As settlement of your conveyancing transaction draws towards completion you can expect to receive a settlement statement from Tetlow Legal which sets out the balance due at settlement once adjustment for rates, levies, rent, reports and the like have been accounted for.
Settlement figures may look overly complex but once you understand the way they are calculated they are actually relatively simple to interpret.
In an effort to remove the mystery and confusion in reading a settlement statement (for both buyers and sellers alike), we have set out an example below, which works through a few of the more common adjustments.
When you receive a settlement statement some or all of the items listed in the settlement statement below may appear on it.
Sale/purchase price – the amount you are selling/buying the property for.
Deposit paid – The amount that has already been paid towards the purchase price (usually on or before exchange of Contracts for Sale).
General Rates – this is the total amount payable for the full financial year (365/366 days) towards land rates for the property.
The date ‘paid to’ is the date that the rates have been or will be paid up to at completion (this is usually to the end of the nearest quarter).
The phrase ‘Buyer allows X days’ is the number of days between the settlement date and the date the rates have been paid to.
The calculation is worked out by dividing the total amount payable for rates by the amount of days in the year (i.e. 365/366). This figures is then multiplied by the amount of days being allowed. The resulting figure is the amount the Buyer is to “pay back” to the Seller for the period of time that the Buyer owns the property and that the Seller has already paid in advance.
Water & Sewerage Rates are calculated in the same way using the fixed residential water and sewerage connection fee (as determined by Icon Water) for the financial year (for 2015/16 this is $624.32).
Body corporate levies are ordinarily adjusted on a quarterly basis. The amount payable for the quarter is divided by the number of days in the quarter (1.1.16 – 31.3.16 = 91 days) which is then multiplied by the number of days in which the Buyer will own the property during that quarter. The resulting figure is the amount to be allowed by the Buyer to the Seller.
Buyer allows Body Corporate Certificate –the cost of obtaining the Body Corporate certificate (included in the Contract for Sale) is to be borne by the Buyer and accordingly the Buyer must ‘pay back’ to the Seller the cost of the certificate. The amount of this fee is legislated (for 2015/16 this is $105.00).
Buyer allows Building/Pest/Compliance Report fees –the cost of obtaining the Building, Pest and Compliance Reports (included in the Contract for Sale) is to be borne by the Buyer. The Buyer must accordingly ‘pay back’ to the Seller the cost of those reports.
Seller allows registration of Discharge of Mortgage –the cost of registering the Discharge of the Sellers Mortgage on the property is payable by the Seller. In practice however the Buyer (or their bank/mortgagee) will take responsibility for registering the Discharge with the Land Titles Office. To ensure that the Buyer is not out of pocket, the Seller allows (as a deduction from the Purchase Price) the amount of the registration fee. As at 2015/16 the registration fee is $130.00.
Balance due on settlement – This is the final amount payable to the Seller on settlement with all of the appropriate adjustments and allowances having been taken into account.
We hope that this explanation makes things a little clearer. As always if you have any questions please contact Tetlow Legal on 02 6140 3263 or [email protected]