Dec232025
Partition Action Q&A Series

Can one co-owner be reimbursed for taxes and insurance they paid, and how is that handled at closing? – North Carolina

Short Answer

Yes. Under North Carolina law, a co-owner (cotenant) can usually seek contribution for “carrying costs” paid to preserve the property—often including property taxes and homeowner’s insurance. How it gets handled at closing depends on whether the co-owners have a written agreement for an offset in the settlement statement or whether a court order in a partition case directs the closing attorney on how to divide sale proceeds.

Understanding the Problem

In North Carolina, when two or more cotenants agree to sell a jointly owned property instead of filing a partition action, a common question is whether one cotenant can be repaid for property taxes and insurance paid while both cotenants owned the property. The decision point is whether the repayment will be handled as an agreed “credit/offset” in the closing paperwork, or whether a court needs to decide the amount and order how it is paid out of the sale proceeds.

Apply the Law

North Carolina recognizes that certain expenses paid to preserve jointly owned real property can justify contribution from other cotenants. In a partition proceeding, the statute expressly allows a cotenant to apply for contribution for “carrying costs,” which include items like property taxes and homeowner’s insurance. If the matter is not in court (because the parties agree to list and sell), reimbursement is typically handled by a written settlement agreement that the closing attorney can follow when preparing the closing disclosure/settlement statement.

Key Requirements

  • Cotenancy and qualifying expense: The paying party must be a cotenant who paid “carrying costs” that preserve the value of the property, such as property taxes and homeowner’s insurance.
  • Proof and allocation: The paying cotenant should be able to document what was paid, when it was paid, and that it was paid for the property (receipts, tax bills, insurance declarations, canceled checks, lender statements).
  • Proper vehicle for repayment: Repayment must be handled either (a) by agreement (credit/offset on the settlement statement at closing), or (b) by a court order in a partition case that directs how the net proceeds are adjusted among the cotenants.

What the Statutes Say

Analysis

Apply the Rule to the Facts: Here, the cotenants plan to avoid a partition case by listing and selling with a mutually acceptable realtor, and one cotenant has been paying taxes and insurance and can back it up with receipts and statements. Those payments are the kind of “carrying costs” North Carolina law commonly treats as eligible for contribution in a partition context. Because the sale is by agreement, the cleanest closing outcome usually comes from a written, signed allocation agreement directing the closing attorney to reimburse the paying cotenant from sale proceeds before the remaining net proceeds are split.

Process & Timing

  1. Who files: No court filing is required if the cotenants agree. Where: The agreement is provided to the closing attorney handling the North Carolina closing. What: A written reimbursement/offset agreement with an itemized list of reimbursable taxes and insurance and supporting documents. When: Ideally before the closing attorney drafts the settlement statement, and well before closing so any disputes can be resolved.
  2. Settlement statement handling: The closing attorney can show the reimbursement as a line-item debit/credit (or separate disbursement) so the paying cotenant receives the agreed amount from sale proceeds, and the remaining proceeds are distributed to the cotenants based on their ownership percentages (unless the agreement states a different allocation).
  3. If there is a disagreement: If cotenants cannot agree on what counts (for example, whether a payment was truly for the property, whether amounts were duplicated, or whether other offsets apply), the closing attorney may require a written joint instruction signed by all cotenants or a court order. At that point, a partition action (or a related civil claim for contribution/accounting) may be needed to obtain an enforceable allocation of proceeds.

Exceptions & Pitfalls

  • No signed closing instruction: Even when reimbursement makes sense, a closing attorney often will not change distributions based on one side’s receipts alone. A signed agreement (or court order) avoids last-minute closing delays.
  • Mixing “carrying costs” with upgrades: Taxes and insurance usually fit the “carrying cost” bucket. Renovations and upgrades can be treated differently and may require a different analysis (for example, value-added versus cost) in a partition setting.
  • Offsets and “exclusive possession” issues: In some situations, disputes arise if one cotenant had sole use of the property, collected rent, or otherwise benefited more than their share. Those facts can affect the net accounting between cotenants and should be addressed in writing before closing.
  • Proof problems: Paying in cash, paying from an account without clear memo lines, or failing to retain tax bills/insurance invoices can make it hard to verify what was paid and for which period.

Conclusion

North Carolina law generally allows a cotenant to seek contribution for property “carrying costs” such as taxes and homeowner’s insurance, and those amounts can be repaid from sale proceeds. When the property is sold by agreement (instead of through a court-ordered partition sale), reimbursement is typically handled by a written, signed offset agreement that the closing attorney can implement as a line-item on the settlement statement before splitting the remaining net proceeds. If a partition petition is filed, a 10-year lookback can limit tax contribution claims under the partition statute.

Talk to a Partition Action Attorney

If co-owners are dealing with reimbursement for taxes and insurance and want to make sure the closing distribution matches North Carolina law and the parties’ agreement, an attorney can help draft a clear offset agreement and avoid a closing-day dispute. 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.

Category: Partition Action Q&A Series

Author: jpierce

Attorney Jared Pierce is the founder of Pierce Law Group in Raleigh, North Carolina, a firm he established with a dedicated focus on probate administration and estate planning across North Carolina. Born and raised in the Republic of South Africa, Jared moved to Durham with his family in 2001, bringing with him a rich cultural background and a distinctive accent that often serves as a conversation starter.