What is a Property Adjustment?

When you buy or sell a property, there are various ongoing costs and expenses associated with the property. These costs are often pre-paid or accrued over time, and the ownership of the property changes during the middle of these periods. A property adjustment is a financial calculation that ensures these costs are fairly divided between the buyer and the seller based on the actual date of transfer.

Why are property adjustments used

Property adjustments are used to ensure that both the buyer and the seller pay their fair share of any ongoing costs or receive their fair share of any pre-paid expenses. These adjustments are crucial for a smooth property transaction because they help avoid disputes and ensure a fair division of expenses.

Common types of adjustments

1. Council Rates: Local councils charge rates to property owners to fund services such as waste collection and local infrastructure. These rates are usually billed annually or quarterly. If a property is sold partway through a billing period, the rates need to be adjusted so that both the seller and the buyer pay only for the time they own the property.
2. Water Rates: Similar to council rates, water authorities charge for the supply of water and sewerage services. Adjustments ensure that these costs are shared fairly based on the ownership period.
3. Owners Corporation Fees: For properties within a strata scheme, such as apartments, owners corporation (or body corporate) fees cover the maintenance of common areas and facilities. Adjustments ensure these fees are divided appropriately.
4. Land Tax: If applicable, land tax is charged based on the ownership of land as of a specific date. Adjustments may be necessary if the tax has been paid in advance or is due shortly after the property transfer.