Jan232026
Real Estate Q&A Series

Can a co-owner require repayment of the original investment plus an interest amount before anyone else gets sale proceeds? – North Carolina

Short Answer

Sometimes, but not automatically. In North Carolina, sale proceeds are usually split based on each co-owner’s ownership percentage, with court-ordered adjustments for certain payments a co-owner made (like taxes, insurance, necessary repairs, and some loan payments) and, in limited situations, interest at the legal rate. A co-owner can be paid “off the top” only if there is a valid, enforceable agreement or a legally recognized reimbursement claim that the court applies when dividing net proceeds.

Understanding the Problem

In North Carolina, when co-owners sell a jointly owned property, can one co-owner insist on getting back an earlier “investment” (and an added interest amount) before the remaining sale proceeds are divided among everyone else? The decision point is whether the earlier payment is treated as a true loan or reimbursable carrying cost versus a contribution that simply increased that co-owner’s ownership stake. The answer often turns on what the written agreement actually says and whether the repayment claim fits the types of reimbursements North Carolina courts recognize when dividing proceeds.

Apply the Law

North Carolina generally treats co-owners (often tenants in common) as entitled to their share of net sale proceeds based on their ownership interests, but the clerk of superior court (and sometimes a judge) can adjust the split in a partition case to account for certain contributions and reimbursements. North Carolina statutes specifically recognize contribution/reimbursement for “carrying costs” (such as property taxes, insurance, repairs, and payments on a loan used to acquire the property) and provide a framework for how improvements and some interest are handled in a partition proceeding.

Key Requirements

  • Clear basis for priority repayment: A co-owner needs an enforceable legal basis to be paid before the ordinary ownership split—most commonly a written agreement that creates a real debt (or a lien) rather than a vague “investment understanding.”
  • Qualifying reimbursable items: In a partition case, North Carolina allows contribution for certain carrying costs and, for improvements, generally limits recovery to the lesser of cost or value added as of the start of the case.
  • Proper request in the right forum: The co-owner seeking reimbursement typically must raise the claim in the partition proceeding so the court can adjust the distribution of net proceeds.

What the Statutes Say

Analysis

Apply the Rule to the Facts: Here, the co-owners are selling, but there is a dispute because one co-owner points to a prior written loan/investment agreement and wants repayment of the original amount plus interest before anyone else receives proceeds. Under North Carolina law, that co-owner’s ability to be paid first depends on whether the agreement creates a true repayment obligation (and possibly a lien) or whether the payment is better characterized as a capital contribution that does not get “paid back” ahead of the ownership split. If the claim is framed as reimbursement for carrying costs (or certain improvements), the court can adjust the net proceeds distribution, but the amount and any interest are controlled by statute-based limits rather than a simple “investor gets paid first” rule.

Process & Timing

  1. Who files: Any co-owner seeking a court-supervised split can file. Where: The Clerk of Superior Court in the county where the property is located. What: A partition proceeding (partition by sale or actual partition, depending on the property and circumstances). When: As soon as it becomes clear the co-owners cannot agree on the split or the sale terms.
  2. Reimbursement request: The co-owner claiming “pay me back first” typically must formally assert the request for contribution/reimbursement during the partition case so the court can decide what adjustments apply under North Carolina law (for example, carrying costs, taxes, and qualifying improvements).
  3. Distribution: After sale-related costs and any court-approved adjustments are determined, the remaining net proceeds are distributed to the co-owners based on the court’s allocation.

Exceptions & Pitfalls

  • “Investment” vs. “loan” confusion: A document that uses informal language can trigger disputes about whether it is a repayable debt, a change in ownership percentages, or a personal promise that does not bind the property or the other co-owners.
  • Interest is not automatic: North Carolina statutes provide interest in specific situations (for example, certain property tax contribution rules and interest on owelty in an actual partition). A private agreement may call for interest, but enforceability can depend on how the obligation is documented and whether it is properly asserted.
  • Exclusive possession limits: North Carolina law can limit reimbursement for certain items (like interest on an existing encumbrance) for periods when the paying co-owner had exclusive possession of the property.
  • Improvement reimbursement limits: In partition, reimbursement for improvements is generally capped at the lesser of the cost or the value added as of the date the partition case begins, not necessarily the amount spent.
  • Not raising the issue in the right place: If the dispute is handled informally at closing without a clear agreement, the closing agent may not be able to “pay one co-owner first,” and the disagreement may need court resolution.

Conclusion

In North Carolina, a co-owner cannot automatically require repayment of an “original investment plus interest” before other co-owners receive sale proceeds. Priority repayment usually requires an enforceable agreement that creates a true repayment obligation (and sometimes a lien) or a court-approved reimbursement claim for recognized items like carrying costs, taxes, and certain improvements. The practical next step is to file (or respond in) a partition proceeding with the Clerk of Superior Court and formally request any contribution/reimbursement adjustment before the proceeds are distributed.

Talk to a Real Estate Attorney

If there is a dispute about whether one co-owner gets repaid first under a written loan/investment agreement, our firm has experienced attorneys who can help clarify how North Carolina rules on contribution, reimbursement, and partition can affect the final split. 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: Real Estate Q&A Series

Author: Pierce Law

Pierce Law Group is a North Carolina law firm focused on probate administration, real estate partition matters, and surplus funds claims across North Carolina. We know these situations often come with stress, family dynamics, and time-sensitive decisions—so we prioritize clear communication, steady guidance, and a practical plan from day one. Our goal is to make a complicated process feel manageable, while protecting what matters most to you.