Explanatory Sheet in Relation to Settlement and Adjustments

Adjustments to and payment of the purchase price

On the day of settlement the purchaser has to pay the balance of the purchase price in accordance with the
seller’s instructions.
Sometimes the seller asks for half a dozen cheques made out to various other parties. They may want to
discharge a mortgage, pay out a credit card or buy a car. The seller is entitled to receive their money any
way they want it, however if they want more than five cheques they must pay a fee for each additional
So long as the total of all the cheques comes to the total amount payable, that is all that matters.

Adjusting for council rates, water rates and strata levies

The rates for a property are levied by the local council, and by the water and sewage authority. Sometimes
the local council is responsible for both rates.
These rates are calculated on an annual basis, and payable by quarterly instalments.
The seller pays rates up to the date of settlement, and the purchaser pays the rates thereafter. If the
purchaser has taken possession before settlement then it is usual practice for rates to be adjusted on the
basis that the seller pays them up to the date of possession and thereafter the purchaser pays them.

Calculating council rates

Solicitors obtain a certificate from council detailing the rates and charges, and then calculate exactly how
much is payable up to the date of settlement.
This is how much the seller must pay and is therefore deducted from the purchase price . As the purchaser
has received the seller’s proportion of the rates by deduction from the purchase price, the purchaser must
now pay the rates in full in addition to the purchase price.
If the seller has paid the rates in advance then the purchaser repays the seller for the amount paid for the
period after settlement. This is payable by the purchaser in addition to the purchase price.

Calculating water rates

As you can imagine water rates are more difficult to accurately determine, as they are dependent on meter
readings. The process is as follows:

    1. Solicitors ask the water authority for a meter reading when requesting a certificate detailing the
      rates and charges. The water authority supplies details of the rates and an estimate of daily
      consumption; and
    2. Water usage is calculated based on the estimates, and therefore how much money the seller would
      owe, up to the date of settlement, and this amount is then deducted from the purchase price. The
      purchaser then pays for all future water usage as they have already received the seller’s portion of
      the water use through the reduction of the purchase price.

The rates and charges other than water usage are adjusted in the same way as council rates.

Calculating strata levies

Levies are adjusted in the same way as council rates. On occasions there are special levies and these are
dealt with in compliance with the terms of the contract which generally is in the same way as council rates.
There are a number of other adjustments which may have been required at settlement. For instance the
seller allows registration fees for registration of the discharge of any mortgage.