Conveyancing sometimes appears to be as concise as studying tea leaves. As far as you are concerned, you have paid the deposit and the settlement date is just around the corner. Your lawyer sends you an ambiguous document titled “Settlement Statement” and asks you to confirm that you are satisfied with the calculations. You think to yourself, ‘it’s pretty easy, just have to deduct the deposit from the purchase price and ta da there you have it’. But wait…it says you have to pay more…why can’t my lawyer count you think to yourself…
Most contracts for the sale of property in NSW require an apportionment of expenses between the vendor and the purchaser on a pro-rata basis depending on the amount of time that you own the property for. Such expenses often include Council Rates, Water Rates, Strata Levies and Land Tax. Basically, you pay for the portion of the period that you own the property for and the vendor pays for the portion that it owns the property for.
For example, if strata levies for the Calendar year are $1,000.00 and you settle on 30 June, provided the Vendor has paid for the entire year, most contracts will hold that you pay to the vendor an amount equivalent to 6 months worth of levies in an effort to reimburse the vendor for a payment she has made for the period that she does not own the property, being in this scenario $500.00. Essentially, you divide the number of expired days in the period by the total period and multiply it by the amount of the expense. The resulting number is the amount you will generally have to pay to the vendor on completion of the conveyancing process (otherwise known as settlement).
So, the purchase price really may not have gone up and you are not really paying more but rather just paying for some of the expenses relating solely to the period for which you own the property. Naturally, the opposite also holds true if the vendor has not paid an expense. In those circumstances, when the settlement statement comes in, it may provide for an allowance to the purchaser who will then pay the expense on behalf of the vendor.
If you have any queries, please do not hesitate to contact one of the expert property lawyers here at ClickLaw.