Short Answer

Yes. In North Carolina, you can allocate tax risk in a mediated settlement with a clear, written, and signed indemnity or “hold harmless” clause. It binds only the parties, not the IRS or N.C. Department of Revenue, so it functions as a reimbursement promise if taxes are assessed later. To be enforceable, put the full terms in writing and have all parties sign before leaving mediation, then submit a consent order or dismissal in the partition case.

Understanding the Problem

You want to resolve a North Carolina partition dispute through mediation and include an indemnity so your sibling co-owner won’t be responsible for any future taxes tied to your time as a listed “partner.” The decision point is: can your mediated buyout agreement include a tax indemnity, and how should it be documented in the Clerk of Superior Court partition proceeding?

Apply the Law

North Carolina allows parties to settle civil disputes at mediation and to allocate risk by contract. A mediated settlement is enforceable if it is reduced to writing and signed by the parties. In partition special proceedings before the Clerk of Superior Court, the clerk can order or accept mediation, and the parties may present their written settlement as a consent order or file a dismissal once terms are complete. An indemnity clause can address future tax liabilities between the parties, but it does not prevent tax authorities from assessing taxes; it gives the protected party a contractual right to reimbursement.

Key Requirements

• Written and signed agreement: The mediated settlement must be in writing and signed by the parties at or immediately after mediation to be enforceable.
• Clear indemnity scope: State which taxes, periods, filings, penalties, interest, and professional fees are covered; clarify cooperation, notice, and defense rights.
• Consideration and releases: Tie the indemnity to the buyout and mutual releases so the contract is supported and comprehensive.
• Court handling of the partition: Convert the settlement into a consent order or file a dismissal in the partition special proceeding before the Clerk of Superior Court.
• Limits of indemnity: The clause binds only the parties; it does not bind the IRS or N.C. Department of Revenue.

What the Statutes Say

• N.C. Gen. Stat. § 7A-38.1 (Mediated settlement in superior court) – Settlement reached at mediation is enforceable if written and signed.
• N.C. Gen. Stat. § 7A-38.3B (Mediation in matters before the clerk) – Authorizes mediation in special proceedings, including partition, before the Clerk of Superior Court.
• N.C. Gen. Stat. Ch. 46A (Partition) – Governs partition proceedings and sales of co-owned real property.

Analysis

Apply the Rule to the Facts: Because your case will be mediated, you can include a written, signed indemnity promising that your sibling will be reimbursed for any assessed taxes, penalties, interest, and tax-professional fees tied to the period when you were listed as a partner. Tie the indemnity to the buyout consideration and include mutual releases. After signing, submit a consent order (or later a dismissal upon closing) in the partition file with the Clerk of Superior Court so the court’s sale process is paused or ended.

Process & Timing

1. Who files: The parties (through counsel). Where: Clerk of Superior Court in the county where the property lies. What: A written Mediated Settlement Agreement signed by all parties, followed by a proposed consent order or a stipulation of dismissal in the partition special proceeding; you may use court ADR forms to memorialize terms at mediation and then draft a fuller agreement. When: Sign at mediation; submit the consent order or dismissal promptly so any scheduled sale or hearings are stayed.
2. The clerk or a judge (if transferred) reviews and enters the consent order or notes the dismissal. Timeframes vary by county; ask the clerk’s office about local processing.
3. Close the deal: exchange deed and consideration; record documents; set any escrow or holdback to secure the indemnity; file a dismissal with prejudice if appropriate.

Exceptions & Pitfalls

• Indemnity does not bind tax authorities; it only creates a repayment duty between the parties.
• Vague indemnities cause disputes; define covered tax years, returns, penalties/interest, defense control, cooperation, survival period, and any caps or escrow.
• If any co-owner or necessary party does not sign, the settlement may not resolve the partition; ensure all record owners and necessary entities sign.
• If minors or unknown interest holders exist, additional steps (e.g., appointment of a guardian ad litem) may be required before approval.
• Do not assume the partition sale is paused—promptly file the consent order or notify the clerk to avoid sale or upset-bid complications.

Talk to a Partition Action Attorney

If you’re navigating a partition case and want to include a tax indemnity in a mediated buyout, our firm has experienced attorneys who can help you understand your options and timelines. Call us today at [919-341-7055].

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.