Understanding the Problem
You’re selling a North Carolina property you co-own, and a small prorated tax amount will be deducted at closing. The key question is how the buyer and the two sellers split the current year’s property taxes as of the closing date. You also want to know whether one seller can cover the tax proration in exchange for the other covering different costs.
Apply the Law
Key Requirements
- Calendar-year proration: Unless the purchase contract says otherwise, property taxes are prorated between the seller and buyer on a calendar-year basis.
- Contract terms: The contract may alter the default allocation, including who is charged for the day of closing and whether the parties will make a later adjustment.
- Tax lien: The real-property tax lien attaches on the date as of which the property must be listed for taxation.
- Billing realities: If the current bill is unavailable, the closing attorney may use an estimate for the settlement statement. If the bill has issued, the taxes may be paid or adjusted at closing.
- Delinquencies: Prior-year unpaid taxes ordinarily must be addressed because the tax lien remains attached to the property.
- Allocation among co-owners: Co-owners may direct in writing how the seller-side charge should be allocated between them, provided the closing figures and disbursements remain consistent with their agreement.
What the Statutes Say
- North Carolina Gen. Stat. § 39-60 (Property tax proration) – Unless the contract provides otherwise, property taxes on real property being sold are prorated between the seller and buyer on a calendar-year basis.
- North Carolina Gen. Stat. § 105-355 (Creation and attachment of tax lien) – The lien for taxes levied on real property attaches on the date as of which the property must be listed.
- North Carolina Gen. Stat. § 105-321 (Tax records and collection) – Tax receipts generally must be delivered to the tax collector on or before September 1 each year.
- North Carolina Gen. Stat. § 105-360 (Due date and interest) – Local property taxes are due September 1, remain payable at face amount before January 6, and begin accruing interest when paid on or after January 6.
Analysis
At your cash closing, the settlement statement will ordinarily debit the sellers for their allocated share of the current year’s taxes and credit the buyer, subject to the purchase contract. If the current bill is unavailable, the attorney may estimate the amount, and the buyer generally pays the bill when it is issued. Between you and your co-owner, the attorney can allocate the seller-side tax proration to either of you, or split it, if you both provide clear written instructions.
Process & Timing
- No court filing is required. The closing attorney reviews the purchase contract and county tax information and places the proration on the settlement statement.
- The attorney checks for unpaid prior-year taxes. Delinquent amounts are generally paid from closing proceeds or otherwise resolved so the lien does not remain against the property.
- If the current bill has issued, the taxes may be paid at or after closing. If it has not issued, the parties may use an estimated proration, and the buyer ordinarily pays the bill when it arrives.
- The deed is recorded with the Register of Deeds, and the buyer should confirm responsibility for any unpaid current-year bill and any contractual post-closing adjustment.
Clock to watch: Property taxes are due September 1, remain payable at face amount before January 6, and accrue interest if paid on or after January 6.
Exceptions & Pitfalls
- Contract controls: The purchase contract may specify who bears the day of closing or require a post-closing true-up.
- Estimate changes: An estimate may be inaccurate if assessed values or tax rates change. The parties can address a later adjustment in writing.
- Municipal taxes and special charges: City taxes and special assessments may be separate, so confirm which charges are included in the closing figures.
- Deferrals and exclusions: A tax benefit that ends upon sale may produce an additional amount due. The contract should address who bears that charge.
- Seller co-owners: If one seller will cover the tax proration while the other covers different expenses, both should give the closing attorney signed instructions before closing.
Conclusion
North Carolina law prorates property taxes between seller and buyer on a calendar-year basis unless the purchase contract provides a different allocation. The settlement statement should charge each party according to that rule and the contract, while delinquent taxes generally must be resolved because they remain liens on the property. Co-owners may agree to shift the seller-side charge between themselves. Give the closing attorney signed instructions before closing and confirm how any estimated bill or later adjustment will be handled.
Talk to a Real Estate Attorney
If you need help reviewing a property-tax proration or allocating closing costs between co-owners, call us at 919-341-7055 to request a free case evaluation with a North Carolina real estate attorney.
