Sarah stared at her Toronto condo closing statement, confused.
She thought she was paying $450,000, but the final number was $451,847. "Did someone make a mistake?" she wondered.
Spoiler alert: Nope! Welcome to the world of Canadian closing adjustments.
If you're buying your first home in Canada, that closing statement might look like it's written in another language. Don't worry. Those extra charges and credits aren't someone trying to sneak money out of your pocket. They're called closing adjustments, and they're actually pretty logical once you understand how Canadian real estate transactions work.
What Are Property Closing Adjustments in Canada?
Think of closing adjustments like splitting a restaurant bill fairly. When you and the seller "break up" on closing day, you need to figure out who owes what for all the ongoing expenses tied to the house.
The seller has been living there and paying for things like property taxes, utilities, and condo fees. But since you're taking over partway through billing cycles, you need to reimburse them for what they've already paid that covers your time in the house. When you are closing your property, your real estate lawyer will present you with a document called "Statement of Adjustments" , which is an accounting document for your property closing. Within the Statement of Adjustments, you should be able to clearly see any cost adjustments.
Pro Tip: Reading and reviewing the statement of adjustments is critical. Please take the time to learn more and review your statement with your lawyer.
The Big Players: What You'll Typically See Adjusted When Buying a Property
Property Taxes (The Big One)
This is usually the largest closing adjustment you'll encounter in Canadian real estate. Here's why it gets a bit weird: property taxes work differently across Canada. In Ontario, they're typically paid annually or semi-annually. In BC, they're due July 2nd. In Alberta, they're often paid monthly through your mortgage.
Sarah's Story Continued: Sarah's condo had annual property taxes of $3,600. The seller had already paid the full year upfront in February, but Sarah was closing in July. That means the seller had pre-paid for 5 months of Sarah's ownership (August through December).
The math: $3,600 ÷ 12 months = $300/month × 5 months = $1,500 that Sarah owes the seller.
Condo Fees/Maintenance Fees
If you're buying a condo or townhouse, monthly maintenance fees are almost always adjusted.
Real Example: Marcus bought a condo with $485 monthly maintenance fees. He closed on the 15th of the month, but the seller had already paid the full month's fee. Marcus owed the seller for half the month: $485 ÷ 2 = $242.50.
Utilities (Sometimes)
This depends on your area and the type of utilities, but you might see adjustments for:
- Prepaid heating oil (common in rural areas)
- Water bills (in some municipalities)
- Natural gas deposits
Small Town Ontario Story: When Jamie bought a farmhouse outside Ottawa, the oil tank was 3/4 full. At current heating oil prices, that represented about $600 worth of fuel that the seller had paid for but Jamie would use. Closing adjustment: +$600 to Jamie's closing costs.
Rent (For Multi-Unit Properties)
Buying a duplex or house with a basement apartment? If there's a tenant paying rent, you might get credited for rent collected in advance.
The Closing Costs That Might Surprise You
Home Insurance
Unlike other adjustments, you can't "take over" the seller's home insurance in Canada. You need your own policy starting on closing day. But here's the thing – many Canadian buyers forget to arrange this ahead of time, and your real estate lawyer won't let you close without proof of insurance.
Property Management Fees
If you're buying a rental property that's professionally managed, you might see adjustments for management contracts or tenant deposits.
Special Assessments
This is where things can get expensive. If the condo board has approved a special assessment for roof repairs or elevator upgrades, you might be on the hook for the seller's portion.
Vancouver Cautionary Tale: David thought he was getting a great deal on a downtown Vancouver condo until closing day, when he discovered a $12,000 special assessment for seismic upgrades that hadn't been properly disclosed. The lesson? Always ask about pending or recently approved special assessments during your offer process, especially in earthquake-prone BC.
The Bottom Line
Closing adjustments aren't fun surprises. They're fair ways to split ongoing expenses. The key is understanding them ahead of time so you can budget properly and avoid that deer-in-headlights feeling when you see your final closing statement.
Remember Sarah from our opening story? Once her real estate lawyer explained that her $1,847 in adjustments was mostly prepaid property taxes and condo fees, she realized she was actually getting a pretty good deal. She was basically getting those services "prepaid" rather than having to set up all new accounts and make deposits.
Pro Tip: Keep all your closing documentation! Those property tax adjustments will be useful when you file your taxes next year, and you'll want the records for your own budgeting as a new homeowner.
Still confused about your closing statement? That's what your lawyer and realtor are for. Don't hesitate to ask questions – buying a home is probably the biggest financial transaction of your life, and you deserve to understand every line item.
Unlock Your Seamless Closing Experience
Your Journey to a Worry-Free Closing Starts Here!
