Short Answer

In North Carolina, co-owners can account for “rents and profits” in a buyout by agreeing to a written credit for rental income (net of agreed expenses) as part of the settlement and deed. If negotiations fail, you can ask the Clerk of Superior Court in a partition proceeding to address accounting between cotenants and apply credits or owelty to the final amount. Tax appraisals are not binding; use a current market appraisal to set value.

Understanding the Problem

You want to know how, under North Carolina partition law, you can make sure rental income is actually reflected in the buyout you and your co-owner are negotiating. The key decision: can you require the buyout price to include a credit for rents collected (after agreed expenses) before you sign? You have a scheduled mediation at a neutral mediator’s office and a change in counsel, and there’s disagreement about using a recent tax appraisal.

Apply the Law

North Carolina cotenants may settle their dispute by agreement or, if needed, through a partition special proceeding before the Clerk of Superior Court where the property sits. In that forum, courts routinely consider accounting among cotenants for “rents and profits,” taxes, insurance, necessary repairs, and may balance the equities through credits or an owelty payment. Mediation can be ordered or used voluntarily to nail down these terms, and any settlement should clearly state the rental-income credit and valuation method.

Key Requirements

• Right to an accounting: In a partition context, cotenants can seek an accounting for rents received and necessary carrying costs so the buyout reflects net rents, not just gross collections.
• Prove the numbers: Be ready with leases, bank records, and a simple ledger showing rent collected, vacancies, and agreed expenses (taxes, insurance, routine repairs).
• Net, not gross: Credits typically use net rental income after agreed shared expenses; major improvements are credited only to the extent they increased value.
• Use market valuation: County tax assessments are not binding evidence of fair market value; independent appraisals or a stipulated valuation method are preferred.
• Put it in writing: The settlement must specify the rent credit, the accounting period, allowed expenses, valuation method, and the deed/owelry terms—signed at mediation.
• Forum and trigger: If no agreement, file a partition special proceeding with the Clerk of Superior Court in the property’s county and ask for an accounting and appropriate credits.

What the Statutes Say

• North Carolina Gen. Stat. Chapter 46A (Partition) – establishes partition as a special proceeding, commissioner process, sales, and equitable adjustments (including owelty).
• N.C. Gen. Stat. § 7A-38.3B (Mediation before the Clerk) – allows the Clerk to order mediation in matters within the Clerk’s jurisdiction.
• N.C. Gen. Stat. § 1-301.2 (Appeals in special proceedings) – sets the path and timing for appeals from orders of the Clerk in special proceedings like partition.

Analysis

Apply the Rule to the Facts: Because you and your co-owner expected rents to be part of the buyout, draft an itemized, net-rent accounting (with supporting records) and propose it as a specific credit in the mediation term sheet. Reject reliance on a bare tax appraisal and propose an independent appraisal (or a two-appraisal average) to set value. Ensure your new attorney is formally substituted and authorized to sign a written settlement that lists the rent credit, valuation method, and deed/owelry language.

Process & Timing

1. Who files: Either cotenant. Where: Office of the Clerk of Superior Court (Special Proceedings) in the North Carolina county where the property is located. What: If settlement fails, file a Petition for Partition and request an accounting for rents and profits; ask for commissioners or sale if appropriate. When: After mediation if no agreement; before mediation, prepare a detailed term sheet with a rent-credit schedule and valuation method.
2. At mediation, exchange rent ledgers, leases, and expense proofs in advance when possible. The mediator can manage attendance and separate sessions. If you reach terms, sign a written memorandum of settlement that lists: net rent credit, accounting period, shared expenses, appraisal method, closing timeline, and deed/owelry provisions.
3. To finalize, execute and record the deed reflecting the agreed buyout and any owelty/credits, exchange funds, and dismiss any partition filing. If no settlement, the Clerk may appoint commissioners and consider accounting; the report can include credits for rents and expenses, followed by judicial approval.

Exceptions & Pitfalls

• Exclusive occupancy vs. rent: A cotenant merely living in the property usually doesn’t owe rent absent exclusion, but rents received from third-party tenants are subject to accounting.
• Improvements vs. repairs: Credits for improvements generally apply only to the extent they increased value; routine repairs and carrying costs are handled as shared expenses.
• Tax values: County assessments are not market value; rely on a certified appraisal or a stipulated valuation method.
• Service and notice: If a partition is filed, all cotenants must be properly served; missing a party can derail orders and closings.
• Mediation formalities: Settlement isn’t enforceable unless it’s in a signed writing; confirm who may attend and who has authority to sign, especially with changing counsel.

Talk to a Partition Action Attorney

If you’re dealing with a co-owner buyout and want rental income credited correctly, our firm has experienced attorneys who can help you understand your options and timelines. Call us today.

Disclaimer: This article provides general information about North Carolina law based on the single question stated above. It is not legal advice for your specific situation and does not create an attorney-client relationship. Laws, procedures, and local practice can change and may vary by county. If you have a deadline, act promptly and speak with a licensed North Carolina attorney.