What is a statement of adjustments in a Canadian real estate closing?
A statement of adjustments is the closing document prepared by the lawyers that reconciles prepaid and shared costs between buyer and seller as of the closing (possession) date. The most common adjustment is property tax: if the seller prepaid the year's taxes, the buyer reimburses the seller for the portion of the year the buyer will own the home.
How are property taxes prorated at closing in Canada?
Taxes are split by the number of days each party owns the property in the tax year. The lawyers calculate a daily rate (annual tax divided by days in the period) and multiply by each party's days. If the seller already paid the full year, the buyer credits the seller for the buyer's remaining days; if unpaid, the seller credits the buyer.
Who pays property tax on the closing day itself?
Convention varies, but the closing (possession) date is typically treated as belonging to the buyer, meaning the buyer is responsible for that day. Your real estate lawyer will confirm the exact convention and reflect it on the statement of adjustments so neither party over- or under-pays.
What other items get adjusted at closing?
Beyond property taxes, adjustments can include prepaid utilities, condo/strata fees, rental income and deposits (for tenanted properties), fuel oil left in a tank, and prepaid maintenance contracts. Each is prorated to the closing date so the seller pays for their ownership period and the buyer for theirs.