How can I negotiate with a buyer to cover part of the prorated taxes? – North Carolina

Short Answer

In North Carolina, property tax prorations are a contract term, not a fixed law. By default, taxes are prorated as of the closing date so the seller pays for their days of ownership and the buyer pays the rest, but you can change that with a signed addendum. Because the annual tax bill is a lien on the land, the closing attorney will collect or adjust for taxes on the settlement statement; you can negotiate buyer credits or price adjustments to shift some of that cost.

Understanding the Problem

You’re selling North Carolina real estate and want to know whether you can negotiate for the buyer to cover some of the current year’s prorated property taxes at closing. You and a co-owner will also need to decide how your side splits any tax charge or credit. The key decision is whether to keep the standard prorations or change them by agreement before the closing attorney finalizes the settlement statement on a cash purchase.

Apply the Law

Under North Carolina law, the county’s annual property tax lien attaches to the land for the tax year, and any unpaid taxes must be addressed at closing to deliver clear title. In practice, taxes are prorated as of the closing date unless the buyer and seller agree otherwise in the purchase contract or an addendum. The closing attorney applies that agreement on the ALTA/Closing Disclosure and pays or holds funds as needed, even if the bill hasn’t issued yet.

Key Requirements

• Clear written agreement: Put any nonstandard tax split in the contract or a signed addendum before closing.
• Specific allocation method: State the date used, per‑diem or percentage split, and whether there’s a cap or post‑closing true‑up.
• Deal with liens first: Prior‑year delinquencies and the current liened tax must be satisfied or reserved from proceeds before distributions.
• Coordinate with the settlement agent: Give the closing attorney written instructions so the settlement statement reflects the agreed credits/debits.
• Internal seller split: Co‑owners should agree in writing how their side shares any tax charge or credit from the proceeds.

What the Statutes Say

• N.C. Gen. Stat. § 105-355 (Creation of property tax lien) – Property taxes become a lien on the real property for the tax year.
• N.C. Gen. Stat. § 105-366 (Collection remedies) – Tax collectors have tools to enforce unpaid taxes, so closings customarily collect or reserve funds.

Analysis

Apply the Rule to the Facts: Because taxes are typically prorated as of closing, your side would normally cover the seller’s share and the buyer the remainder. If you want the buyer to shoulder part of your share, propose a signed addendum giving the buyer a credit for certain costs while the buyer agrees to assume a larger portion of the year’s tax. Internally, document how you and your co‑owner divide any seller debit or credit so the closing attorney can split proceeds correctly.

Process & Timing

1. Who files: Seller (through agent or attorney). Where: Between parties, then to the closing attorney in North Carolina. What: A signed contract addendum that states how current‑year property taxes will be allocated (e.g., buyer pays X% or per‑diem variation; any cap; true‑up if bill not issued). When: Deliver to the closing attorney before the final settlement statement/Closing Disclosure is prepared.
2. The closing attorney confirms county tax amounts or estimates if the bill is not out yet, applies the agreed proration, and may hold an escrow if needed for a later true‑up. Timelines can vary by county and when tax bills are released (often late summer/early fall).
3. At closing, the settlement statement shows the negotiated credit/debit. Prior‑year delinquencies, if any, are paid first; then prorations are applied; remaining proceeds go to the sellers per their internal split.

Exceptions & Pitfalls

• If the county has not issued the bill, build in a clear escrow/true‑up method to avoid disputes after closing.
• Lenders (if any) must see all credits on the Closing Disclosure; avoid off‑statement side deals.
• Don’t overlook prior‑year taxes—those must be paid in full to clear title before prorating the current year.
• Co‑owners should sign a written direction to the closing attorney on how to split any seller charge/credit from proceeds.
• Special assessments or exemptions (e.g., present‑use value) can complicate prorations—spell them out in the addendum.

Talk to a Real Estate Attorney

If you’re dealing with negotiating tax prorations or how to split them with a co‑owner and buyer, 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.