Owning property brings recurring outgoings such as rates, and sometimes income such as rent, which relate to a period, often a year or quarter. Settlement rarely lands at the start of a period, so the parties adjust these as at the adjustment date, defined as the earlier of the buyer taking possession or completion.
Rates are generally adjusted on a rates paid basis, so if the vendor has paid them an allowance is made in the vendor's favour, and if they are unpaid the amount is deducted from the vendor at settlement and treated as paid. Under section 175 of the Local Government Act 1989 a buyer is liable to the council for rates due and payable on completion, including arrears, though the buyer can require the vendor to cover arrears, and under section 175(1A) a buyer can rely on any instalment option that was open to the vendor. Adjustment can be annual or, as is now common, quarterly. The right to adjust comes from the contract, so an open contract with only the parties, property and price may give no right to adjust at all.
Some items are not adjustable. One off special levies, street construction charges and special rates imposed by notice fall to whichever party they were struck against before or after the contract rather than being apportioned, and owners corporation accumulated funds belong to the owners corporation. Supplementary rates relating to the pre settlement period are recoverable by the buyer from the vendor. Land tax, windfall gains tax, the absentee owner surcharge and vacant residential land tax each have their own rules.
This is the kind of matter CMK Legal's property and conveyancing team handles.
A contract without an adjustment clause may give no right to adjust. Failing to adjust can waive the right, and while an error can sometimes be readjusted after settlement as an exception to merger, a total failure to adjust usually cannot.
Law referenced: Local Government Act 1989 ss 175, 174A; Sale of Land Act 1962 s 10G; Owners Corporations Act 2006 s 28; contract adjustment conditions.