Duhaime's Law Dictionary

Statement of Adjustments Definition:

A document that proposes financial reconciliation of a transaction to a specified date and requisite pay-outs to the parties to the transaction or to a defined third-party.

Statement of adjustments can be prepared and useful in estate or income tax negotiations.

Mostly, they are tools of real estate law where the statement of adjustments calculates and formalizes adjustments to the purchase price to the date the buyer takes possession and proposes pay-outs.

An accounting document prepared in the context of a real estate transaction which sets out, generally in table form, the monies that are coming in from the buyer (aka purchaser or transferee), and the agreement on the distribution of those monies, resulting in a net pay-out of money to the seller (aka vendor or transferor) on the date that the transfer of the property interest actually occurs or, as lawyers would say, when the deal completes (completion date) or closes (closing date); generally one and the same date.

"Statement of adjustments have three main purposes: (a) to define the financial matters to be adjusted as well as the calculation of those items; (b) to confirm the method of payment of the purchase price; and (c) to provide for disbursement of the sale proceeds."1

In Kirsh v. MacPherson, Madam Justice Huddart of the Supreme Court of British Columbia adopted these words:

"(S)tatements of adjustments ... set out all of the financial aspects of the conveyance - purchase/sale price, legal fees, disbursements, real estate commission, etc. (The) main purpose of these statements is to obtain each party's confirmation of all financial matters prior to completion so that both parties completely understand what they are paying/receiving....

"Usually a set of notes is also attached to the statements of adjustments to assist the party in interpreting and understanding the statement of adjustments."

The credit column is sometimes also called "money in" or some such similar phrase. Credits will generally include the initial deposit, if any, and the proceeds of sale, the purchase price. The credit column might also include additional monies paid by the purchaser for some included asset such as, for example, a full tank of heating oil or property taxes paid in advance by the seller.

sample statement of adjustmentsThe debit column, sometimes also called "money out", or some such similar phrase, will include things the buyer must pay for or buy at closing from the seller. They generally start with the payment of any mortgage held on the property by the seller.

The two columns must reconcile, balance.

Depending on the jurisdiction, either the seller or the buyer will generally be responsible for preparing the initial draft of the statement of adjustments which in almost all cases, must be agreed to in writing (signature) by the other seller or the buyer, as the case may be.

The custom is that the buyer, or the buyer's notary or lawyer will draft the statement of adjustments.

It is a fact of life in the practice of real estate law that the parties or their lawyers to a real estate transaction will often use the process of agreement on a statement of adjustments to bargain for a new term. This is improper and it may in fact vitiate the whole conveyance since it breaks the consensus ad idem on which the original contract of sale is based.2

Statement of adjustments will often have notes to them following the traditional footnote pattern. Care must be taken to ensure that no new term is slipped into the contract of sale by the discrete addition of such a term pouched or hidden inside a footnote to the statement of adjustments.

Some of the standard notes to a statement of adjustments include that the buyer will purchase his own insurance as of the completion date.


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