Do I have to pay my attorney’s bill before closing if I intended to pay from closing proceeds? – North Carolina

Short Answer

Usually, no statute forces prepayment just because a closing is delayed. In North Carolina, attorney fees are often paid from sale proceeds at settlement, but that can only happen after the settlement agent has “collected” funds and records the transaction. If closing is postponed, there are no proceeds to disburse, so the fee agreement controls whether interim payment is due.

Understanding the Problem

In North Carolina real estate, can a seller wait to pay a closing attorney’s invoice until a rescheduled closing when payment is intended to come from sale proceeds, even if permitting delays push the closing date? The decision point is whether payment must occur now or can wait until the new closing, based on the fee agreement and settlement disbursement rules.

Apply the Law

North Carolina’s Good Funds Settlement Act governs when a settlement agent may disburse closing proceeds, including attorney fees listed on the closing statement. Disbursement at closing requires “collected” funds and recording. Separate from those rules, the attorney–client fee agreement sets when the client owes payment for services.

Key Requirements

• Fee agreement controls timing: The written engagement terms set when the invoice is due and whether payment can be deferred to closing.
• Collected funds rule: The settlement agent cannot disburse any closing proceeds, including attorney fees, until funds are “collected” and the transaction is ready to record.
• Authorization on the closing statement: Payment from proceeds typically appears as a line item on the Closing Disclosure/ALTA, reflecting client authorization.
• No proceeds before closing: If closing is delayed, there are no proceeds to disburse, so any interim payment depends on the fee agreement and the attorney’s billing practices.
• Responsibility if deal fails: If the transaction never closes, the client generally remains responsible for fees earned to date under the fee agreement.

What the Statutes Say

• N.C. Gen. Stat. § 45A-1 (Good Funds Settlement Act) – States the Act’s purpose and scope for settlement disbursements.
• N.C. Gen. Stat. § 45A-4 (Disbursement conditions) – Prohibits disbursement of closing funds until the settlement agent has collected funds and the closing is ready to record.
• N.C. Gen. Stat. § 45A-5 (Collected funds) – Describes what qualifies as collected funds for immediate disbursement.
• N.C. Gen. Stat. § 45A-8 (Violations and remedies) – Provides remedies for improper disbursement of settlement funds.

Analysis

Apply the Rule to the Facts: The closing was postponed because permits are pending, so there are no sale proceeds yet. Under North Carolina law, the settlement agent cannot disburse attorney fees from the closing until funds are collected and the documents are recorded. Whether payment must occur before the new closing depends on the fee agreement; if it allows deferral to settlement, payment can wait, but if it requires interim payment for work already performed, payment may be due now.

Process & Timing

1. Who files: No court filing. Where: Coordinate with the closing attorney/settlement agent’s office in North Carolina. What: Confirm in writing that the attorney’s fee will appear on the Closing Disclosure/ALTA for payment from sale proceeds, or arrange interim payment per the engagement letter. When: Before the closing package is finalized and sent for signing.
2. If paying at closing: the settlement agent receives the buyer’s funds, records the documents with the Register of Deeds, confirms funds are collected, and then disburses the attorney’s fee from proceeds. Timing can vary by county and by bank cutoffs.
3. If paying before closing: send funds as instructed by the attorney (often to a trust account). The attorney transfers earned fees to the operating account after work is performed and documented by invoice.

Exceptions & Pitfalls

• If the fee agreement requires a retainer or interim billing, payment may be due before the rescheduled closing.
• Omitting the fee line from the Closing Disclosure/ALTA can prevent payment from proceeds; provide written authorization in time for document preparation.
• Relying on checks near closing can delay disbursement because funds may not be “collected” the same day; wires usually avoid that issue.
• If the deal never closes, payment from proceeds will not occur; the client typically remains responsible for fees earned to date.

Talk to a Real Estate Attorney

If you’re dealing with a delayed closing and need to decide whether to pay an invoice now or at settlement, 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.