Prorations are the division of operating income and expenses between buyer and seller at close, based on the closing date. Typical items: rent, property tax, utilities, insurance premiums.
At the escrow officer calculates prorations: seller gets credit for rent collected covering post-close days, pays property tax for pre-close days, etc. Prorations ensure each party only bears costs and receives income for their portion of the month or fiscal period.
LA multifamily prorations are standard. Common proration complications: tenants paying rent for partial months, LAHD fees due on specific dates, insurance premiums paid annually, property tax reassessments pending. Review the settlement statement carefully.
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