Proration is the division of ongoing costs and income between seller and buyer at the closing date: property taxes, collected rent, association dues, and utility and service periods. Each party pays for the days it owned the property, and the arithmetic lands as credits and debits on the closing statement.
- Rent is prorated on what was collected, not on what was owed. A tenant who has not paid is a collection problem, not a credit.
- Security deposits are transferred, not prorated. They are the tenant's money in full, whatever the calendar says.
- Florida tax bills carry an early-payment discount, so the proration convention and the assumed bill both belong in the contract.
- Check the statement line by line before signing. Prorations are small, routine and wrong often enough to be worth the ten minutes.
A September 18 closing, the 261st day of the year, on the building's $31,990 annual tax bill.
The seller has not paid the November bill yet, so his share arrives as a credit to the buyer, who pays the whole bill later.
Related terms
All termsSecurity Deposit
A security deposit is money a tenant gives a landlord to secure performance of the lease.
ClosingEstoppel Letter
An estoppel letter is a written statement of what is actually owed and agreed, given by the party in a position to know and binding on them afterward.
ClosingDocumentary Stamp Tax
Florida taxes the transfer of real property by deed.
Terms arrive with the writing.
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