Updated: 6 days ago
Settlement statements can often look complex and confusing, particularly for buyers and sellers navigating a property transaction for the first time. Understanding how adjustments are calculated and why certain amounts are credited or deducted at settlement is essential to knowing where your money is going.
In this article, we explain what a settlement statement is, clarify common adjustment terms, and outline how rates, water, body corporate fees, rent, and negotiated adjustments are handled at settlement, so you can approach settlement day with greater clarity and confidence.
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In This Article:
What Is A Settlement Statement?
A Settlement Statement is a financial document that shows the adjustments made at settlement in favour of the buyer or seller. It considers the purchase price, any deposit paid, whether a mortgage is to be released, and any adjustments required for rates, water, and/or body corporate, if applicable.
Terms & Their Meanings
Plus Adjustment
If a Seller has already paid something in advance (such as council rates), the Buyer reimburses the Seller for their share from the settlement date to the end of the billing period.
Less Adjustment
Expenses incurred by the Seller during their ownership period that remain unpaid at settlement. The Seller's share is deducted from the final sale proceeds, allowing the Buyer to pay the outstanding bill post-settlement.
Current Period
This is the charging period in which possession changes.
Rates Adjustment
This charge is for local council rates.
Water & Sewage Access
This charge is for access to water and sewerage connections from the local council. Some councils may incorporate these charges into rates charges (meaning an adjustment is made as part of a rates adjustment, rather than as a separate adjustment).
Special Meter Water Read
The water provider or local council will conduct a special water meter reading to determine the amount of water (measured in kilolitres) used on that specified date, for comparison and calculation against the last search reading. The reading will provide the kiloliter amounts and the rate per kiloliter used.
Water Usage
This charge is an adjustment we make using specialised calculators for the seller's water usage, from the special meter reading up to the day of settlement.
Body Corporate Adjustment
This is the levy adjustments required at settlement, in accordance with the information certificate.
Rental Adjustment
This means the adjustments for any rent or bond paid by a current tenant at the property.
How Do Rate Adjustments Work?
On settlement, rates must be adjusted for the current period and paid at settlement. This will provide our office with a breakdown of current rates for the current period (for example, 01/07/2021 to 31/12/2021) as well as any outstanding amounts owed for earlier periods.
If the rates are paid for the current period, we will not draw a cheque from the sale proceeds, as the plus adjustment will reimburse the seller for the days in which the buyer will own the property during the current period, as per your settlement statement.
If the rates are not paid, we will draw a cheque from the sale proceeds to pay both the seller’s portion and the adjusted portion paid by the buyer, by way of a plus adjustment. In this situation, the buyer pays the seller back by adding a plus adjustment to the settlement statement, in exchange for a cheque being drawn from the settlement funds.
If the council holds credit, we will make a plus adjustment to "pay back" the seller for the credit held, as we can't request the funds back from the council. The credit will then remain on the account for the buyer's future use. Generally, the adjustments section of a settlement statement shows whether the credit has been accounted for at settlement.
How Do Water Adjustments Work?
There are two types of adjustments:
Water and sewerage access; and
Water usage.
Both adjustments are dealt with differently and separately.
The water and sewerage access adjustment is a plus adjustment, and the period details and charges are on the rates search or the specialised water meter reading search from the water provider (for example, Unity Water or Qld Urban Utilities). This search will provide a breakdown of current water and sewerage access fees for the current period, as well as any outstanding amounts owed for previous periods on the settlement statement.
Water usage is calculated from the last read date and estimates the seller's daily usage up to the settlement date. This ensures that when the future account is issued after settlement, the seller has already paid the buyer for their water use up to the settlement date through a less adjustment, as shown on the settlement statement. This is because the buyer must pay the bill when it issues.
How Do Body Corporate Adjustments Work?
There are three types of body corporate levies:
Administration fund; and
Sinking fund; and
Insurance.
We must adjust for the current period, similar to a rates adjustment. The adjustment details are in the information certificate search. We obtain this certificate by searching and requesting it from the body corporate.
If the current period is outstanding, we will draw a cheque to cover the outstanding levies. Then we will adjust the account to "pay back" the seller, in exchange for a cheque being drawn from the settlement funds.
How Do Rental Adjustments Work?
If there is a tenant at the property, the managing agent does not conduct the rental adjustment, and we must confirm how far the rent is paid up to and create a plus or less adjustment depending on how much rent has been paid.
If the rent is paid up to a date after settlement, and these monies have been paid to the seller, then we will do a less adjustment to credit the buyer for the period owed to them from settlement. This is different to requesting the seller to refund what they have already been paid. It is also because most standard form contracts and residential tenancy legislation provide that the seller is entitled to rent up until the settlement date and the buyer is entitled to it on and from settlement.
If the rent is unpaid and owing up to and including the settlement date, we will make a plus adjustment to credit the seller for the period up to settlement, as the rent will not have been collected. The buyer will then be reimbursed in a future rental payment.
Any rental bond paid for the property is dealt with directly through the managing agent. The managing agent must complete a change of property manager/owner form to notify the Residential Tenancies Authority (RTA) in Queensland. The RTA will then continue to hold the bond until the tenant vacates, subject to any competing claim on the bond for any loss or damage claimed.
How Do Negotiated Less Adjustments Work?
In some circumstances, if the parties negotiate a less adjustment for repairs in satisfaction of building and pest, we will make a less adjustment for the negotiated amount. This adjustment allows the buyer to attend to the repairs after settlement if they choose to.
If you are buying or selling property, understanding your settlement statement is just one part of a smooth conveyancing experience. Having the right legal support can help ensure adjustments are calculated correctly and that your interests are protected from contract through to settlement.
If you would like clarity around your property transaction or assistance with conveyancing, our team is here to help. Contact RHC Solicitors today for a free conveyancing quote and to speak with an experienced member of our team.
Disclaimer: This publication is not intended to be comprehensive, nor does it constitute legal advice. We are unable to ensure the information is current and there is no guarantee in relation to accuracy. You should seek legal or other professional advice before acting or relying on any of the content of this publication. The views and/or opinions expressed in this publication is that of the author and may not necessarily represent the views and/or opinions of RHC Solicitors.
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