Mastering the Settlement Statement Walkthrough for the Alberta Real Estate Exam
Last updated: April 2026
As you prepare for your real estate licensing journey, mastering the financial mechanics of a property transaction is non-negotiable. For candidates taking the Real Estate Council of Alberta (RECA) licensing exams, the "settlement statement"—formally referred to in Alberta as the Statement of Adjustments—is a critical area of study. If you want a broader look at everything you need to know to pass, be sure to bookmark our Complete Alberta Real Estate Associate Exam Exam Guide.
While real estate associates do not draft the Statement of Adjustments (this is the strict domain of real estate lawyers in Alberta), you are expected to understand its components, explain it to your clients, and ensure your brokerage's trust ledger aligns with the final numbers. This walkthrough will break down exactly what you need to know for the exam.
Understanding the Statement of Adjustments in Alberta
In Alberta, the Statement of Adjustments is the final financial blueprint of a real estate transaction. It calculates the exact amount of money the buyer must bring to their lawyer to close the deal, and the exact amount the seller will receive after all debts and fees are cleared.
The core principle of the settlement statement relies on Debits (amounts owed) and Credits (amounts already paid or to be received). To pass the exam, you must be able to look at an expense—like property taxes or condominium fees—and correctly identify whether it results in a debit or a credit to the buyer or seller.
Key Components of the Settlement Statement
1. The Purchase Price and Deposits
The foundation of the statement is the agreed-upon purchase price from the standard Alberta Real Estate Association (AREA) Residential Purchase Contract.
- Purchase Price: This is a Debit to the buyer (they owe this money) and a Credit to the seller (they will receive this money).
- Initial Deposit: The deposit held in the brokerage's trust account is credited toward the buyer's purchase price. This is a Credit to the buyer. For more on how deposits relate to the buyer's overall financial picture, review our guide on loan-to-value and down payment calculations.
2. Property Tax Adjustments (Crucial Exam Concept)
Property taxes are the most frequently tested adjustment calculation on the RECA exam. In Alberta, municipalities levy property taxes annually (typically covering January 1 to December 31).
Under the standard AREA contract, the buyer is responsible for the property taxes starting on the Completion Day.
Alberta real estate calculations use a standard 365-day year (ignore leap years unless specifically instructed otherwise by the exam question).
Daily Tax Rate = Annual Property Taxes ÷ 365
3. Condominium Contributions (HOA Fees)
If the property is a condominium, monthly condo contributions must be adjusted. Because these are typically paid on the 1st of the month, a mid-month closing requires an adjustment where the buyer reimburses the seller for the days they own the property during that month.
Debits vs. Credits: A Practical Exam Scenario
Let’s walk through a realistic scenario you might encounter on the exam.
The Scenario:
- Purchase Price: $400,000
- Deposit: $20,000 (held by the buyer's brokerage)
- Completion Day: August 15
- Annual Property Taxes: $3,650 (The seller has already paid the entire year's taxes to the municipality).
Step 1: Calculate the Tax Adjustment
- Daily tax rate: $3,650 ÷ 365 = $10.00/day.
- Seller's days owned (Jan 1 to Aug 14): 31 + 28 + 31 + 30 + 31 + 30 + 31 + 14 = 226 days.
- Buyer's days owned (Aug 15 to Dec 31): 365 - 226 = 139 days.
- Adjustment amount: 139 days × $10.00 = $1,390.
Because the seller already paid for the buyer's 139 days, the buyer must reimburse the seller. This results in a $1,390 Debit to the Buyer and a $1,390 Credit to the Seller.
Step 2: Calculate the Buyer's Balance Due
- Debit: Purchase Price ($400,000)
- Debit: Tax Adjustment ($1,390)
- Credit: Deposit ($20,000)
- Balance required from Buyer (via mortgage and cash): $400,000 + $1,390 - $20,000 = $381,390.
Typical Closing Costs Breakdown in Alberta
Unlike other provinces, Alberta does not have a Land Transfer Tax. Instead, the Alberta Land Titles Office charges registration fees based on property value and mortgage amount. Understanding these approximate costs helps you advise buyers on the cash they need on closing day.
Typical Buyer Closing Costs ($500k Alberta Property)
How This Appears on the RECA Exam
When you sit for the exam, you won't be asked to draft a full legal Statement of Adjustments from scratch. Instead, you will be tested on your comprehension of the mechanics.
You can expect multiple-choice questions asking you to calculate a specific adjustment (like the property tax example above) or to identify which party receives a debit or credit for a specific item (like an assumed tenant security deposit).
To better understand how these calculation questions fit into the broader exam, take a look at our exam format and structure overview, and familiarize yourself with the pacing by reviewing how many questions and time limits you'll face on test day.
Frequently Asked Questions (FAQs)
Does the real estate associate prepare the Statement of Adjustments in Alberta?
No. In Alberta, the Statement of Adjustments is prepared by the seller's lawyer and reviewed by the buyer's lawyer. However, as an associate, you must understand it to explain the closing process to your clients and ensure your brokerage's trust deposit is correctly credited.
Who is responsible for property taxes on closing day under the standard AREA contract?
Under the standard Alberta Real Estate Association (AREA) Residential Purchase Contract, the buyer assumes all financial responsibilities for the property—including property taxes, utilities, and condo fees—starting at 12:00 AM on the Completion Day.
Are real estate commissions included on the buyer's settlement statement?
No. Real estate commissions are typically the responsibility of the seller. They will appear as a debit on the seller's Statement of Adjustments, and the funds are usually paid directly to the listing brokerage by the seller's lawyer from the sale proceeds.
How are tenant security deposits handled on the Statement of Adjustments?
If the buyer is assuming an existing tenancy, the tenant's original security deposit (plus any required accrued interest under the Alberta Residential Tenancies Act) is credited to the buyer and debited from the seller. The buyer will then hold these funds in trust for the tenant.
What happens if property taxes haven't been assessed yet for the current year?
If the transaction closes early in the year before the municipality has issued the new tax assessment, lawyers will typically base the adjustment on the previous year's taxes. They may also hold back a small amount of funds in trust (an undertaking) to settle any discrepancies once the final tax bill is issued.
---