Pro-Rations At Settlement - Delaware
When you sell a home in Delaware, your sales contract contains the following language: “Taxes, special assessments, ground rent, water, sewer, electric and other lienable charges imposed by the State of Delaware, any political subdivision thereof, any school district, neighborhood association and/or condominium common expenses shall be apportioned pro-rata at the time of final settlement, as shall the rents and pre-paid operating expenses.”
The concept of pro-rations recognizes that there are certain bills that a seller may have paid before settlement, but the period covered extends beyond the date of settlement. When this happens, the seller has to be reimbursed for a portion of this period. Take the following example.
The New Castle County sewer bill is charged on an annual basis and covers the period January 1 to December 31. The sewer bill is usually paid in full by the end of February. Let’s assume that settlement takes place on September 1, 2010. The seller will have already paid the bill for the period January 1, 2010 through December 31, 2010. Because the buyer becomes the owner on September 1, 2010, the contract requires the buyer to reimburse the seller for that portion of the year that the buyer is the owner (September 1, 2010 through December 31, 2010).
Now let’s look at the County and School taxes. The tax year begins July 1 and ends June 30. The deadline for paying the taxes is September 30. If settlement take place on September 1, 2010, the seller is responsible for the taxes for the period July 1, 2010 through August 31, 2010, and the buyer is responsible for the taxes from September 1, 2010 through June 30, 2011. The logistics for this can be a little confusing due to the fact that the seller has been escrowing for taxes with his mortgage company. If the seller’s mortgage company has already paid the taxes, then the seller will receive his reimbursement from the buyer at settlement for the period September 1, 2010 through June 30, 2011. If the seller’s mortgage company has not yet paid the taxes, then the taxes for the period July 1, 20201 through August 31, 2010 will be deducted from the seller’s proceeds at settlement, and the seller’s mortgage company will refund to the seller the entire balance in his escrow account.
If you’re selling your home in Delaware, speak to an experienced real estate lawyer so that you can become an informed and knowledgeable seller.
