What happens if my co-owner refuses to pay their share of property taxes? – North Carolina

Short Answer

In North Carolina, annual property taxes are a lien on the property, not just on one owner. If a co-owner will not pay, the county can add interest and, if unpaid long enough, pursue collection or foreclosure against the property. A co-owner who pays more than their fair share can seek reimbursement (contribution) and, in a sale or partition proceeding, ask the Clerk of Superior Court to credit those taxes from the other co-owner’s proceeds. At closing, unpaid or prorated taxes are typically paid from seller proceeds and can be allocated between co-owners.

Understanding the Problem

In North Carolina real estate, you want to know: if you and a co-owner are selling and the closing attorney will prorate property taxes, what happens when the co-owner refuses to fund their share? Here, the sale has a cash offer and a small prorated tax amount will be deducted, but how that seller-side tax amount is split between you and your co-owner remains unresolved.

Apply the Law

Under North Carolina law, ad valorem property taxes attach to the real estate each tax year. Co-owners are collectively responsible as to the property. When one co-owner pays necessary carrying costs (like property taxes) to protect the property, North Carolina allows that owner to seek contribution from the other co-owners. If the parties cannot agree, a partition proceeding can be started before the Clerk of Superior Court. In a partition sale, the clerk can order sale and, before distributing net proceeds, make accounting adjustments to credit the paying owner and charge the nonpaying owner. In a private sale closing, the settlement statement can allocate the seller-side proration and charge a nonpaying co-owner’s share against their proceeds or place the disputed amount in escrow.

Key Requirements

• Tax lien on the property: Each year’s property taxes attach to the land; unpaid balances accrue interest and can be collected against the property.
• Right to contribution: A co-owner who pays necessary expenses (taxes, insurance, mortgage interest) beyond their share may seek reimbursement from the other co-owner(s).
• Partition process if no agreement: A co-owner may file a partition special proceeding with the Clerk of Superior Court; if sale is ordered, the clerk can adjust proceeds to account for taxes paid and other necessary expenses.
• Closing proration and allocation: At sale, the closing attorney typically prorates taxes between seller and buyer and can allocate the seller-side amount between co-owners or escrow disputed sums.
• Forum and timing: Partition special proceedings start with the Clerk of Superior Court in the county where the property sits; tax liens attach annually, and interest starts after the local deadline if unpaid.

What the Statutes Say

• N.C. Gen. Stat. § 105-355 (Tax lien on real property) – Annual property taxes become a lien on the land effective the listing date until paid.
• N.C. Gen. Stat. § 105-365.1 (Tax collection remedies) – Counties may use interest, attachment, garnishment, and foreclosure to collect delinquent taxes.
• N.C. Gen. Stat. Ch. 46A (Partition of real property) – Sets the procedures for partition before the Clerk of Superior Court, including sale when division is impractical and distribution of proceeds.

Analysis

Apply the Rule to the Facts: You and your co-owner are under contract to sell, and the closing attorney will prorate taxes. Because taxes attach to the property, the closing will typically pay any unpaid or prorated amount from seller proceeds. If your co-owner refuses to contribute, you can ask the closing attorney to charge their share against their net proceeds or escrow the disputed portion. If agreement cannot be reached, you can pay to protect the sale and later seek contribution, or file partition and request a credit from their share in any sale proceeds.

Process & Timing

1. Who files: Any co-owner. Where: Clerk of Superior Court in the North Carolina county where the property is located. What: For sale closings, ask the closing attorney to reflect separate seller allocations on the settlement statement and to charge the nonpaying co-owner’s share against their proceeds or escrow the disputed amount. For disputes that block resolution, file a verified petition for partition under Chapter 46A requesting an accounting/credits for taxes paid. When: Do this before closing drafts are finalized; if proceeding to partition, file once it is clear voluntary resolution will not occur.
2. Next step: In a partition case, the clerk determines whether to divide in kind or order a sale. If a sale is ordered, the clerk oversees the process and, before distributing net proceeds, can adjust for necessary carrying costs (taxes, insurance, mortgage payments) and offsets (e.g., rents received, exclusive possession).
3. Final step and outcome: For a normal sale, the closing attorney disburses taxes from seller proceeds and allocates between co-owners or escrows disputed amounts. In a partition sale, the clerk enters an order confirming sale and distributing proceeds, including any credits for your tax payments and charges against the nonpaying co-owner’s share.

Exceptions & Pitfalls

• Written agreements between co-owners can change the default split; get any side deals about taxes and other costs in writing and reflected on the settlement statement.
• Exclusive use can affect credits and offsets (for example, a co-owner in sole possession may face an offset for fair rental value when asking for tax credits).
• If the co-owner has received rents, that may be offset against their claim that you owe them for shared expenses.
• In partition, serve all co-owners and relevant lienholders properly; missed parties can delay or complicate distribution.
• If you cannot agree at closing, request an escrow holdback; failing to do so may force you into post-closing disputes to recover contribution.

Talk to a Real Estate Attorney

If you’re dealing with a co-owner who won’t pay their share of property taxes or disputes about tax proration at closing, 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.