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Pro-rated Rent

If you move into a house or condominium on any day other than the first day of the month, for example if you move in on the 8th of July, with a landlord who doesn't own many units, then most rental contracts will have monthly payments on the 8th day of the month in this example, i.e., you will pay the next month of rent on August 8, then the following month on September 8, and so on. This is usually, but not always, the case, that there is no "pro rated" rent. You can request a preference for either pro-rated or not pro-rated months, or whatever you prefer, and most landlords are flexible and agreeable.

On the other hand, with an apartment building (one owner for all units), things are usually very standardized for all units in the building, so that if you don't move in on the first day of the month, then you will pay a pro-rated rental amount for the first and last months, and your rent will be due on the 1st day of every month.

In cases of pro-rated months, since months can be 31 days, 30 days, 28 days, or even 29 days, there are 3 different ways that rent is pro-rated:

  1. Calculating the fraction based on the number of days of that particular month, such as 8 days out of 31, which is typically done with relatively informal landlords, or
  2. Calculating the fraction based on the number of days of the year, such as 8 days out of 365 days (or 366 days in a leap year), or
  3. Calculating the fraction based on 30 days regardless of the month.

Option #3 has gotten some complaints because it's slightly disadvantageous to the tenant, but it is followed by many apartment buildings, as well as many financial institutions and companies which don't deal with real estate, so that all accounting calculations are simply based on 30, and don't get complicated in varying by month. I have also heard that some companies calculate pro-rated salary this way for employees who work less than a month, which is advantageous to the employee and correspondingly disadvantageous to the company when the employee gets paid more than if the calculation was based on a 31 day month.

For a private landlord of a house or condominium who is not dealing with a lot of tenants and complicated accounting every month, options 1 and 2 are usually followed, but apartments often use option 3.

That covers rent. However, for electricity and water utilities, the standard is just to read the meter when you move in and move out, and calculate a pro-rated amount based on actual consumption, without regard to the number of days.

Some examples of the 30 day month accounting method can be found in: the European 30E/360 method, the US/NASD method, the BMA/PSA (Bond Market Association), and the ISDA (International Swaps and Derivatives Association).

This article is not an endorsement of one or another method, it is simply an explanation. I prefer options 1 or 2, but I'm not dictator, and what eventually happens depends upon the situation and all parties involved.




SiteMap > FAQ and Blog > Pro-rated rent

 

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