When you reach the closing stage of your new purchase, several other expenses need to be calculated before ownership changes hands. These are known as adjustments.
At Hallmark Attorneys LLP, we make sure these expenses are calculated correctly, and you are only paying what was agreed upon and lawful.
Adjustments On Closing
This term is found in all agreements of purchase and sale. When a deal is closed, all costs concerning 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 determine 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 before closing. We determine the daily tax rate and multiply that rate by the days the seller owned the property before closing. This is the seller’s share of taxes for the year.
We then compare this amount with the amount the seller has actually paid. If the seller’s payment is less than their share, the buyer will receive a credit or reduction in the balance due on closing. Conversely, if the seller has paid more than his share the overpayment will be added 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 & Condos
If the property is a brand new home or condominium, taxes (usually just the vacant land component) are adjusted in the same manner.
However, builders typically use the term “adjustment” to include additional charges you’ll pay on top of the purchase price specified in your contract. 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 hookups
- 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 on 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 +1 (548) 708 4291 or fill out the form below if you have any questions or concerns regarding the closing of your new property.
