In a sale and purchase agreement, there is a clause stating that the purchase price outstanding on the closing date will be paid by certified cheque subject to the usual adjustments.
At the time of closing, the certified cheque required from the purchaser includes all the adjustments which become payable:
All Adjustments between resale vendor and purchaser:
Adjustments on a resale home include prepaid items by the seller beyond the date of closing, which ends up benefitting the purchaser. These prepaid items are pro-rated, and all adjustments arising from this situation are payable to the seller on the closing date. Few examples are:
- Prepaid fees of condominium (for condominium purchases)
- Fuel oil (if the oil furnace is part of the property)
- Property taxes prepaid
- Any prepaid rent and rent for current month, where tenancies are assumed
All Adjustments between new construction builder and purchaser
Closing adjustments are typically higher in builder properties as compared to resale properties. On builder properties, many adjustments are not present in the resale properties and hence not adjusted in its purchase. Some possible adjustments include:
water and hydrometer installation costs;
- Boulevard tree planting;
- Grading deposit;
- Driveway paving;
- Gas water heater;
- Mandatory fencing as per municipality standards;
- Tarion New Home Warranty Enrolment Fee;
- Additional governmental, educational or municipal charges or levies.
Additional levies may be imposed on the transaction at the time of closing. It is advisable to discuss this with your real estate lawyer and include caps on such levies to contain such charges. The agreed additional levies and their possible caps should be expressly noted in the agreement to ensure all such levies are capped.
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A sale or purchase agreement clearly mentions the balance remaining on the closing date and its method of payment. The remaining balance amount may be paid through cash or via a certified cheque. In the latter’s case, the cheque must include any relevant adjustments that are to be paid on closing.
Adjustments between Vendor and Purchaser for Resale
In case of a resale home, these adjustments will include the items that are already paid for by the seller. These will benefit the purchaser after the date of closing and thus will be paid for in the form of credit to the seller on the closing date. For example, prepaid property taxes, fuel oil (in case of an oil furnace) or relevant condominium fees.
Adjustments between Builder and Purchaser for New Construction
The closing agreements are more in case of a new construction as compared to a resale home. These adjustments can include water and hydro meter installation costs, boulevard tree planting, gas water heater, fencing charges etc. Besides these, there are many other items that are not normally adjusted. All the items are to be paid for in the beginning at the time of the closing of the deal.