Contract Glossary
Proration
Definition
Proration is the process of dividing or allocating costs, charges, or credits proportionally based on actual usage or time. In contracts, proration commonly applies to rent (when a tenant moves in or out mid-month), property taxes (divided between buyer and seller at closing), insurance premiums, and subscription fees. The prorated amount is calculated by determining the daily rate and multiplying by the number of applicable days. Proration ensures that parties only pay for what they actually use or the time period they're responsible for.
In Practice
A tenant signs a lease starting on March 15th with monthly rent of $2,100. For March, the landlord calculates prorated rent: $2,100 ÷ 31 days = $67.74/day × 17 remaining days = $1,151.61. The tenant pays $1,151.61 for the partial first month, then $2,100 for each full month thereafter. The lease specifies that proration applies at both move-in and move-out to avoid disputes about partial-month charges.
Example Clause
If the Commencement Date falls on a day other than the first day of a calendar month, Tenant shall pay prorated rent for the partial month based on a per diem rate calculated by dividing the monthly rent by the actual number of days in that month. Proration shall similarly apply upon termination if the Term expires on a day other than the last day of a calendar month.
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