Closing Adjustments in Ontario: What the Statement of Adjustments Adds Beyond the Price

Step 1: Understand what the statement is — and the all-important adjustment / closing date

The first thing I tell every buyer at closing: the cash you bring is not the contract price. Sitting between them is the Statement of Adjustments — an accounting document prepared by the seller’s lawyer and delivered to your lawyer that lists, line by line, every prepaid or owing item that has to be apportioned between the two of you.

The whole statement turns on one point in time: the adjustment date, which is normally the closing date itself. The rule is simple — costs up to and including the closing day belong to the seller, and costs from the day after closing belong to you. Every item is cut at that line and prorated by days. A diligent lawyer will usually send you a draft statement a few days before closing to review — and you should ask for it, for reasons that become clear below.

Step 2: Property tax apportionment — the biggest line, and usually you reimburse the seller

The largest and most common adjustment is property tax. Ontario taxes property by the calendar year, but closings rarely land exactly at year-end, so taxes are split by how many days each side owns the home. The mechanism: annual tax ÷ 365 = a daily rate, multiplied by each party’s number of days of ownership.

Direction depends on what the seller has paid: if the seller prepaid the full year’s taxes, the portion covering the period after closing — which is really yours — is reimbursed to the seller (a debit to you). If taxes are in arrears, the opposite happens and the seller credits you for their share.

A purely hypothetical illustration (numbers are for explanation only, not real market figures): assume annual tax of $3,650, so $10 per day. On a September 1 closing, the 122 days from September 1 through December 31 are yours, so you’d reimburse the seller roughly $1,220. Change the date or the tax bill and the result changes entirely — which is why you read your own statement, not someone’s example.

Step 3: Condo / common expenses

If you’re buying a condo or common-element townhouse, the monthly common expense (maintenance fee) is almost always paid in advance for the whole month. If the seller paid all of June on June 1 but you close mid-June, the slice from the day after closing to month-end is yours and is reimbursed to the seller on the statement, prorated by days in that month.

It’s a smaller line, but easy to overlook. If the corporation has a special assessment or reserve-fund arrangement in play, your lawyer should reconcile that too, so you’re not picking up a historical liability that belongs to the seller.

Step 4: Utilities and "fuel / rented equipment" items

The second common category is utilities and metered consumables. Water, hydro and gas are typically settled to the closing date, but a few items show up specifically on the statement in Ontario (especially rural and detached homes):

• Fuel oil / propane: a home heated from an oil tank or propane tank often has a meaningful amount left at closing. The seller paid for it and is leaving it for you, so it’s valued at the closing-day quantity and price and reimbursed to the seller.
• Rented hot water tank and similar equipment: many Ontario homes have a rented hot water tank (Enercare, Reliance, etc.) that is not the seller’s asset. Rather than being “bought out” on the statement, the rental contract transfers to you along with the equipment, and you take over the monthly rental going forward. The key is confirming whether each item is rented or owned — it changes who keeps paying after closing.

There’s no fixed dollar figure here — it depends on how full the tank is and what the rental contract says — so I’m describing the mechanism, not a number.

If you’re buying a tenanted property, the statement adds two tenancy-related items that investors most often get tangled up on:

• Prepaid rent: rent the seller collected that covers the period after you take possession is credited to you — once you own the home, that rent is yours.
• Last month’s rent deposit (LMR): Ontario landlords commonly hold a last-month’s-rent deposit from the tenant. That money is the tenant’s, held in trust by the landlord — it is not the seller’s. At closing it must transfer to you with the tenancy, and the usual way to handle it is to credit the deposit (plus the interest required by law) to you on the statement, so you hold it for the tenant as the new landlord.

When buying a rental, have your lawyer confirm the LMR amount, whether interest was applied, and that the lease terms are as represented — you’re inheriting not just the home but the tenancy and the obligations to the tenant.

This is the most commonly misunderstood point. Items on the Statement of Adjustments and your closing costs are two entirely separate pools of money — don’t lump them together:

• Adjustments are the buyer–seller “split”: prepaid or owing property tax, condo fees, utilities, fuel, and rent/deposits, cut at the closing date and reconciled. This money flows between you and the seller.
• Closing costs are what you separately pay to complete the deal — paid to the government or third parties — including Land Transfer Tax (plus a municipal LTT in Toronto), legal fees, and title insurance. These are not apportioned on the seller’s statement.

So I always budget two separate lines for clients: the net balance to close after adjustments, and the hard costs of LTT + legal fees + title insurance. And always ask your lawyer for the draft Statement of Adjustments before closing and check it line by line — amounts, the adjustment date, the direction of the tax adjustment, whether the deposit transferred. Catching an error before closing is far easier than chasing it afterward.

Who actually prepares the Statement of Adjustments?

It's normally prepared by the seller's lawyer and sent to your (the buyer's) lawyer. It itemizes the prepaid and owing amounts to be split beyond the price and produces the net balance you bring on closing day. A diligent lawyer sends a draft a few days before closing — make sure you ask for it and review every line.

Why do I end up reimbursing the seller for taxes the seller owed the city?

Because Ontario property tax is charged by the full year and split by days of ownership. If the seller prepaid the year's taxes, the portion covering the period after closing — your time — is reimbursed to the seller on the statement. Only when taxes are in arrears does it flip, with the seller crediting you. It comes down to how far the taxes were paid at closing.

My home's hot water tank is rented — do I "buy it out" on the statement?

Usually not. Many Ontario tanks are rented equipment owned by companies like Enercare or Reliance, not the seller's asset, so the rental contract transfers to you with the equipment and you take over the monthly fee — rather than paying the seller a lump sum on the statement. Confirm whether each item is rented or seller-owned, since that determines who pays after closing.

On a tenanted purchase, who keeps the tenant's last month's rent deposit?

It stays the tenant's money, held by you as the new landlord. The last month's rent deposit (LMR) is legally the tenant's and isn't the seller's, so at closing it must transfer with the tenancy — typically by crediting the deposit (plus the interest the law requires) to you on the statement. On a rental purchase, have your lawyer verify the amount and interest.

Is the money on the statement the same as Land Transfer Tax and legal fees?

No. The statement is the buyer–seller split (property tax, condo fees, utilities, fuel, rent and deposits reconciled at the closing date). Land Transfer Tax, legal fees, and title insurance are closing costs you pay separately to the government or third parties and are not on the seller's statement. Budget the two as separate lines.