Settlement and early ownership
Understanding settlement adjustments
A worked adjustment statement — council rates, water charges, owners-corporation fees and rent, split between buyer and seller at settlement.
Key points
- Adjustments split prepaid costs like rates and water charges between buyer and seller by days of ownership: bill amount × buyer's days ÷ days in the billing period.
- Most adjustment items are reimbursements for something already paid, not new fees.
- Common items: council rates, water service and usage, owners-corporation fees, and rent for a tenanted property.
- The Emergency Services and Volunteers Fund (formerly the Fire Services Property Levy) is usually adjusted the same way as council rates.
- The exact adjustments depend on the specific contract and property — review the statement before settlement, not after.
How are settlement adjustments calculated?
The seller is responsible for rates and other outgoings up to and including settlement day, the buyer from the day after (Consumer Affairs Victoria, verified 29 Jul 2026). The worked example below apportions each prepaid bill by days:
Buyer's reimbursement to the seller = bill amount × buyer's days in the billing period ÷ total days in the billing period
If the buyer owes the seller, the amount is added to the balance the buyer pays at settlement. Which items are adjusted, and on what basis, is set by the contract, so your conveyancer's statement is what applies.
Why the buyer doesn't just pay the contract price
Council rates and other outgoings are adjusted between buyer and seller at settlement — the seller is responsible up to and including settlement day, the buyer from the day after (Consumer Affairs Victoria, verified 29 Jul 2026). Because rates, water charges and similar costs are usually billed in advance for a period (a quarter or a year), whoever paid the bill is entitled to be reimbursed for the portion covering the other party's period of ownership. The adjustment statement your conveyancer prepares is what actually calculates this — it isn't optional or a formality.
What typically gets adjusted
Common adjustment items include council rates, water service and usage charges, owners-corporation fees (including any special levy already paid), and — for a tenanted property — rent already collected and the bond. The Emergency Services and Volunteers Fund (ESVF, formerly the Fire Services Property Levy) is also usually adjusted the same way as council rates — it's collected via the same rates notice and apportioned daily by ownership period, just like the rate itself. Exactly what's adjusted, and how, depends on the specific contract; not every item applies to every property.
A worked adjustment statement
Illustrative numbers: a property settles 120 days into the council's 365-day rating year, and the seller has already paid the full year's $2,400 council rates. The seller has also paid a $600 water-service charge for a 90-day billing period that began 44 days before settlement (settlement day included), so 46 days of that period fall after settlement.
Scroll sideways for more columns
| Item | Paid by | Buyer's share | Adjustment |
|---|---|---|---|
| Council rates ($2,400/year, seller paid in full) | Seller | 245 of 365 days ($2,400 × 245 ÷ 365) | Buyer reimburses seller ≈$1,611 |
| Water service charge ($600 for a 90-day period that began 44 days before settlement; seller paid in full) | Seller | 46 of 90 days ($600 × 46 ÷ 90) | Buyer reimburses seller ≈$307 |
| Owners-corporation fee (none applicable here) | — | — | $0 |
These reimbursements are added to the amount the buyer pays at settlement — they're not a separate bill sent later. Your conveyancer calculates the exact figures from the actual rates notices, water bills and OC statements for the property, not estimates.
Worked example
A buyer's settlement statement shows a base contract-price balance plus two adjustment lines reimbursing the seller for prepaid rates and water charges. The buyer queries a $340 owners-corporation adjustment they didn't expect — their conveyancer explains it's reimbursing the seller for a quarterly OC fee paid in advance, not an unexpected new charge. Reviewing the statement before settlement, not after, is what let them ask before the funds moved.
Common mistake: assuming every dollar on the adjustment statement is an extra cost. Most adjustments are reimbursements for something already paid on your behalf, covering your period of ownership — not a new fee.
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Practical checklist
Before settlement
- Ask your conveyancer for a draft adjustment statement before settlement day
- Confirm which items are being adjusted for this specific property
- Query anything you don't understand before the funds move, not after
- Keep the final settlement statement — you'll need it for your records and, for an investment property, for tax purposes
Questions for a professional
- Can you walk me through each adjustment line before settlement?
- Are there any adjustments specific to this property I should expect — an OC special levy, or rent already collected?
Official resources
Important limitations: This is a general worked example of how settlement adjustments work, not a calculation for your specific contract. Your conveyancer calculates the actual figures from the real rates notices, water bills and other statements for the property. The underlying pro-rata adjustment concept is standard practice nationally, but the worked example and standard-contract mechanics shown are Victorian and haven't been checked against other states.
Sources and methodology
- Settlement — Consumer Affairs Victoria (retrieved 29 Jul 2026, last checked 31 Jul 2026). Licence: CC BY 4.0
Figures on this page are drawn from Delora's local knowledge graph, refreshed from these primary sources and checked for changes on a regular schedule. If a figure here looks out of date, the official source above is always the authority — please let us know.
Evidence record
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