Property guide  ·  NSW

Settlement adjustments in NSW: what buyers and sellers need to know

At settlement, council rates, water, strata levies and sometimes land tax are shared between buyer and seller. Learn how NSW adjustments work and what to check before settlement day.

The amount that changes hands on settlement day is rarely the exact purchase price in your contract. That’s because of settlement adjustments: the process of sharing the property’s ongoing bills between the buyer and the seller, so each pays only for the time they own the property.

For example, a seller may have paid council rates for the whole quarter, even though you’ll own the property for part of it. Adjustments make sure the seller is reimbursed for your share, and that any amounts the seller still owes are paid before the property becomes yours.

This guide explains how adjustments work under the standard NSW contract, what gets adjusted, and the traps to look out for.

What are settlement adjustments?

Most residential sales in NSW use the Law Society and REINSW standard Contract for the Sale and Purchase of Land. Clause 14 of the contract deals with adjustments. It makes the seller responsible for rates, water, sewerage and drainage charges, land tax, levies and other periodic outgoings up to and including the adjustment date. The buyer is responsible after that.

The adjustment date is the earlier of the day you’re given possession and completion (settlement). In most sales, that’s settlement day. Because the seller is responsible up to and including that day, the seller pays for settlement day itself.

The 2026 edition of the contract, released earlier this year, did not change the adjustment clauses. The clause numbers in this guide apply to both the 2022 and 2026 editions.

What gets adjusted?

The usual adjustments on a residential sale are:

Water usage

Water usage is billed in arrears, so the last bill usually stops before settlement. Under clause 14.7, the seller pays for the unbilled days using the daily average from the last bill. If you want a more accurate figure, your lawyer can order a special meter reading from Sydney Water or the relevant water authority.

Rent on a tenanted property

If you’re buying an investment property with a tenant in place, rent is adjusted too. Rent the tenant has paid in advance for the period after settlement is credited to you. Under clause 24.1, rent that is unpaid at the adjustment date is treated as if it had been paid, and the seller keeps the right to recover it from the tenant. The seller must also do what’s reasonably necessary to transfer the rental bond to you.

Bills paid in advance and bills still owing

How an adjustment works depends on whether the seller has already paid the bill.

If the seller has paid in advance

The buyer reimburses the seller for the days after the adjustment date. Here’s a simple example:

If the seller owes money

Any arrears the seller owes, such as overdue rates or unpaid strata levies, are the seller’s responsibility. They’re normally paid out of the seller’s sale proceeds at settlement, so the account is clear when the property passes to you. That’s why the certificates matter: they show exactly what’s owing on the day.

Land tax and settlement

Land tax is the adjustment that causes the most confusion. Under clause 14.4 of the standard contract:

• Land tax is only adjusted if the contract says it is. The front page of the contract has a “land tax is adjustable” choice, and the default answer is no.
• If land tax is adjustable, it’s calculated as if the seller owned no other land, so the buyer isn’t paying for the seller’s wider property holdings.
• Surcharge land tax is never adjusted.

Many contracts also change these rules in the special conditions, so always check them before you sign.

Separately, unpaid land tax is a charge on the land itself. That means a buyer could become liable for a seller’s unpaid land tax if it isn’t cleared. To protect you, your lawyer obtains a land tax clearance certificate from Revenue NSW, and the contract requires the seller to clear any charge it shows by settlement. Revenue NSW recommends that the certificate is obtained at least 14 days before settlement, so there is time to deal with any charge it shows. For more on how land tax works, see our guide to land tax in NSW.

Strata levies and special levies

If you’re buying a unit or townhouse in a strata scheme, regular levies for both the administrative fund and the capital works fund are adjusted in the same way as rates.

The seller must give you a strata information certificate (under section 184 of the Strata Schemes Management Act 2015) at least 7 days before settlement. It shows the levies payable and any amounts owing. The buyer pays the fee for the certificate at settlement. As the NSW Government explains, a buyer isn’t liable for an outstanding levy that the certificate doesn’t show.

Who pays a special levy?

Special levies are one-off contributions, often for major repairs. Under clause 23.6, if a special levy wasn’t disclosed in the contract:

• the seller pays it if the owners corporation decided on it on or before the contract date, even if it’s payable in instalments after settlement; and
• the buyer pays it if it was decided after the contract date.

Special levies that were disclosed in the contract are adjusted like regular levies. If you know major works are coming, it’s worth negotiating who pays before you sign.

Who prepares the adjustment figures?

Under clause 14.2, the buyer’s lawyer or conveyancer prepares the adjustment figures and sends them to the seller’s representative at least two business days before settlement. The seller must confirm them at least one business day before settlement.

Almost all NSW settlements now happen electronically through PEXA. Once the figures are agreed, they’re entered into the PEXA workspace’s settlement schedule, which shows where every dollar comes from and goes to: the buyer’s funds and loan, the seller’s mortgage payout, payments to the council and water authority, and the balance to the seller. On settlement, the money moves and the transfer is lodged at the same moment. For what happens on the day, see our guide to settlement day for sellers in NSW.

Your settlement adjustment checklist

Frequently asked questions

This article is general information only and is not legal advice. It reflects NSW law at the date of publication. Please contact us for advice about your circumstances.

Related guides