North Carolina Guide: Recovering Carrying Costs from a Co-Owner During a Joint Sale
What Are “Carrying Costs”?
Carrying costs are the ongoing bills necessary to keep real estate in good standing. Typical items include:
- Property taxes
- Mortgage interest and principal
- Homeowners’ insurance
- Basic repairs and utilities (maintenance that preserves, not improves, the property)
Step-by-Step: Calculating Each Owner’s Share
- Add up all qualified costs that one owner paid out-of-pocket.
- Determine ownership percentages. If the deed is silent, North Carolina presumes equal shares. Example: two owners = 50 % each.
- Multiply the total costs by the non-paying owner’s percentage.
Formula: (Total costs) × (Co-owner’s % share) = Reimbursement owed. - Subtract any partial payments the other owner already made.
- Add statutory interest. North Carolina allows 8 % simple interest unless a different rate was agreed. See N.C. Gen. Stat. § 24-1.
Hypothetical. A and B hold title 50 / 50. A alone pays $8,000 in taxes and $2,000 in insurance (total = $10,000).
- B’s share: $10,000 × 50 % = $5,000
- Add 8 % annual simple interest from the date each bill was paid.
When the house sells, A receives $5,000 plus accrued interest off the top or as a set-off against B’s net proceeds.
Legal Tools for Recovery Under North Carolina Law
- Voluntary Agreement. A written “settlement statement” signed by all owners is the fastest solution.
- Accounting in a Partition Action. When co-owners cannot agree, one may file a partition proceeding in the clerk’s office of the county where the land lies. The clerk (or a court-appointed commissioner) can:
- Order sale of the property; and
- Adjust the final distribution to reimburse the paying owner. Authority: N.C. Gen. Stat. § 46A-64 (allowing “owelty or reimbursement” for taxes, insurance, and other necessary expenses).
- Equitable Lien. North Carolina case law (e.g., Wall v. Wall, 24 N.C. App. 725) recognizes a paying co-tenant’s right to an equitable lien that attaches to the property or sale proceeds.
Timeline in a Typical Partition Sale
- File Petition. Any co-owner may petition for partition under § 46A-3.
- Initial Hearing. The clerk decides whether to order a sale. Necessary expenses already advanced are presented at or before this stage.
- Sale & Commissioner’s Report. After closing, the commissioner files a proposed accounting showing each owner’s credits and debits.
- Objections & Confirmation. Owners may object. Once confirmed, reimbursements are paid from the escrowed sale proceeds.
Helpful Hints
- Document everything. Keep receipts, bank statements, and proof of payment in your name.
- Send written notice to the other owner before or immediately after you pay a large bill. Advance notice strengthens your claim for interest.
- Exclude “improvements.” Upgrades that increase value (new deck, remodel) are treated differently. You may receive credit only for the amount the upgrade added to the sale price, not the full cost.
- Avoid self-help set-offs. Withholding rent or blocking a sale can backfire. Use formal accounting methods.
- Act quickly. Carrying-cost claims older than three years risk a statute-of-limitations defense under § 1-52.
Need Help Collecting from a Co-Owner?
North Carolina partition law gives diligent owners powerful tools to recover carrying costs, but the rules are technical and deadlines are unforgiving. Our firm has years of experience guiding clients through partition sales and contribution claims. To protect your bottom line, call us today at (919) 341-7055 for a confidential consultation.
