The Statement of Adjustments is a Legal Document
The Statement of Adjustments on a real estate transaction is a financial statement showing various debits and credits for both the Buyer and the Seller. Basically, it shows the final calculation of the monies the Buyer owes to the Seller in order to complete the sale.
In British Columbia, the Statement of Adjustments is prepared by the Buyer’s lawyer. There is one statement prepared for the Buyer called the Buyer Statement of Adjustments. In addition, the Buyer’s lawyer prepares a separate statement for the Seller called the Seller Statement of Adjustments.
Contract of Purchase and Sale
The Contract of Purchase and Sale identifies the Adjustments in item 6 stating:
“Adjustments: The Buyer will assume and pay all taxes, rates, local improvements assessments, fuel utilities, and other charges from, and including, the date set for adjustments, all adjustments both incoming and outgoing of whatsoever nature will be made as of “date” (Adjustment Date).
Generally speaking, adjustments can include property taxes, city utility charges, property tax credits at the city tax department, title insurance, survey certificates, strata fees, strata move-in and out fees, rents, tenant damage deposits, and other suitable items.
How are the Adjustments Calculated?
The adjustment date is noted in the Contract of Purchase and Sale and is typically the same day as possession. It is not typically the completion date. The Adjustment date is the date that the buyer’s lawyer will look at the property taxes and determine what portion of the year should the Buyer be paying for. For example, the Seller paid $12,000 for the 2023 property taxes on July 1, 2023. The completion of the sale was November 30, 2023, and the adjustment date was December 1, 2023. Therefore, the Buyer credits the Seller with one month of property tax, in this case $1,000. Other items are calculated the same way. Please note, that this is a simplified version so all can understand.
When is the Statement of Adjustments Signed?
The Buyer and the Seller will meet with their respective lawyers to review and sign the Statement of Adjustment (SOA) a few days prior to the completion date. If the Buyer has not taken financing then the Buyer can e-sign the SOA. If a finance company is providing funds, then the legal documents including the SOA will be signed at the same time in the presence of a lawyer or notary.
Note: The Seller has to sign the land transfer documents in the presence of a lawyer or notary, so at that time the SOA would also be signed.
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Marion
Marion Anderson Personal Real Estate Corporation
marion@WhistlerSkiinSkiout.com (604) 938-3885