Apportionment is a conveyancing term for the division of any outgoing costs on a property, due at the completion date, between the seller and the buyer.
If a seller has paid a year’s rent in advance, then on completion of a sale the amount will be apportioned so that the buyer will have to reimburse the seller for the proportion of the rent calculated from the day after completion until the end of the year. But if the rent is outstanding the buyer can deduct the proportion which the seller owes for the period from the beginning of the year to the completion date.
This ensures that the buyer only pays outgoings due from the date when he or she becomes the owner of the property.
Apportionments are now most commonly found on the sales of leasehold properties, where it is necessary to apportion ground rent, service charges, insurance premiums and any other payments which may be due under the lease. On freehold properties outgoings such as Council tax are apportioned by the council, so will not be handled by Conveyancing Solicitors.
If a property is sold subject to a tenancy, then rent paid by the tenant will be similarly apportioned as the buyer is entitled to receive rent from the date of completion.
Any apportionments should be set out in a completion statement from the seller's solicitor to the buyer's conveyancer, and both parties should be informed of the relevant amounts.
Example of Apportionment:
A seller has paid ground rent of £250 for the period from 1 January 2011 to 31 December 2011, together with a further payment of £750 for estimated service charges for the same period. The flat is being sold, and the agreed completion date is 19 August 2011. The following calculations would be set out in the completion statement, to show how much the buyer will have to pay in addition to the purchase price:
Ground rent from 20 August 2011 to 31 December 2011 (133 days) @ £250 p. a. = £91. 10
Service charge from 20 August 2011 to 31 December 2011 (133 days) @ £750 p. a. = £273. 29
The Standard Conditions of Sale usually used in residential conveyancing provide that it is to be assumed that the seller owns the property until the end of the day on which completion takes place. See also ‘Retention’ for more information.