Behind on Property Taxes in North Carolina: What Happens and What You Can Do

When taxes become delinquent and what it costs

North Carolina property taxes are billed by the county (and by a city or town if the property is inside one) for the fiscal year, are generally due on September 1, and can be paid without interest through January 5. On January 6 they are delinquent and interest begins to accrue under the schedule in G.S. 105-360. Interest keeps accruing every month the balance is unpaid, and enforcement costs are added once collection actions begin.

The tax office can also use enforced collection remedies that do not involve the house itself, such as garnishment of wages or attachment of bank accounts, before or alongside a foreclosure.

The tax lien

The lien for property taxes attaches to the real property on January 1 of the year the taxes are levied. It has priority over most other liens and interests, including in most cases a mortgage recorded earlier, which is why lenders often pay delinquent taxes through escrow to protect their own position. If a lender advances taxes on your behalf, that amount is added to what you owe the lender.

The two ways a county forecloses

Under G.S. 105-374, the county files a civil action in Superior Court to foreclose the tax lien in much the same way a lender forecloses a mortgage. The owner and lienholders are served, there is an opportunity to respond, and if judgment is entered, a commissioner sells the property at public auction subject to the same upset bid process used in other judicial sales.

Under G.S. 105-375, the in rem method, the tax collector dockets a judgment for the taxes with the Clerk of Superior Court after giving the owner notice, and after a waiting period the property is sold by the sheriff. The in rem method is faster and cheaper for the county, and the notice requirements are strict, but it ends in the same place: a public sale of the property.

In both methods the owner can stop the process by paying the full amount of taxes, interest, and costs before the sale is complete. Any surplus from the sale above what is owed belongs to the owner and other lienholders, but it is often small once costs are added.

Your options before the sale

The first call is to the county tax office, which can confirm the exact payoff and whether a payment arrangement is available; practices vary by county. Some owners refinance or borrow from family to pay the balance. Others sell.

A sale, whether listed or direct, uses the proceeds to pay the taxes and any mortgage at closing, and the closing attorney handles the payoff and gets the lien released. For a house with equity, selling before the tax foreclosure is complete is usually the option that preserves the most of it, because a tax foreclosure sale often brings less than a normal sale and adds costs on top.

• Ask the tax office for a written statement of all years owed, interest, and costs, and whether any action has been filed.
• Check whether the property is also subject to a mortgage foreclosure; the two processes run separately.
• If you receive a notice of a docketed judgment or a foreclosure complaint, the deadlines are set by the court papers, not by anyone else, and an attorney can explain them.
• This guide is general information for North Carolina property owners. It is not legal, tax, or financial advice, and it does not create any professional relationship. Laws and procedures change, and every situation is different. Please confirm anything that matters to your decision with a North Carolina attorney, a tax professional, or a HUD-approved housing counselor.