A few days before closing, your notary sends you a statement of adjustments. On it you'll see the price, the down payment, the notary's fees… and a series of "adjustment" lines that often surprise first-time buyers. These are the property's taxes and charges, split to the day between the seller and you.
The principle: everyone pays for their own period
Property taxes are billed for a full year, but the property changes hands partway through it. The property tax adjustment at closing restores the balance: the seller covers the days they owned the home, and the buyer covers the days after.
- If the seller has already paid for the whole year, they've paid for days when you'll be the owner: you reimburse them for that period.
- If part of the bill hasn't been paid yet, it's the reverse: the seller credits you their share, and you pay the bill when it's due.
In practice, taxes are often paid in several instalments. The notary checks with the municipality what has been paid and calculates the exact balance.
What gets adjusted
- Municipal taxes: the biggest item, split to the day.
- School tax: same principle. It follows its own billing period, separate from the municipal tax; the notary takes that into account.
- Condo fees: in a condo, the common expenses for the month of closing are split between seller and buyer. The notary also checks with the syndicate of co-owners that there are no arrears.
- Heating oil: if the house is heated with oil, the buyer generally reimburses the fuel left in the tank, as set out in the promise to purchase.
Fictional example: the municipal tax
Suppose an annual municipal tax of $4,200, already paid in full by the seller for the calendar year. Possession takes place on July 1, and the year has 365 days.
| Item | Value |
|---|---|
| Annual municipal tax (paid by the seller) | $4,200 |
| Days covered by the seller (January 1 to June 30) | 181 days |
| Days covered by the buyer (July 1 to December 31) | 184 days |
| Cost per day ($4,200 ÷ 365) | $11.51 |
| Buyer's reimbursement to the seller (184 days) | $2,117 |
In this example, the buyer needs about $2,117 more at closing, just for the municipal tax. Add the school tax and, in a condo, that month's fees.
The earlier in the year you take possession, the bigger the reimbursement, since the seller has paid for more days still to come. Conversely, a closing late in the year leaves little to reimburse. To estimate this item before you get the statement, ask the seller or your broker for the latest tax bill and what has already been paid.
The notary's statement of adjustments
The notary prepares a statement of adjustments that summarizes all the money changing hands: price, down payment, loan amount, adjustments, fees and disbursements. You usually receive it a few days before closing, along with the exact amount to hand over.
That amount must be available at closing, usually by wire transfer or bank draft, following the notary's instructions. Don't discover it at the last minute: keep some margin in your account and include the adjustments in your total closing costs calculation.
Another cash amount: the tax on the mortgage insurance premium
If your down payment is under 20%, your mortgage must be insured. The premium is added to the loan, but the provincial tax on that premium can't be financed: it's paid in cash at the notary. The rate is 9%, and 9.975% for premiums paid after December 31, 2026.
Fictional example: for a $400,000 property with 5% down, the loan is $380,000 and the 4% premium comes to $15,200. The tax payable in cash is about $1,368 at the 9% rate, or $1,516 at the 9.975% rate.
For the notary's own fees, see the price ranges for notary fees, inspection and appraisal.
Frequently asked questions
What is the property tax adjustment at closing?
It's how municipal and school taxes, and other charges such as condo fees, are split between the seller and the buyer based on the date of possession. If the seller has already paid for the year, the buyer reimburses them for the period after moving in.
When do you find out the exact amount of the adjustments?
The notary shows it on the statement of adjustments, usually a few days before closing. The amount is payable at closing, on top of the down payment.
Can the tax on the CMHC premium be added to the mortgage?
No. The mortgage loan insurance premium can be added to the loan, but the provincial tax on that premium must be paid in cash at the notary.
