Getting All The Adjustments Correct at Settlement


IN THE CONVEYANCING stage, before settlement, the vendor and purchaser adjust the purchase price to deal with the following matters:

  • Periodic payments of all statutory outgoings (such items as council rates, water rates and land tax); plus …
  • Rent and outgoings payable by a tenant under a lease.

Statutory Expenses

The vendor is usually responsible for all statutory outgoings up to and including settlement, while the purchaser will be responsible for these amounts after settlement.

Likewise, the vendor will be entitled to receive all rent and outgoings payable under a lease up to and including settlement.

And the purchaser will be entitled to receive these monies for the period, which commences as from settlement.

It is critical each party should ensure that the adjustments are prepared correctly — because proceeding with settlement may merge each party’s respective rights under the contract.

This means you may not be able to re-adjust these items after settlement — if their was an error in the original adjustment calculations.

Consumption Charges

Consumption charges such as water, gas, electricity etc. are not adjusted, because they are not capable of running with the land.

Therefore, they would become the purchaser’s responsibility after settlement.

However, recent changes in Victoria (see s.274(4A) of the Water Act 1989 (Vic)) means that water and sewerage consumption charges now constitute a lien, and therefore capable of running with the property.

BOTTOM LINE: From a purchaser’s perspective, it is critical that all the outstanding statutory outgoings are paid at settlement. These outgoings are charges that run with the land.

If you do not deal with them appropriately before settlement, you may inherit all the outstanding amounts — a nasty surprise for sure!

Disclaimer: If you think a similar situation may apply to you, contact us or another professional for detailed legal advice relating to the particular facts and circumstances of your property or lease agreement. This article is not intended to provide such detailed and specific advice and you should not act on the basis of any matter contained in this article without first obtaining more comprehensive professional advice.


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