Dec52025
Real Estate Q&A Series

What terms should be included in a new settlement and release to protect us from any claims by the first buyer? – North Carolina

Short Answer

Under North Carolina law, a settlement and release with a first buyer should clearly identify the parties and transaction, state that it is a full and final settlement, and include a broad release of all known and unknown claims related to the deal. It should also address future lawsuits, contribution and indemnity rights, confidentiality, non-disparagement, no admission of liability, and how any existing liens, contracts, or security interests tied to the first buyer will be released or modified. The agreement must be signed with proper formalities if it will be recorded or affect real estate interests.

Understanding the Problem

The core question is: when a seller in North Carolina real estate enters into a new agreement to sell a property, what terms should a new settlement and release include to prevent the first buyer from later asserting claims about the original contract or transaction? The focus stays on one decision point: how to structure and word a settlement and release under North Carolina real estate law so that it fully resolves the first buyer’s rights arising from the initial purchase agreement, earnest money, inspections, or related negotiations. The concern is whether the first buyer can later sue, file a lien, or seek contribution, and how a well-drafted release can minimize that risk within North Carolina’s rules.

Apply the Law

Under North Carolina law, a settlement and release is a contract that can extinguish contract and tort claims if it clearly states what rights are being resolved and who is bound. For real estate matters, the primary forum for enforcement or disputes is the North Carolina Superior or District Court in the county where the property or parties are located. If the release affects a recorded interest (such as a lien or deed of trust), it may also involve recording in the county Register of Deeds, and statutory rules on releases of obligations and covenants not to sue help define the legal effect of those documents and their impact on contribution or remaining obligations.

Key Requirements

  • Clear identification and scope: The release should clearly identify the parties, the property, the first purchase contract, and state that it resolves all claims arising out of or related to that transaction.
  • Broad release and covenant not to sue: The document should include a broad release and an express promise not to sue for any past, present, or future claims connected to the first contract, and address how that affects other potential liable parties and contribution rights.
  • Real estate and recording details: If a lien, deed of trust, or other recorded instrument is involved, the release should contain the details statute requires (such as recording data and parties) so it can be recorded and effectively remove any encumbrance or obligation from the public record.

What the Statutes Say

Analysis

Apply the Rule to the Facts: Because no specific facts are provided, it is useful to consider two simple variations. In one scenario, the first buyer only signed a purchase contract and paid earnest money; a settlement and release would need to release all contract and tort claims, document the return or disposition of earnest money, and state that the first buyer will not file suit or record any lien relating to that contract. In another scenario, the first buyer already recorded a lien or security interest; the settlement would need both a broad personal release of claims and a recordable obligation or partial release that clearly identifies the recorded instrument so it can be released from the public record.

Process & Timing

  1. Who files: The seller (and often the first buyer) negotiate and sign the settlement and release; if a recorded interest is affected, the holder of that lien or obligation signs the statutory-style release. Where: The settlement itself is typically kept in the parties’ files, while any lien or obligation release is filed with the appropriate County Register of Deeds in North Carolina. What: A written settlement and release agreement, and if applicable, a document that meets the content requirements for an obligation release or partial release. When: Commonly before closing with the new buyer, and before disbursing sale proceeds that may be needed to fund the settlement.
  2. After signing, any necessary releases or satisfactions are submitted to the Register of Deeds with the required recording information and fees. Recording times vary by county but are often completed within days of submission.
  3. Once recorded, the public record shows that the prior lien or obligation tied to the first buyer is released, and the parties retain the fully executed settlement and release as evidence that all claims between seller and first buyer relating to the original contract are resolved.

Exceptions & Pitfalls

  • If the release language is narrow or only covers specific claims, the first buyer may argue that other claims (such as misrepresentation, nondisclosure, or specific performance) were not released.
  • If the settlement does not expressly include a covenant not to sue and a dismissal with prejudice of any pending case, the first buyer may try to continue or refile litigation despite the payment.
  • Failing to address contribution and indemnity can leave open disputes among multiple parties (such as agents, contractors, or co-owners) about who ultimately pays if someone else is later sued.
  • If a recorded lien or deed of trust in favor of the first buyer is not properly released in the form and manner the statutes require, it can remain on title and complicate or delay the new buyer’s closing.
  • Not clearly stating that the settlement is not an admission of liability, and not including confidentiality or non-disparagement terms when appropriate, can create reputational and business risks even after claims are paid.

Conclusion

For a North Carolina seller, a settlement and release with a first buyer should clearly identify the parties and property, state that it is a full and final settlement of all claims arising from the first contract, and include a broad release and covenant not to sue, plus no-admission, confidentiality, and contribution provisions. Where a recorded lien or security instrument exists, it should also include or be paired with a recordable release that meets statutory content rules. The most important next step is to have a North Carolina attorney draft a written settlement and coordinate any lien or obligation releases before closing with the new buyer.

Talk to a Real Estate Attorney

If a prior buyer’s contract or threats of claims could interfere with a new sale, our firm has experienced real estate attorneys who can help structure a settlement and release that protects your interests and aligns with North Carolina law. 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: 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.