CONVEYANCING SETTLEMENT ADJUSTMENTS EXPLAINED
When you sell or purchase a property, your solicitor or conveyancer will prepare settlement adjustments, which will be incorporated into the final financial schedule for settlement. What exactly are settlement adjustments? Settlement adjustments, or simply adjustments, are council and water rate proportions payable by the vendor and purchaser respectively. In some instances, the adjustments would include items such as land tax and strata fees.
A settlement adjustment sheet will include a “payable by purchaser” column and a “payable by vendor” column. For the purpose of setting the example below, the settlement date is 31 st October 2022.
Council rates are calculated from 1 st July to 30 th June each year. As such, the proportion payable by the vendor would be calculated from 1 st July 2022 to 29 th October 2022, which is 121 days. The proportion payable by the purchaser would be from 31 st October 2022 to 30 th June 2023, which is 243 days.
Water rates have more than one component. The first component is the service fee, which is calculated quarterly. For a settlement on 31 st October, the relevant quarter is 1 st October to 31 st December. Accordingly, the proportion payable by the vendor would be from 1 st to 29 th October, being 29 days. The proportion payable by the purchaser would be from 31 st October to 31 st December, being 62 days.
The second component is water usage, which is calculated from the last date of reading to the date before/of settlement. As during this time, the water will still be used by the vendor, this calculation allows the vendor to give the purchaser an allowance to pay the next water bill, which will be issued to the purchaser.
Example Settlement Adjustment Sheet
Below is a sample settlement adjustment sheet with the above calculations:
|Settlement Date: 31 st October 2022||Payable by Purchaser||Payable by Vendor|
|Council Rates: $2000.00||($2000/364 days) x 243|
days = $1,335.16
|Water Service Fee: $160.00||($160/91 days) x 62 = $109.01||$50.99|
|Number of days from last date of reading to 31 st October x $2.50/kL x average daily use (these information will be on the Section 66 Sydney Water Certificate available to your solicitor/conveyancer)|