Bob Aaron in Legal, Condo Buying Tips
In 2005, Stuart signed an agreement to purchase a condominium unit for $326,900 in an upscale 20-storey project not far from the Annex area.
He was able to take possession of his unit early in 2008 and final closing occurred on Aug. 12, 2008.
On Stuart's closing, as with every other real estate transaction, the seller's lawyer prepared what's known as a statement of adjustments. The statement is used to calculate the unpaid balance of the purchase price due on closing. In addition, it allocates adjustable items like tax bills between the parties as of the closing date.
As set out in the purchase agreement, the builder adjusted 2008 taxes with Stuart (and the other 215 owners) on the assumption that it would pay all of the taxes for the year of closing when the bills were issued.
On this basis, the builder would be responsible for 222 days of taxes (to Aug. 12), and Stuart would be responsible for the remaining 143 days of the year.
But since the actual 2008 tax bills were unknown at the time of closing, the builder estimated the taxes and adjusted with the purchasers on the assumption that the taxes had been (or would be) paid.
On the builder's closing statement of adjustments, the 2008 taxes were estimated at $3,970.
But when the city finally issued the 2008 tax bill in January 2010, it came in at only $2,107.92. As a result, the builder had over-estimated the 2008 tax bill by a staggering $1,862.08.
