In South Dakota, property taxes are paid in arrears. At closing, how are property taxes typically handled?
Correct Answer
B) The seller credits the buyer for accrued but unpaid taxes through the day of closing
South Dakota property taxes are paid in arrears, meaning taxes for a given year are not due until the following year — the first half by April 30 and the second half by October 31. Because the seller has occupied the property during the tax year but the bill will come due after closing, the seller typically provides the buyer a credit at closing for the portion of taxes accrued through the day of closing. The buyer then assumes responsibility for paying the full tax bill when it comes due. The exact proration method is governed by the purchase agreement.
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Related Topics & Key Terms
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Related Concepts
A bilateral contract is an agreement in which both parties exchange promises and are both obligated to perform, while a unilateral contract is one in which only one party makes a promise and the other party is not obligated to act.
A breach of contract occurs when one party fails to perform their obligations under the contract without a legal excuse. The non-breaching party is entitled to legal remedies including damages, specific performance, or contract rescission.
Consideration is something of value exchanged between parties to a contract, making the agreement legally binding. It can be money, a promise to act, a promise to refrain from acting, or anything else of value.
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