📅 What Is a Prorations Clause in Real Estate?

A Prorations Clause in a real estate contract explains how certain costs — such as property taxes, HOA dues, rents, utilities, and assessments — are divided between the buyer and seller at closing. The clause ensures each party pays only their fair share for the time they owned or occupied the property.

How a Prorations Clause Works

Most property-related expenses are billed monthly, quarterly, or yearly. When ownership changes hands mid-cycle, the cost must be prorated so that the seller pays for their portion and the buyer pays for theirs.

Common items prorated at closing include:

  • Property taxes — most states prorate taxes to the day of closing.
  • HOA or condo dues — monthly, quarterly, or annual fees.
  • Rent — for tenant-occupied properties, rent is prorated and credited to the buyer.
  • Utilities — if not individually metered (e.g., shared water bills).
  • Special assessments — depending on the contract and disclosure timeline.

The Prorations Clause defines how prorations are calculated and what expenses are included.

Why a Prorations Clause Matters

Benefits for Buyers:

  • Ensures the buyer is not overpaying for taxes or dues owed by the seller.
  • Guarantees accurate credits for rent or prepaid expenses.
  • Provides clarity on financial responsibilities at closing.

Benefits for Sellers:

  • Protects sellers from being charged for post-closing periods.
  • Prevents disputes about HOA dues, assessments, or prepaid items.
  • Helps sellers understand their net proceeds more accurately.

Example of a Prorations Clause

A typical Prorations Clause might state:

  • “Taxes, rents, dues, and assessments shall be prorated as of the closing date.”
  • “Seller shall receive credit for any prepaid items; buyer shall receive credit for any unpaid accrued items.”
  • “Prorations shall be based on the most recent available tax bill unless otherwise agreed.”
  • “If actual tax amounts differ from estimates, neither party shall be required to make post-closing adjustments unless required by law.”

These examples show how prorations prevent overpayment by either side.

Why It Matters for FSBO Sellers

FSBO sellers often complete closing paperwork without an agent, so understanding the Prorations Clause is essential for knowing how much they owe — and how much they may receive as credits.

  • Helps sellers anticipate expenses and calculate net proceeds.
  • Prevents disputes with buyers over taxes or HOA dues.
  • Clarifies how much sellers must pay at closing versus what is refunded.
  • Ensures full transparency when disclosing taxes and HOA fees.

When listing with Flat Fee MLS through Brokerless, sellers receive guidance on prorations, dues, assessments, and title charges.

Frequently Asked Questions

Who pays prorated taxes at closing?
The seller usually pays taxes for the portion of the year they owned the home. The buyer pays from the closing date forward.

Do HOA dues get prorated?
Yes. If the seller prepaid dues, the buyer reimburses them for the unused portion.

What happens if tax bills change after closing?
Most contracts state that no further adjustments are required unless mandated by state law.

Are prorations negotiable?
Yes — buyers and sellers can negotiate responsibility for taxes, dues, assessments, rent, and utilities.