Humber/Ontario Real Estate Course 3 Exam Practice

Which statement best describes the requirement at closing for prepaid rent credits?

1. Insurance transfer needs to be completed

2. Property taxes are solely the seller’s responsibility

3. Prepaid rent must be credited to the seller from closing date

4. No reading for metered utilities required

5. Prepaid utilities must be settled by the buyer

6. Closing fees need full payment

The correct answer is: Prepaid rent must be credited to the seller from closing date

Prepaid rent credits at closing imply that any rent paid in advance by the seller for the period after the closing date must be accounted for during the transaction. The rationale behind this is that the buyer will take possession of the property after closing but the seller has already paid for the use of the property beyond that date. Therefore, it’s essential for the seller to receive a credit for the prepaid rent when calculating the final financial settlement at closing. This adjustment ensures that the seller is not disadvantaged financially by paying for a period in which they are no longer entitled to occupy the property, while the buyer, who will benefit from that prepaid rent, does not incur additional costs for a period they won't occupy. In this context, the other options presented do not accurately address the mechanics of prepaid rent or how it should be handled at the time of closing. For instance, transferring insurance, property tax responsibilities, and utility readings pertain to other aspects of the real estate transaction that do not specifically relate to handling prepaid rent. Thus, the correct understanding revolves around correctly applying prepaid rent credits to benefit both parties equitably.