What are adjustments in a real estate transaction?
Adjustments are calculations that consider various costs related to the property being transferred from one owner to another. A typical transaction will have adjustments calculated with regards to municipal and school taxes, and, if applicable, monthly condo fees, rent, mortgage capital and interest, water tax, propane, oil, or any fixed compensation amount related to late occupancy that has been decided amongst the parties.
Depending on the time of year, what has been paid by the vendor up to date, or the specificities of the file, the adjustments can be in favor of the purchaser or in favor of the vendor. The notary explains how they came to these calculations and determines the final amount owed by either party during your appointment for the closing. The general idea is that wherever a seller has overpaid with regards to their respective responsibility, the buyer reimburses the seller. Wherever a seller has underpaid with regards to their respective responsibility, they reimburse the buyer.
The “date of adjustments” (the date which serves as the basis for determining each party’s respective responsibility) will always either be set to the date of the closing (the signing of the sale) or the date of occupancy. This is determined in the promise to purchase and/or in the amendments and modifications.
If you are a purchaser, you become responsible for property costs as of the date of the adjustments.