proration-schedule

# Proration Schedule

Drafts a mathematically precise proration schedule allocating property expenses, income, and obligations between buyer and seller at closing.

## Prerequisites

Collect before drafting:

1. **Purchase agreement** — closing date, closing-date-charge convention, proration terms
2. **Property tax records** — current/prior year bills, assessment notices, pending appeals
3. **HOA documents** — governing docs, statements, special assessments
4. **Lease agreements** (if tenant-occupied) — rent rolls, security deposits, prepaid rent
5. **Utility bills** — water, sewer, trash, property-linked services
6. **Title commitment** — legal description, parcel ID, encumbrances
7. **Insurance policies** (if transferring) — premiums and coverage periods

## Quick Start

1. Gather all prerequisite documents
2. Set closing date and day-count convention (365-day default or 360-day if jurisdictionally required)
3. Determine closing-date allocation (buyer or seller bears closing date)
4. Identify all proration items from the checklist
5. Calculate daily rates and allocations for each item
6. Draft post-closing adjustment provision for estimated amounts
7. Verify net proration ties to settlement statement / Closing Disclosure

## Document Header

Include: document title ("Proration Schedule"), preparation date, closing date, property (address + legal description + parcel ID), escrow/file number, seller(s) and buyer(s) full legal names and addresses, applicable jurisdiction, and day-count convention used.

## Proration Items Checklist

Identify all applicable items:

- Real property taxes (actual or estimated)
- HOA regular fees and special assessments
- Rental income and security deposit transfers
- Water/sewer, trash, other property-linked utilities
- Prepaid insurance premiums (if policy transfers)
- Improvement district / special district charges

## Calculation Table

For each proration item, present:

| Column | Description |
|--------|-------------|
| Item | Description of charge |
| Total Amount | Full periodic amount |
| Period Covered | Start–end dates |
| Daily Rate | Total ÷ days in period |
| Seller Days / Amount | Days responsible × daily rate |
| Buyer Days / Amount | Days responsible × daily rate |
| Credit To | Buyer or Seller |

### Day-Count Convention

- **Default:** 365-day year (actual days per period)
- **Alternative:** 360-day year / 30-day months — apply local convention and document which is used

### Closing-Date Allocation

1. Check purchase agreement for explicit allocation
2. If silent, apply prevailing jurisdictional custom
3. Document the convention in the schedule header

## Property Tax Rules

- State whether based on **actual** or **estimated** (prior-year) bill
- Disclose pending reassessments or tax appeals and explain impact
- Arrears jurisdictions: seller credited for prepayment or debited for accrued liability
- Advance-payment jurisdictions: seller credited for post-closing prepaid portion
- Always include post-closing true-up provision

## Rental Income Rules

- Prorate collected rent as of closing date
- Advance rent beyond closing → credit to buyer
- Security deposits: **transfer** to buyer (not prorated); seller receives corresponding debit
- Note partial-month rent calculations

## Summary

Net proration must appear as:

- Total credits to seller
- Total credits to buyer
- Net proration adjustment (credit to buyer or seller)

This net figure must tie exactly to the proration line on the settlement statement / Closing Disclosure.

## Post-Closing Adjustment Provision

Include clauses for:

1. **Property taxes** — true-up if actual bill differs from estimate by more than $[threshold]; buyer obtains final bill; adjustment within [X] days
2. **Utilities** — final meter readings post-closing; seller liable through closing date; 60-day adjustment deadline
3. **Retroactive assessments** — seller liable for charges attributable to seller's ownership period
4. **Refunds** — buyer remits to seller any refund/credit for seller's ownership period
5. **Settlement method** — direct payment between parties unless otherwise agreed

## Regulatory Compliance

- **TILA-RESPA** (residential + federally related mortgage): proration figures must match Closing Disclosure entries; this schedule is backup documentation
- **State-specific rules:** verify jurisdiction-mandated calculation methods, required disclosures, and statutory allocation requirements
- Note applicable jurisdiction in document header

## Execution Block

Signature lines for all buyers and sellers: printed name, signature, date, and acknowledgment that parties reviewed calculations and agree to allocations. Label as exhibit to settlement statement / Closing Disclosure.

## Pitfalls and Checks

- Show all math — every daily rate derivation must be visible
- Match name/entity references to title documents exactly
- Number all pages; include property address and closing date in footer
- Flag estimated amounts and tie to post-closing adjustment provision
- Never assume tax amounts — use prior-year estimate if bills unavailable and label accordingly
- Add notary blocks if required by lender or local custom
- **Final check:** net proration must reconcile to settlement statement line item