Property Taxes, Utilities, Rent, Security Deposits, Interest, Homeowners Association Fees

The standard sale and purchase contract used in Alberta is provided by the Alberta Real Estate Association (AREA).  This contract, in the existing paragraph 10.4, sets out that:

“Items such as real estate property taxes, local improvement fees, utilities, rents, security deposits, statutory interest on security deposits, mortgage interest and homeowner association fees will be the seller’s responsibility for the entire Completion Day and thereafter assumed by the Buyer”.

What this means is that the seller (through their lawyer) will be required to ensure that all payments on the above-referenced items will be paid by the seller up to and including the possession date.  If the seller has paid some of these items for the entire year, an adjustment will be made by the buyer’s and seller’s lawyers to reimburse the seller for any such overpayment.  For example, if the possession date is on April 30 and the seller has already paid the property taxes for the entire year, then the seller will be reimbursed by the buyer for the payment made on behalf of the buyer.  In other words, the buyer would now owe the seller property taxes from May 1 to the end of the year, and this would be adjusted for at the time of closing (through the lawyers).  Alternatively, if the seller has not paid the property taxes for the year and the buyer is required to do so, then the Buyer will be given a credit for the property taxes that should have been paid by the seller between January 1 to April 30.  The same concept applies to any security deposits, condo fees, rents on rental properties, etc.

Lawyers will not involve themselves with adjustments to any utilities that the seller pays after the closing or possession date.  It is imperative that the seller is aware that it is their responsibility to have their utilities cut-off as of the possession date.   The buyer’s utilities should be set up to commence on the possession date.

Property Taxes – Tax Installment Payment Plan (TIPP)

If you, the seller, have registered with the municipality’s tax-installment payment plan (monthly payment on property taxes), it is your obligation to ensure that the municipality is made aware of the date that you are selling your home.  Otherwise, monthly property tax payments may continue to be debited from your account without your knowledge or consent well after the possession date.  You should also confirm with the municipality when the last payment will be taken from your account and advise your lawyer so that proper adjustments can be made.  Different municipalities have different notice period requirements.  The Edmonton Law Office suggests that you advise your municipality of the sale at least 30 days prior to the possession date.  Some municipalities will also require you to send written confirmation to them of the sale.