When you buy or sell a home, you'll be presented with an adjustment statement (refusionsopgørelse). This document plays a central role in the property transaction, but can seem overwhelming at first glance. Let's dive into what it actually is, how to read it, and what significance it has.
What is an adjustment statement? An adjustment statement is like a financial X-ray of the home on the day of possession.
It shows all income and expenses tied to the property and ensures a fair split between buyer and seller.
Example:
- Let's say Pia sells her house to Peter on 1 July. - Pia has already paid property tax for the whole year (let's say 12,000 kr.). - Without an adjustment statement, Pia would have paid for 6 months she doesn't live in the house. - The adjustment statement ensures that Peter pays Pia back for the 6,000 kr. covering July to December.
The legal significance of the adjustment statement The adjustment statement is not just a practical tool; it also carries legal weight. Here are some key points about its legal significance:
- Legal basis: According to the Sale of Goods Act (Købeloven, § 66), a statement and division of ongoing income and expenses must be made upon the transfer of real property
- Binding agreement: Once both parties have approved the adjustment statement, it becomes a binding part of the overall agreement on the property transaction.
- Basis for final settlement: The adjustment statement forms the basis for the final financial settlement between buyer and seller.
- Evidence: In the event of later disagreements, the adjustment statement can be used as evidence of what the parties agreed.
- Tax significance: The statement can have significance for both the buyer's and seller's tax situation, especially when it comes to deductions for property tax and other deductible expenses.
How to understand your adjustment statement Understanding your adjustment statement is key to ensuring a fair property transaction. Here is a step-by-step guide:
- Identify the possession date: This is the cut-off date for all calculations.
- Review each individual item: Look at the amount and period for each expense or income item.
- Understand the allocation principle: In general, the seller pays for the period up to the possession date, while the buyer pays for the period after.
- Calculate pro rata allocations: For expenses that span the possession date, the amount must be allocated proportionally.
- Look at the total: At the bottom of the statement there will be a total amount that either the buyer must pay the seller or vice versa.
Review of common expense items Let's go through the typical items with examples:
- Property tax: Annual property tax of 12,000 kr. paid by the seller in January. Upon possession on 1 July, the buyer must reimburse 6,000 kr.
- House insurance: Annual premium of 4,800 kr. paid by the seller in April. Upon possession on 1 July, the buyer must reimburse 3,600 kr. (for 9 months).
- Water and sewage charges: Quarterly payment of 1,500 kr. If the seller has paid for the entire quarter (July-September), and possession is on 1 August, the buyer must reimburse 1,000 kr.
- Waste collection: Half-yearly payment of 1,200 kr. for July-December. Upon possession on 1 September, the buyer must reimburse 800 kr. (for 4 months).
- Homeowners' association dues: Monthly dues of 300 kr. If the seller has paid for the whole year, and possession is on 1 July, the buyer must reimburse 1,800 kr. (for 6 months).
- Shared expenses (for owner-occupied flats): Monthly shared expenses of 2,000 kr. Upon possession mid-month, for example on the 15th, these will be split 1,000 kr. to each party.
- Advance heating payment (a conto varme): Annual advance payment of 12,000 kr., paid quarterly. Upon possession on 1 August, a refund is due for 2 months, which comes to 2,000 kr.
What do you do about disagreements? Disagreements about the adjustment statement can arise. Here is a step-by-step guide to how you handle it:
- Identify the problem: Exactly which item or calculation do you disagree with?
- Document your claim: Gather relevant documentation, e.g. bills or statements.
- Communicate in writing: Send an email to the other party or the estate agent clearly explaining the disagreement.
Example of such an email:
"Dear [Name],
I have reviewed the adjustment statement and noticed a discrepancy in the property tax item. The statement shows 12,000 kr. annually, but according to the latest property tax bill (attached) the correct amount is 11,500 kr.
I propose that we adjust this item so it reflects the correct amount. This will change the allocation as follows: [calculation].
Let me know if you have any questions or need further information.
Best regards, [Your name]"
- Be open to dialogue: Disagreements can often be resolved through an open and honest conversation.
- Consider professional help: If you cannot reach an agreement, it may be necessary to involve a legal advisor or an independent agent.
- Document agreements: If you reach a solution, make sure to get the new agreement in writing.
How to read and understand your adjustment statement Let's take a concrete example of an adjustment statement and go through it in detail:
Let's go through each line:
- Property tax: Paid for the whole year. Split equally between buyer and seller.
- House insurance: Paid from April to March. The seller has used 3 months, the buyer needs 9.
- Water charge: Paid for July-September. The buyer takes over on 1 July, so they pay for all of it.
- Waste collection: Same principle as the water charge.
- Homeowners' association dues: Annual amount, split equally between buyer and seller.
The result is that the buyer must pay the seller 5,100 kr., because the seller has prepaid some expenses that extend into the buyer's period of ownership.
Guide to understanding your adjustment statement Here are some key points you should be aware of when reviewing your adjustment statement:
- Possession date: All calculations are based on this date.
- Periodic expenses: Pay attention to how expenses that span a period are allocated.
- Prepaid expenses: Look for items where the seller has paid for a period that extends beyond the possession date.
- Pro rata calculations: For items that cross the possession date, a daily rate is often calculated.
- Special agreements: Look for any special agreements you have entered into, e.g. regarding the takeover of special equipment or services.
- Totals: Check that the total amounts for each party are calculated correctly.
- Net amount: Look at the final amount to be paid either by the buyer to the seller or vice versa.
Handling the adjustment statement in a property transaction The adjustment statement is an important part of the property transaction process. Here is an overview of how it's typically handled:
- Preparation: The adjustment statement is typically prepared by the estate agent or a lawyer.
- Timing: It's normally made shortly before or after the possession date, once all relevant information is available.
- Review: Both the buyer and seller (or their representatives) review the statement.
- Approval: Both parties must approve the adjustment statement.
- Adjustment: If errors are found or there are disagreements, the statement is adjusted.
- Final settlement: The adjustment statement forms the basis for the final financial settlement between the parties.
- Filing: The approved adjustment statement should be kept together with other important documents from the property transaction.
Practical tips for handling the adjustment statement:
- Be proactive: Gather relevant documents (e.g. property tax bill, insurance policy) in good time.
- Ask questions: If something is unclear, ask the estate agent or your lawyer.
- Double-check calculations: Use a calculator to verify the figures.
- Consider future expenses: Think about whether there are upcoming expenses that should be taken into account.
- Be prepared for adjustments: Changes can occur even after you've received the first version of the statement.
The adjustment statement is an important document that ensures a fair financial split between buyer and seller.
By understanding its content and significance, you can navigate the property transaction more confidently and avoid unpleasant surprises later on.
Get professional help with your adjustment statement At Bomae, we are ready to help you navigate the adjustment statement and other aspects of your property transaction. We can:
- Review your adjustment statement in detail
- Explain complex calculations
- Advise on handling any disagreements
- Ensure all relevant items are included
- Help communicate with the other party if there are discrepancies
Understanding and handling an adjustment statement correctly is an important part of a successful property transaction. It can seem complicated, but with the right knowledge and attention to detail, you can ensure your interests are looked after.
Remember, it's always better to ask questions and seek clarification if something is unclear. A well-understood and correctly prepared adjustment statement can save time, money and potential conflicts in the future.
Contact us today for professional assistance with your adjustment statement and to ensure a secure property transaction from start to finish.
