Glossary
Statement of Adjustments
A Statement of Adjustments is the closing document that lists the amounts each party to a property transaction owes or is owed, fixing the final cash balance..
A Statement of Adjustments is the closing document that lists the amounts each party to a real estate transaction owes or is owed, so the final cash figure exchanged on closing day can be settled. It is prepared by the buyer's and seller's lawyers or notaries and sits alongside the purchase agreement and mortgage documents in the closing package.
What Appears on a Statement of Adjustments
The statement reconciles costs one party has already paid that belong partly to the other. Common adjustments include:
- Property tax — if the seller prepaid municipal taxes covering a period after closing, the buyer typically reimburses the seller for the buyer's share, and if taxes are owing the seller may credit the buyer.
- Prepaid expenses — items such as condo or strata fees already paid for a period the buyer will occupy.
- Deposits and rent — fuel or utility deposits, or rent where the property is tenanted.
- Mortgage payout — the seller's mortgage balance and accrued interest discharged on closing.
- Transaction costs — land transfer tax, legal fees and title insurance are often shown for completeness.
Credits usually include the buyer's deposit already held in trust and the new mortgage advance, while debits include the balance of the purchase price and the buyer's share of costs. The net difference is what the buyer must deliver.
Why It Matters to a Borrower
The statement determines how much cash the buyer must bring to closing. An error, such as an incorrect tax figure or a missed prepaid expense, changes the certified cheque or bank draft required on the completion date. Reviewing it before closing lets a buyer question line items with their lawyer rather than scrambling on closing day. A closing costs calculator can help estimate the broader cash requirement, though the final numbers come from the statement itself. The closing costs picture overall is wider than adjustments alone.
How the Arithmetic Works
A simplified structure usually looks like this:
- Start with the purchase price.
- Subtract the deposit already held in trust.
- Subtract the mortgage advance from the lender.
- Add the buyer's share of prepaid taxes or fees owed to the seller.
- Subtract any credit the seller owes the buyer.
The result is the balance the buyer must deliver at closing. Provincial rules and local practice vary, so buyers should confirm current conventions with their own legal professional.
Frequently asked questions
Who prepares the statement of adjustments in Canada?
It is normally prepared by the buyer's lawyer or notary, sometimes in coordination with the seller's legal representative, using the agreement of purchase and sale, the mortgage instructions and municipal tax records. Both sides review it before closing, and any disagreement is sorted out before funds are exchanged.
Does the statement of adjustments change my closing costs?
It can. Adjustments for prepaid property tax, strata fees or other items add to or reduce the cash you must bring on closing day, on top of land transfer tax and legal fees. The statement shows the exact balance, so review it carefully rather than relying on earlier estimates.
What if I disagree with an item on the statement of adjustments?
Raise it with your lawyer or notary immediately, before closing. Most disagreements involve property tax calculations, prepaid expenses or the deposit credit. Because funds are exchanged on the completion date, resolving questions early avoids delays, and the final figures should match the agreement of purchase and sale.
Sources
Related terms
- Adjustment — A pro-rated credit or debit between buyer and seller at closing for prepaid or outstanding items such as property tax.
- Closing Costs — Closing costs are the one-time fees, taxes, and charges paid on top of a home's purchase price, separate from the down payment.
- Completion Date — The date on which a real estate sale legally closes, the mortgage funds are advanced, and ownership of the property transfers to the buyer.
- Land Transfer Tax — A provincial tax on transferring property title, paid by the buyer at closing and calculated as a percentage of the purchase price.
- Property Tax — A property tax is a municipal levy on property ownership, based on assessed value and the local rate, often collected with your mortgage payment.