Humber/Ontario Real Estate Course 3 Exam Practice

Which situation at closing does not require an adjustment if fuel is a metered utility and a reading is taken?

1. If insurance is transferred at completion

2. If fuel is a metered utility with a reading taken at closing

3. If property taxes for the closing date are settled at closing

4. If prepaid rent is credited to the seller from the closing date

5. If unpaid utility bills are settled at closing

6. If closing fees are settled

The correct answer is: If fuel is a metered utility with a reading taken at closing

The correct answer is based on the nature of metered utilities and how they are typically handled during the closing of a real estate transaction. In the case where fuel is a metered utility and a reading is taken at closing, there is no need for an adjustment because the reading provides an accurate measure of the fuel consumed up to that point. Since the actual usage can be precisely accounted for, adjustments are not required to reconcile payments between the seller and buyer. In other situations mentioned, adjustments are necessary to align financial liabilities and credits between parties. For instance, if insurance is being transferred, adjustments may be needed to reflect the change in coverage and any applicable premiums. Similarly, property taxes, prepaid rent, and unpaid utility bills require meticulous calculation to ensure correct payment allocations are made to the appropriate party, providing fairness in the transaction. Thus, the specific process of taking a fuel reading at closing renders such adjustments unnecessary, as all parties have an agreed-upon and accurate amount to work from based on that reading. This creates a clear and transparent transition of responsibility for the utility usage, without the need for recalculating or compensating between the buyer and seller.