charges will include:
- The Tarion enrolment fee
- The cost of meters and utility hook ups
- Tree planting fees
- Levies (charges imposed by the town and region where the property is located)
- Increases in existing levies
- Mortgage discharge fees
- The cost of a blue box
HST will be charged on top of these adjustments. Be certain to get dollar amounts for any such charges referred to in your purchase agreement or you will have no way of determining what you will have to pay on the date of closing.
Until very recently these types of charges could be found just about anywhere in the agreement. Now builders are required to list all such charges on schedule B to the Tarion pages that form part of the agreement. However, there are transitional provisions that permit builders to use the old method for pre-existing projects.
Learn More About Your Adjustments On Closing
Call our firm at (905) 884-9242 or send us a message online if you have any questions or concerns regarding the closing of your new property.