What specific contract language should I include to confirm that taxes, liens, and fees are handled at closing? – North Carolina

Short Answer

In North Carolina, add clear “paid from seller’s proceeds” language that (1) allocates who pays what, (2) authorizes the closing attorney to obtain payoffs and disburse sale proceeds to satisfy taxes, liens, assessments, and mortgages at closing, and (3) requires proration of current-year property taxes. Include an escrow/holdback clause if any payoff or release is not available at closing. This keeps you from paying seller charges out of pocket before closing.

Understanding the Problem

You’re selling North Carolina real estate under an existing offer to purchase. You want the contract to state that the buyer pays closing costs, and the seller’s taxes, liens, special assessments, and mortgages are paid at closing from the sale proceeds—not out of your pocket. You also plan to pay a fixed sum to others held in trust until closing, and you want a mutual release after closing.

Apply the Law

Under North Carolina practice, the closing attorney disburses funds from the trust account after recording and receipt of collected funds. Seller-side items like property taxes (which attach as a lien each year), special assessments, mortgages/deeds of trust, and docketed judgment liens are commonly paid from the seller’s proceeds at closing using payoff statements and the settlement statement. Contracts should expressly authorize these disbursements, require tax proration as of the closing date, and provide for an escrow if a payoff or release cannot be finalized at closing.

Key Requirements

Clear allocation and source of payment: State who pays what and that seller charges are paid from seller’s proceeds at closing.
Authorization to disburse: Authorize the closing attorney to obtain payoff statements and to disburse proceeds to satisfy taxes, liens, assessments, and mortgages, and to record releases.
Tax proration: Require proration of current-year ad valorem taxes as of the closing date, and identify who pays any special assessments (in full by seller or prorated).
Escrow/holdback: Permit a holdback from seller’s proceeds if a payoff, statement, or release is pending or if final amounts are uncertain.
Trust account and good funds: Acknowledge that funds will be handled through the attorney trust account and not disbursed until collected and recording is complete.

What the Statutes Say

North Carolina Gen. Stat. § 45A-4 (Good Funds Settlement Act) – Settlement funds must be collected before disbursement from the attorney trust account.
North Carolina Gen. Stat. § 45-36.7 (Payoff statements) – Secured creditors must provide payoff statements so liens can be satisfied.
North Carolina Gen. Stat. § 105-355 (Property tax lien priority) – Annual property tax liens attach and generally have priority.

Analysis

Apply the Rule to the Facts: Your contract should say seller obligations (taxes, liens, special assessments, mortgages) are paid from your sale proceeds at closing. Authorize the closing attorney to obtain payoff letters and to disburse proceeds to those payees through the settlement statement. Require tax proration as of closing and specify how special assessments are handled. Add an escrow/holdback so you don’t fund anything out of pocket if a payoff or lien release cannot be finalized the day of closing.

Process & Timing

Who files: The parties. Where: Incorporate the language in an addendum to the purchase contract in North Carolina and provide it to the closing attorney. What: A contract addendum with “paid from proceeds,” disbursement authorization, tax proration, and escrow/holdback terms. When: Before the closing package is finalized so the settlement statement matches these directives.
The closing attorney requests mortgage and lien payoffs, verifies property tax and assessment balances, and prepares the settlement statement (often ALTA/CD). This usually occurs in the 1–2 weeks before closing, depending on county practices and creditor response times.
At closing, the deed and any deed of trust are recorded; after funds are collected under the Good Funds rules, the attorney disburses to lienholders, tax/assessment authorities, and finally the seller, issuing releases as applicable.

Exceptions & Pitfalls

Unknown or last-minute liens can delay closing; include an escrow/holdback clause to cover surprises and allow closing to proceed.
Expired payoff statements or per-diem interest changes can create shortfalls; authorize the attorney to adjust disbursements accordingly.
Unclear special assessment allocation leads to disputes; specify whether seller pays in full at closing or the parties prorate.
Judgment liens may attach county-by-county; ensure title searches and payoffs cover every county where the property sits.
Do not assume the attorney can disburse before recording or before funds are collected; acknowledge Good Funds requirements to avoid timing issues.

Conclusion

To ensure seller-side taxes, liens, assessments, and mortgages are handled at closing in North Carolina, state that they will be paid from the seller’s proceeds, authorize the closing attorney to obtain payoffs and disburse, require tax proration as of closing, and include an escrow/holdback for unresolved items. Next step: add a written contract addendum with these terms and deliver it to the closing attorney before the settlement statement is finalized.

Talk to a Real Estate Attorney

If you’re dealing with contract wording to make sure taxes, liens, and fees are paid from proceeds 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.