What to expect on settlement day

March 19, 2015
Rob Lees

It’s the day you’ve been counting down to - the day when you get to breathe a sigh of relief or perhaps a shout of excitement, pick up your keys, and officially start the next chapter of your life.

Although, before celebrations begin there’s a number of other processes that need to be completed on settlement day by your conveyancer or solicitor before you get to pick up the keys.


On the day, your lender will provide the funds to the vendor to finalise the purchase of your property. In addition, as the buyer, you will receive the title of the property and the vendor’s solicitor or bank will arrange for the Registrar General to register the transfer and home loan (if applicable). The mortgage will be then noted on the title until the term of the home loan is completed. Both parties are also required to advise the agent in writing that settlement has occurred, allowing the agent to release the keys to you.


Settlement is also the time when your conveyancer or solicitor will work out any additional costs such as water and council rate adjustments. What many buyers may not realise is that it is customary when purchasing property for the purchase price to be “adjusted” to allow for expenses that have been paid in advance or expenses that are outstanding at the date of settlement. The solicitor/ conveyancer will do all of this for you but here is how it works.


For example, say the vendor pays the council rates for a three month period but then sells and vacates the property after just one month. As the buyer, you will be required to reimburse the vendor for the additional two months’ worth of council rates. These costs will often be referred to by your solicitor or conveyancer as ‘adjustment costs’.


The most common ‘adjustment’ items that you could expect to pay upon settlement include:

  • Water rates
  • Strata levies
  • Council rates

To work out exactly how much you may need to adjust the purchase price of your property, each item is given a ‘daily rate’. The balance of the purchase price is then adjusted depending on whether the items are paid in advance or left unpaid at time of settlement.


Say you purchase a home with settlement to occur on 20 May and the seller has already paid the quarterly council rates of $455 for the April – June period (ie up to 30 June). In this example, the seller has paid the council rates for 91 days even though they will only live in the property for 49 of those days.


As the buyer, you are responsible for paying the remaining 42 days of the 91 day period. To calculate how much this cost will be, a daily rate must first be established. From 1 April to 30 June, there is 91 days. As such, the daily rate can be worked out using the following equation: 455/91 = $5 a day.


Therefore, you owe the seller $5 x 42 days = $210 in council rates – a fee that is included in the overall purchase price of the property. While this may sound very confusing, the good news is you don’t need to worry about working out the adjustment costs yourself.


Your solicitor or conveyancer will handle all of the ‘settlement day duties’ for you, so the only thing you need to worry about is picking up the keys to your new home! 




Posted in: Home loans

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