GLOSSARY
APPORTIONMENTS
The financial calculation used in mainly leasehold and buy-to-let transactions.
Apportionments divide ongoing property expenses such as ground rent, service charge and rental income fairly between the buyer and the seller.
As these expenses are often paid in advance or arrears, a precise mathematical split is required. This calculation ensures that neither party pays for a period when they did not own the property or that the incoming landlord on a buy-to-let transaction does not miss out on rental income.
The figure is agreed between the buyer’s and seller’s legal representatives prior to completion. The agreed figure is factored into the completion statement, either as an addition to what the buyer owes or as a credit back to the seller.
EXAMPLE 1 (LEASEHOLD)
Service Charge and Ground Rent are £1,000.00 for the year, with the 'chargeable period' being 1st January to 31st December.
Completion occurs on 31st July.
31st July to 31st December = 153 days.
£1,000.00 divided by 365 days = £2.74 per day.
£2.74 x 153 days = £419.22.
£419.22 is paid to the seller's legal representative to reimburse the seller for their upfront payment of Service Charge and Ground Rent.
EXAMPLE 2 (BUY TO LET)
The rental income is £1,000.00 per calendar month.
Completion occurs on 16 July.
16th July to 31st July = 15 days
£1,000.00 divided by 31 days = £32.26 per day.
£32.26 x 15 days = £483.90.
£483.90 is deducted from the completion proceeds so as to reimburse the incoming landlord for missed rental income.
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