For many buyers and sellers, receiving a settlement statement can be confusing, especially as settlement day approaches. Buyers may mistakenly believe they are being charged for the seller’s unpaid bills. At Zettle, we will guide you through the key components of a settlement statement and explain the common adjustments made during the process.
What is a Settlement Statement?
A settlement statement is a financial document that outlines all costs and payments involved in completing a property transaction. It details the amounts to be paid by both the buyer and seller at settlement and is typically prepared by the buyer’s conveyancer.
Common Adjustments in a Settlement Statement
Settlement statements often include various adjustments to ensure that both the buyer and seller are fairly charged or credited for amounts that have already been paid or owed. The adjustments depend on the timing of the transaction and the specific services related to the property. Below are some of the most common adjustments:
Rates Adjustment
The seller is responsible for paying rates up to the settlement day. If the seller has paid rates beyond the settlement day, they will be credited for the extra amount. The buyer will need to reimburse the seller for the portion of rates applicable from the settlement date onward.
For example:
If settlement occurs on 1 December and the seller has already paid rates until 31 December, the buyer will need to pay an additional amount to cover the seller’s prepayment for the remainder of the year (when the buyer will become the owner).
Water and Sewerage Access Charges
Like rates, water and sewerage access charges are often paid in advance. An adjustment is made to ensure the seller is reimbursed for the buyer’s portion.
Special Water Meter Reading
As water usage is charged in arrears, the seller is responsible for a portion of the water consumed up to settlement, while the buyer will pay for the next bill. To calculate the seller’s anticipated consumption, a special water meter reading is taken as close to settlement as possible. This reading shows the amount of water used between the last billable reading and the special reading. The daily average water usage is then calculated, and the seller’s water usage costs up to the settlement date are determined. This amount is then deducted from the settlement amount.
Levies (Body Corporate Fees)
For properties within a strata or community scheme, body corporate levies cover the maintenance of common areas. These levies are typically billed quarterly, and an adjustment is made to reflect the seller’s responsibility for levies up to the settlement date. The buyer will take responsibility for levies from the settlement date forward. If the seller has already paid the levies for the upcoming period, they will be credited for the portion that covers the time after settlement.
Rental Adjustments
Rental adjustments ensure that rental income and expenses are divided fairly between the buyer and the seller. The seller will receive a credit for rent paid up to the settlement date, while the buyer will receive any rent paid after settlement. The statement will also include any outstanding rent or security deposits that need to be transferred.
What about gas, electricity and internet?
Gas, electricity, internet and other services are ‘personal’ utilities. New owners will need to arrange connection of these services individually. Adjustments are not made on settlement.
The settlement statement is an important document that summarises the financial breakdown of your property transaction. Adjustments for rates, water, and other charges ensure both the buyer and seller are fairly compensated for costs incurred before and after settlement. With Zettle on your side, you can navigate these adjustments with confidence, ensuring a smooth and seamless settlement process.
