How can I keep my real estate deal alive if the closing is delayed because permits aren’t issued yet? – North Carolina

Short Answer

In North Carolina, most deals can be preserved by (1) signing a written contract extension, (2) using an escrow holdback at closing tied to permit or inspection milestones, or (3) seeking a temporary certificate of compliance from the local code official when allowed. Any disbursements at closing must comply with North Carolina’s Good Funds Settlement Act, so the closing attorney can only release funds (including invoices) from collected funds and as escrow conditions are met.

Understanding the Problem

The issue is narrow: in North Carolina, can a buyer and seller keep a real estate transaction on track when the closing is postponed because the permitting office has not issued required approvals? The actors are the buyer, seller, closing attorney/settlement agent, lender (if any), and the local inspections department. The relief sought is a practical, lawful path to close—often by extending the settlement date, using an escrow holdback, or obtaining a temporary certificate—without violating code or settlement rules, and while arranging payment of closing invoices from proceeds.

Apply the Law

North Carolina law separates two key systems: local building code/permitting (governed by the State Building Code and enforced by local code officials) and real estate settlements (governed by contract and the Good Funds Settlement Act). Local officials issue permits, conduct inspections, and issue certificates of compliance, including temporary certificates in some situations. Closing attorneys must disburse only from “collected funds” and follow written escrow instructions if money is held back to bridge unfinished items like pending permits.

Key Requirements

• Written contract change: A written amendment or addendum extending the settlement date or adding a permit-related contingency keeps the deal enforceable and aligned with lender timing.
• Permit/Certificate status: Required permits, inspections, and a certificate of compliance must be in place to lawfully use the space; a temporary certificate may be available from the code official when limited conditions are satisfied.
• Escrow and disbursement rules: Any holdback must be in clear, written escrow instructions; the settlement agent may disburse only from collected funds and only when escrow conditions are met.
• Lender approval: If there is financing, the lender must approve any extension, temporary certificate approach, or escrow holdback terms.

What the Statutes Say

• N.C. Gen. Stat. § 160D-1110 (Permits) – Work requiring permits and local authority to issue them.
• N.C. Gen. Stat. § 160D-1116 (Certificate of compliance) – Final and temporary certificates authorizing use/occupancy when code official allows.
• N.C. Gen. Stat. § 45A-3 (Good Funds Settlement Act – definitions) – Defines “collected funds” and frames disbursement rules that closing attorneys must follow.

Analysis

Apply the Rule to the Facts: The closing was postponed because permits are still pending. A written extension or addendum keeps the contract alive and aligned with lender timelines. Because approvals are not issued, occupancy or use generally requires either a final certificate of compliance or, if the code official allows, a temporary certificate. If the parties want to close while awaiting approvals, a narrowly drafted escrow holdback can reserve funds in the closing attorney’s trust account and release them only when the permit/certificate condition is satisfied; the attorney may pay the firm’s invoice from collected funds at closing or upon escrow release, consistent with the Good Funds Settlement Act.

Process & Timing

1. Who files: Buyer and seller (and lender, if applicable) sign a contract addendum. Where: Through the settlement/closing attorney handling the transaction in North Carolina. What: Written extension of the settlement date and, if needed, a permit/certificate contingency. When: Before the current settlement/closing date expires.
2. Permitting step: Owner/contractor coordinates with the City/County Inspections Department to complete inspections and request a final or temporary certificate of compliance; timing depends on inspector availability and scope of work.
3. Escrow holdback at closing: Parties give the closing attorney written escrow instructions stating the holdback amount, the precise release condition (e.g., “upon issuance of the certificate of compliance”), an outside date, and what happens if the condition is not met. Funds remain in the attorney trust account; disbursements occur only from collected funds and when the stated condition occurs.
4. Disbursement and invoices: After funding with collected funds, the closing attorney disburses per the settlement statement and any escrow instructions; the law firm’s invoice may be paid from closing proceeds at funding or upon escrow release if that is how the instructions are written.

Exceptions & Pitfalls

• Some lenders will not allow a temporary certificate or any escrow holdback for permit issues; obtain lender approval early.
• Temporary certificates are discretionary and may be limited to specific areas or timeframes; not every jurisdiction or project qualifies.
• Vague escrow instructions create disputes. Specify the release condition, amount, outside date, notice method, and default remedy.
• The settlement agent cannot disburse from uncollected funds; plan wire timing so invoices and payoffs can post when expected.
• If the extension is not in writing before the deadline, one party may claim default or walk away under the existing contract terms.

Talk to a Real Estate Attorney

If you’re dealing with a permit-related closing delay, 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.