Settlement statements are crucial documents in property transactions, providing a clear breakdown of the financial details for buyers and sellers. A key component of these statements is the inclusion of plus and less adjustments, which ensure fair allocation of costs related to the property.
At Nationwide Conveyancing, we aim to make property transactions seamless by helping you understand every aspect of your settlement statement. In this guide, we’ll explain what plus and less adjustments are, why they are essential, and how they are calculated.
What Are Plus and Less Adjustments?
Adjustments on settlement statements are financial calculations that divide property-related costs, such as council rates, water charges, and body corporate fees, between the buyer and seller. These adjustments ensure that each party pays only for the period they own the property.
- Plus Adjustments
- These are amounts added to the buyer’s payable total because the seller has prepaid expenses for the property beyond the settlement date. The buyer reimburses the seller for their share of these prepaid costs.
- Less Adjustments
- These are amounts deducted from the seller’s proceeds because they have not yet paid certain expenses up to the settlement date. The seller pays their share by deducting it from their final settlement amount.
Common Types of Adjustments
- Council Rates
- Council rates are typically billed annually or quarterly.
- Example: If the seller has prepaid the rates for the entire year but the settlement date falls halfway through the year, the buyer reimburses the seller for the unused portion.
- Water Charges
- Water charges may include fixed access fees and consumption charges.
- Example: The buyer reimburses the seller for prepaid access fees, while usage charges are calculated based on a final meter reading.
- Body Corporate Levies
- For strata-titled properties, body corporate fees for shared property maintenance are adjusted.
- Example: If the seller has prepaid quarterly levies, the buyer reimburses the seller for the unused portion.
- Land Tax (if applicable)
- Land tax is typically the seller’s responsibility, but some contracts allow for adjustments.
How Plus and Less Adjustments Work
Example Calculation:
- Council Rates: $2,400 annually, paid in full by the seller.
- Settlement Date: July 1 (halfway through the year).
- Calculation:
$2,400 ÷ 12 months = $200 per month.
The buyer owes the seller for 6 months (July to December): $200 × 6 = $1,200 (Plus Adjustment). - Water Charges: $500 annually, unpaid by the seller.
- The seller owes for 6 months (January to June): $500 ÷ 12 months × 6 = $250 (Less Adjustment).
- Final Adjustment:
Buyer reimburses $1,200 (plus adjustment), and the seller pays $250 (less adjustment).
Why Are Adjustments Important?
- Fair Cost Distribution
Adjustments ensure that each party pays only for their ownership period, creating a fair financial outcome. - Transparency
Including adjustments in the settlement statement provides clarity and avoids disputes between buyers and sellers. - Compliance with Contracts
Adjustments align with the terms of the contract of sale, ensuring legal compliance.
How Adjustments Are Calculated
- Determine the Expense Period
Identify whether the expense is billed annually, quarterly, or monthly. - Calculate Daily or Monthly Costs
Divide the total expense by the number of days or months in the billing period. - Pro-Rata the Amount
Multiply the daily or monthly cost by the number of days or months applicable to each party. - Add or Deduct
Apply the calculated amounts as plus or less adjustments to the buyer’s or seller’s totals.
Frequently Asked Questions (FAQ)
Q: What is the purpose of plus adjustments?
Plus adjustments reimburse the seller for prepaid expenses that benefit the buyer after settlement.
Q: Why do less adjustments appear on the settlement statement?
Less adjustments deduct unpaid expenses from the seller’s proceeds to ensure the buyer isn’t responsible for costs incurred before settlement.
Q: How are adjustments calculated for water usage?
Water usage is calculated based on a final meter reading, prorated for the settlement date.
Q: Do adjustments apply to all property transactions?
Yes, adjustments are a standard part of settlement statements for properties with shared or ongoing expenses like council rates, water charges, and levies.
Q: What happens if adjustments are incorrect?
If adjustments are calculated incorrectly, contact your conveyancer immediately to rectify the issue before settlement.
Q: Are adjustments negotiable?
Adjustments are typically based on standard contract terms and legal requirements, so they are not usually negotiable.
Tips for Reviewing Adjustments
- Check Settlement Dates
Ensure the adjustments are calculated correctly based on the settlement date. - Review Expense Periods
Verify that billing periods and amounts match the documentation provided by councils or utilities. - Communicate with Your Conveyancer
Your conveyancer can explain adjustments and ensure accuracy in the settlement statement.
Why Choose Nationwide Conveyancing?
At Nationwide Conveyancing, we specialize in handling settlement statements and adjustments with precision. Our experienced team ensures every detail is accurate and explained clearly, giving you peace of mind during your property transaction.
Plus and less adjustments are essential components of settlement statements in Queensland, ensuring fair cost distribution between buyers and sellers. Understanding these adjustments can help you avoid surprises and ensure a smooth property transaction.
At Nationwide Conveyancing, we’re here to guide you through every step of the settlement process. Contact us today for expert advice and support with your property transactions.
General advice only.