3d rendering. living room with picture frames and fireplace.
In almost all contracts for the sale of land, the periodic outgoings imposed on the land are apportioned between the buyer and the seller.
Periodic outgoings include Council and Water rates (but not water or sewerage usage charges), Land Tax (if applicable and typically only that amount of land tax that would be assessed if the land was the vendor’s only land holding) and Owners Corporation fees (if applicable).
The vendor is responsible for the periodic outgoings up to and including the day of settlement.
The Statement of Adjustments is generally prepared on the basis that the vendor has paid (or will pay at settlement) the periodic outgoings up to the end of the relevant financial period, and therefore the purchaser will have to compensate the vendor for their apportioned share of each outgoing:
Council rates are paid up until 30 June.
Water rates are paid up until the end of the quarter, or 30 June, or the day of settlement, depending on the Water Authority involved.
Land Tax is paid up until 31 December.
Owners Corporation fees are paid up until the end of the quarter, half-year or year, depending on the particular circumstances for that Owners Corporation.
All of this means that the contracted settlement price for the purchaser will be increased by the amount of compensation payable to the vendor, but at the same time the purchaser does not inherit any of the property’s debts (they are all paid at settlement).
During the 2-3 week period prior to settlement, the purchaser’s conveyancer will be making independent enquiries to determine what is owed by the vendor to each Authority. Therefore, to avoid duplicate payments, the vendor should avoid paying rates during this period, and should cancel any direct debit instructions.