Who is responsible for paying prorated property taxes in a real estate sale? – North Carolina

Short Answer

In North Carolina, property taxes are a lien on the land each year, but who pays what at closing is a matter of contract. The standard practice is to prorate the current year’s taxes as of the closing date: the seller covers the portion for their days of ownership, and the buyer covers the rest. Among multiple sellers, their share is typically split by ownership percentages unless they agree in writing to a different split.

Understanding the Problem

You’re selling North Carolina real estate with a co-owner, and a small prorated property tax amount will be deducted from the sale proceeds. The question is how that prorated amount should be allocated between the buyer, you, and your co-owner. In other words: at a North Carolina closing, who pays the tax share for the year up to the closing date, and how is the seller side split?

Apply the Law

Under North Carolina law, county and municipal ad valorem property taxes become a lien on real estate each January 1. At closing, any unpaid prior-year taxes must be paid because the lien follows the land. For the current year’s bill, North Carolina practice is to prorate taxes as of the closing date by contract and reflect the credit/debit on the settlement statement. Taxes are billed by the county, are due September 1, and begin accruing interest if not paid by January 6 of the following year. The closing attorney (settlement agent) implements the parties’ agreement and disburses from sale proceeds to the county tax collector as needed.

Key Requirements

• Tax lien exists: Property taxes attach as a lien on January 1 each year and must be cleared from proceeds if delinquent.
• Proration by contract: The buyer and seller agree how to prorate the current year’s taxes (customarily through the closing date) and the settlement agent applies that math.
• Use available bill or prior year: If the current bill has issued, closings typically pay it at settlement; if not, they prorate using last year’s bill and may escrow or true-up later if terms allow.
• Multiple sellers’ split: The seller-side share is usually divided by deeded ownership percentages unless the sellers give written instructions to apportion differently.
• Delinquencies first: Any past-due taxes are paid in full at closing before other disbursements.

What the Statutes Say

• North Carolina Gen. Stat. § 105-355 (Tax lien attaches January 1) – Annual property taxes become a lien on the real estate on the listing date.
• North Carolina Gen. Stat. § 105-360 (Interest on unpaid taxes) – Taxes are due September 1 and begin accruing interest if unpaid after January 5.

Analysis

Apply the Rule to the Facts: In your sale with a cash offer and a small prorated tax amount, the customary North Carolina approach is to charge the seller for taxes through the day before closing and the buyer from closing forward. On the seller side, your and your co-owner’s shares are typically divided by your deeded percentages unless you both instruct the settlement agent otherwise. If you agree to cover all prorated taxes while your co-owner covers other costs, have that trade documented in the contract or written closing instructions signed by both sellers.

Process & Timing

1. Who files: No court filing. Where: Address tax proration in the purchase contract and give written instructions to the closing attorney/settlement agent. What: Specify proration method (e.g., through closing date) and any special seller-side split. When: Agree on terms before closing and deliver instructions when the settlement statement is prepared (often several days before settlement).
2. The closing attorney obtains the most recent county tax information, calculates prorations, and, if the current bill has issued, collects and pays it at closing. Timeframes vary by county and on when the bill is issued.
3. At closing, past-due taxes are paid first, prorations and any escrows are set, and the deed is recorded. The Closing Disclosure/settlement statement will show the tax payments and credits.

Exceptions & Pitfalls

• No automatic proration rule: Allocation is contractual—if you do not spell it out, default contract language will control.
• Prior-year delinquencies: These liens must be paid in full at closing; they are not “prorated.”
• Bill not yet issued: Using last year’s tax can cause under/over-proration; consider an escrow or a written true-up clause.
• Ownership splits: If seller ownership shares differ, instruct the settlement agent in writing how to split the seller-side proration.
• County timing varies: Issue dates for bills differ by county and year; build in flexibility for escrows or later adjustments.
• Separate from HOA or assessments: Don’t confuse property taxes with association dues or special assessments; handle each separately.

Talk to a Real Estate Attorney

If you’re dealing with how to split prorated property taxes and closing costs in a North Carolina sale, 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.