WHAT IS A STATEMENT OF ADJUSTMENTS?
A statement of adjustments is a document in a real estate transaction that sets out any adjustments of the purchase price in favour of either the buyer or the seller to calculate the required balance due on closing. Examples of adjustments include condominium fees, deposits, and property taxes. Adjustments such as property taxes and condominium fees will be prorated, ultimately increasing, or decreasing the total amount required to finalize the transaction. Typically, the statement of adjustments is drafted by the seller’s solicitor to calculate the balance due on closing and sent to the buyer’s solicitor together with the reply to requisitions. To cover instances where one of the parties has neglected to include an item on the statement of adjustments or an amount was entered incorrectly, both parties to a real estate transaction provide each other with a document called an “undertaking to readjust”. By signing the undertaking to readjust, the parties promise one another that they will readjust the total amount payable for the transaction in the event of the existence of a mistake on the statement of adjustments. Statements of adjustments can become lengthy in the event of new-build properties as there are more items to be adjusted. Our experience shows that buyers are sometimes surprised by the amount and number of adjustments on a statement of adjustments when purchasing a new-build property. An experienced real estate lawyer will make a potential buyer aware of such adjustments at an early stage of the transaction, to prevent any surprises for the buyer on the day of closing.
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Disclaimer: The information contained in this article is not to be construed as legal advice. The content is drafted and published only for the purpose of providing the public with general information regarding various real estate and business law topics. For legal advice, please contact us.
About the Author:
Shahriar Jahanshahi is the founder and principal lawyer at Jahanshahi Law Firm with a practice focus on representing business star-ups and investors in the province of Ontario. For further information about Shahriar Jahanshahi, click here.