The happiest part of buying a home is when you finally get the keys and transfer your belongings to the new home, which is called the settlement day. During the settlement day, the seller and owner finalise their transaction by completing the payments. However, the settlement day is more than just handing over the keys and signing papers, and it includes many other things.
What happens during the settlement day?
Before the new homeowners make their official transfer to the house, they will do a final inspection to see if it meets their expectations. Both parties will then sign the documents to officiate the transfer of property and transfer important documents.
During the settlement, the buyer’s mortgage must be finalised along with the completed State Revenue Office form. This is also when the buyer settles the balances to the house seller to get the house keys in return. Lastly, the completed documents of the settlement statement will be handed over to the new owner.
What is a settlement statement?
A settlement statement is also called a closing statement. It enumerates the things that the buyer must pay the seller on the day of the settlement. The settlement statement is usually gathered by your conveyancing lawyers, and it also includes all the receipts needed for the closing, the homeowner grant, stamp duty, and the adjustment statement.
What is a statement of adjustment?
The settlement adjustment incorporates the settlement statement. Stated here are the financial responsibilities of the house seller that are paid periodically. The statement of adjustment then transfers those responsibilities to the new homeowner.
Written in the statement of adjustment are the following points:
1. Water charges
Water charges are calculated based on the number of days until the settlement date and not how much water is consumed. This is established because water meters are read every quarter. The amount that the seller will pay will be determined by the average usage in the period before the sale.
2. Municipal rates
Municipal rates are initially the responsibility of the seller. It is ideal that the seller pays for these rates in full rather than letting the buyer shoulder it. Then, the responsibility to be transferred depends on the house, its location, and how much has been settled by the seller.
3. Land tax
Homeowners are charged for the land tax at the end of every year (December 31). If the purchased home is the new owner’s principal residence, they will be exempt from paying. However, it only applies to the following calendar year, so they still need to pay for it for a period of time.
If the house purchased is being rented, then the tenant will be paying the rent to the new owner. But if the tenant has paid the rent up to the settlement date, then no adjustment is needed.
5. Security bond
The security bond must be included in the adjustment if the tenant paid for it. If, for some reason, it was used somewhere else, the seller must make way so that the owner receives their part.
6. Owners corporation charges
Regardless of the payment method, this should always be included in the adjustment.
Owning your own home is indeed an exciting experience, yet there are a few more steps that you must know about, such as the settlement statement. New homeowners may overlook vital details, but you can use this as a guide so that you are aware of what your settlement statement should include, which will help you avoid encountering property-related conflicts.
Don’t worry about how complicated the settlement day will be, as Bickell & Mackenzie will provide you with the best conveyancing managers to ease your homeownership journey. We are a law firm that specialises in conveyancing both private and commercial properties. Get in touch with us today to see how we can help!