Apportionment

The term apportionment can be easily applied to many contexts. For example, apportionment in insurance is concerned with how the loss is allocated between two or more insurance companies that collaborated to ensure property or asset. However, in the real estate market, when we talk about apportionment, we refer to the allocation of property expenses that are divided between the buyer and seller during a real estate transaction.

What does Apportionment Mean?

As mentioned above, apportionment is the distribution of costs between the buyer and seller, but this is a bit more complex than you might expect. During a real estate transaction, there are several categories of costs that need to be divided. Firstly, there are tax apportionments that require separate tax notices to be generated for each individual based on the timeline of ownership. Rents can also be apportioned for renters who paid in advance and vacated a property before the deadline. 

Basically, the term apportionment comes from French, and the apportionment meaning is the distribution of something in proper shares. Most commonly used in law, apportionment refers to the distribution of benefits, liability. From a strictly legal perspective, the apportionment can be calculated based on time or based on estate.

Apportionment of estate

Based on estate, the apportionment can result from the act of the parties involved or the law’s operation. An evicted renter is required to pay the amount of rent charged for the time spent in the property prior to eviction, which was an act of the party. However, suppose the renter is evicted because of an act by the law as an instance of eminent domain or an act of God. In that case, the situation is reversed, and we have apportionment from the operation of the law.

Apportionment of time

Based on time, the apportionment can be of rent. If sometimes, before the payment of rent, the renter or landlord dies, or any other type of modification in the parties’ positions happens.

What is Apportionment in Real Estate?

The primary type of apportionment encountered by buyers and sellers is the one that affects costs during a real estate transaction. The parties involved in the transaction will usually split the expenses generated by the property during the month in which the real estate transaction occurs. Here we can refer to taxes, maintenance costs, insurance, and so on. The reason for which this is done is to ensure that the property taxes gained by the local government in portion before the closing date, but were not paid, will be covered by the new owner of the property during the transaction in the form of a credit against the price for which they purchased the property.