Understanding Plus and Less Adjustments on Settlement Statements in QLD

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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 settlement adjustments, such as 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 be explaining settlement adjustments, including what plus and less adjustments are, why they are essential and how they are calculated.

Explaining Settlement Adjustments

Settlement adjustments are financial calculations made during property transactions to allocate costs fairly between the buyer and seller. These adjustments account for prepaid expenses, unpaid costs, and prorated charges, such as council rates, water bills, and body corporate levies. 

They ensure that each party only pays for the period they own the property, based on the settlement date.

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 settlement adjustments ensure that each party pays only for the period they own the property.

  1. 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.
  2. 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 Settlement Adjustments

  1. 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.
  2. 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.
  3. 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.
  4. Land Tax (if applicable)
    • Land tax is typically the seller’s responsibility, but some contracts allow for adjustments.

How Plus and Less Settlement Adjustments Work

When explaining settlement adjustments, it’s important to understand how plus and less adjustments ensure fair cost distribution between the buyer and seller. These calculations balance expenses such as council rates and water charges based on the settlement date.

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 Settlement Adjustment:Buyer reimburses $1,200 (plus adjustment), and the seller pays $250 (less adjustment).

This example demonstrates how settlement adjustments are calculated for council rates and water charges. 

The buyer reimburses the seller for prepaid council rates (plus adjustment), while the seller is responsible for unpaid water charges (less adjustment). This ensures a fair financial distribution based on the settlement date.

Why Are Settlement Adjustments Important?

Explaining settlement adjustments is crucial as they ensure fairness, clarity, and legal compliance in property transactions. These adjustments are vital for a smooth and transparent settlement process.

  1. Fair Cost Distribution
    Adjustments ensure that each party pays only for their ownership period, creating a fair financial outcome.
  2. Transparency
    Including adjustments in the settlement statement provides clarity and avoids disputes between buyers and sellers.
  3. Compliance with Contracts
    Adjustments align with the terms of the contract of sale, ensuring legal compliance.

How Adjustments Are Calculated

Settlement adjustments ensure that both parties in a property transaction share costs fairly, based on their respective periods of ownership. Here’s how these adjustments are generally calculated:

  1. Determine the Expense Period
    Identify whether the expense is billed annually, quarterly, or monthly.
  2. Calculate Daily or Monthly Costs
    Divide the total expense by the number of days or months in the billing period.
  3. Pro-Rata the Amount
    Multiply the daily or monthly cost by the number of days or months applicable to each party.
  4. Add or Deduct
    Apply the calculated amounts as plus or less adjustments to the buyer’s or seller’s totals.

Once the calculations are completed, the buyer and seller will be responsible for paying or receiving the appropriate amounts based on their ownership periods. 

This ensures a fair financial distribution and prevents any party from unfairly absorbing costs outside of their ownership timeframe.

Tips for Reviewing Settlement Adjustments

Reviewing settlement adjustments is a crucial step in ensuring that all calculations are accurate and that both the buyer and seller are treated fairly. Here are some helpful tips to guide you through the process:

  1. Check Settlement Dates
    Ensure the adjustments are calculated correctly based on the settlement date.
  2. Review Expense Periods
    Verify that billing periods and amounts match the documentation provided by councils or utilities.
  3. Communicate with Your Conveyancer
    Your conveyancer can explain adjustments and ensure accuracy in the settlement statement.

By following these steps, you can prevent potential issues and ensure that all adjustments are fair and in accordance with the contract terms.

Frequently Asked Questions (FAQ)

What is the purpose of plus settlement adjustments?

Plus adjustments reimburse the seller for prepaid expenses that benefit the buyer after settlement.

Why do less adjustments appear on the settlement statement?

Less adjustments and deduct unpaid expenses from the seller’s proceeds to ensure the buyer isn’t responsible for costs incurred before settlement.

How are settlement adjustments calculated for water usage?

Water usage is calculated based on a final meter reading, prorated for the settlement date.

Do adjustments apply to all property transactions?

Yes, adjustments are a standard part of settlement statements for properties with shared or ongoing expenses, such as council rates, water charges, and levies.

What happens if adjustments are incorrect?

If settlement adjustments are calculated incorrectly, contact your conveyancer immediately to rectify the issue before settlement.

Are adjustments negotiable?

Adjustments are typically based on standard contract terms and legal requirements, so they are not usually negotiable.

Do plus and less adjustments apply to off-the-plan or new build properties?

Yes, plus and less settlement adjustments apply to off-the-plan or new-build properties, especially for shared expenses such as council rates and utilities.

Can I request a detailed breakdown of each adjustment prior to settlement?

Yes, you can request a detailed breakdown of each adjustment before settlement. It’s essential for transparency and clarity throughout the transaction.

Are settlement adjustments required if the property is sold without any prepaid expenses?

Adjustments may not be required if the property is sold without any prepaid expenses. However, adjustments for unpaid expenses (such as outstanding council rates) would still be applied.

How are body corporate levies adjusted in strata property settlements?

Body corporate levies are prorated for the settlement date. The buyer will pay for the period of ownership from settlement onwards, and the seller will cover the prior period.

Do land tax adjustments apply to all contracts in Queensland?

Land tax adjustments apply if the seller has prepaid land tax. These adjustments are prorated based on the settlement date and are typically included in settlement adjustments for properties in Queensland.

Can errors in adjustments delay property settlement in QLD?

Yes, errors in adjustments can delay property settlement in QLD. It’s important to review all calculations thoroughly to ensure the settlement process goes smoothly.

Why Choose Nationwide Conveyancing for Settlement Adjustments?

At Nationwide Conveyancing, we specialise in handling settlement statements and adjustments with precision and accuracy. Our experienced team ensures every detail is accurate and explained clearly, giving you peace of mind during your property transaction.

Plus and less settlement adjustments are essential components of settlement statements in Queensland, ensuring a fair distribution of costs 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 adjustment process. Contact our conveyancing team today for expert advice and support with your property transactions.

General advice only.