Apportionment

Apportionment is a term that refers to the division of assets, profits or losses between people or entities who are not necessarily partners.

In regular conversational language apportionment simply refers to the allocation of stuff between different parties.

Apportionment is a more cordial word that carries such meaning in business and more cordial language.

There are some common instances where the term is used.

Insurance

Insurers who are jointly providing coverage for an insured person might have to apportion the amount of claims made by the policy holder.

For example, a person who has an insurance coverage for property of $600,000 might have a policy that has been split equally among three insurers. When the property is destroyed and condemned and a full claim is lodged, the $600,000 would be apportioned between the insurance companies of $200,000 each.

Because high valued personal property and real property can often be covered by more than one policy from different insurers, apportionment clauses provide a guide on how claims are allocated.

This is partly to ensure that the assured does not claim an amount greater than the coverage.

As things might become confusing when more than one insurer is providing coverage for the same thing. It can be made even more complex when policies overlap each other but contain different wording that means that same thing.

Common liability insurance policies also often come with apportionment terms.

Property

Apportionment has several different applications in real estate depending on the context in which the term is used.

It is commonly used to refer to property expenses such as repairs, maintenance and other operational expenses that partners need to allocate for each party.

So if expenses come up to $20,000 for the year, two equal partners might split the bill between them at 50% each. However, it is really up to them to determine the share that each person would take on. This is especially the case when they are not equal partners.

This is not only applicable to losses and expenses.

Income generated by property assets such as rental income might be shared between more than one party due to joint investments. The share of income allocated between the investors would be apportioned according to their capital investment or the stake they each have on the property.

Apportionment is also a term used to describe the split between property buyers and seller on how property taxes would be paid.

This can often occur in the sale of a house.

For example, a homeowner might have paid property tax for the year for $3,000. 4 months after the tax date, the home is sold and the seller can legitimately request that the property buyer, who is now the new home owner to return the property tax paid at a pro-rated basis. This would come up to $1,000.

It must be noted that apportionment of property tax liabilities is a private arrangement between the buyer and seller. Government agencies does not set rules HDB might assist parties involved in HDB transactions to calculate a fair apportion amount.

The consultation of lawyers are suggested for private property should help be needed.

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