Jul 22, 2011

Tip 29-2011: Propane/Fuel Oil Proration

(Propane/Fuel Oil Proration)   

A prior Tucker’s Tip, #21-2009, discussed problems with obtaining a reading from the propane company and the calculation of the amount of the credit as provided in Paragraph 9 of the VAR Contract of Purchase.  Paragraph 9 provides that the “Purchaser agrees to pay Seller for all fuel, oil and/or propane remaining in the tank at the prevailing market price as of date of settlement.”

Sometimes the parties to the closing forget about the propane purchase until the last minute, which may cause a problem at the closing table.  A good practice is to make sure that everyone involved with the closing is aware that there is propane or fuel oil which needs to be prorated.  This information should be provided at the very beginning of the contract negotiations and passed on to all parties, including the settlement attorneys involved in the transactions.

As the measurement of the propane or fuel oil does not occur until just before closing, it is a good idea to keep reminding everyone that the propane bill will be coming.  With today’s fuel prices, a full tank can create a very large payment that the Purchasers will have to pay at closing.

Please contact our firm if you have questions or need legal advice.  

Tucker Griffin Barnes - Where deep insight equals powerful advantage.

Senior Partner
William D. Tucker, III
Tucker Griffin Barnes P.C.
Charlottesville, Virginia


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