prorate

Pro Rata

Describing a distribution according to some proportion. For example, a salary may be stated as $120,000 per year pro rata. This means that if an employee only works for six months, his/her salary will be $60,000. Likewise, dividends are distributed pro rata, meaning that shareholders receive them according to the proportion of shares that they own.

Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

prorate

The process of determining the pro rata portions. In real estate, the term comes up frequently at a closing,when allocating certain property expenses.Usually real estate taxes are paid in arrears and homeowners association dues are paid in advance.The new owner will pay 100 percent of the real estate tax bill when it is presented after the closing, but a portion of that bill represents time periods when the seller owned the property.Likewise,the seller will have already paid the association dues for the month, but will own the property for only a portion of the month. At closing, these expenses are prorated between the buyer and seller. The buyer will receive a credit for the accrued-but-unpaid property taxes. The seller will receive a credit for the paid-but-unaccrued association dues.

The Complete Real Estate Encyclopedia by Denise L. Evans, JD & O. William Evans, JD. Copyright © 2007 by The McGraw-Hill Companies, Inc.