Yes, a property that is already breaking a city rule at the time of sale is a 'hidden problem' or encumbrance. The court said there's a big difference between a city having a rule and a property actively breaking that rule. Everyone has to follow city rules, so the existence of a rule isn't the seller's fault. But selling a property that is already in violation is the seller's fault because it creates a real problem for the new owner.

Yes. When the property was sold, it was breaking the city's rule about side lot size, and this counts as a problem with the property that breaks the seller's promise that there were no issues. This is because actually breaking a rule is different from just having rules that might apply to the property. While just having city rules doesn't create a problem with the property, actually breaking those rules at the time of sale does create a problem. Most other states that have looked at this question agree with us. In the Fritts case, the court only decided that having rules isn't a problem, not whether breaking those rules would be a problem. A property problem is defined as anything that puts a burden on the land or restricts how the owner can use it. Breaking the city rule definitely restricts how the property can be used and might get the owner in trouble with the city. So the lower court was wrong to dismiss the case, and we're sending it back for further proceedings.

<?xml version="1.0" encoding="utf-8"?>
<opinion type="majority">
<author id="b169-11">
 CLARK, Judge.
 </author>

 The plaintiffs assign as error the court’s granting of summary judgment in favor of defendant. Plaintiffs contend that a violation of a municipal ordinance regulating the use of real property at the time of sale constitutes an encumbrance on the land and a breach of the warranty against encumbrances.
 

 An encumbrance, within the meaning of such a covenant, has been defined as “any burden or charge on the land and includes
 
 *142
 
 any right existing in another whereby the use of the land by the owner is restricted.”
 
 Gerdes v. Shew,
 
 4 N.C. App. 144, 148, 166 S.E. 2d 519, 522 (1969). The general view is that the existence of a public restriction on the use of real property does not constitute an encumbrance within the meaning of the covenant against encumbrances. Annot., 39 A.L.R. 3d 362 (1971). This view was adopted in North Carolina in
 
 Fritts v. Gerukos,
 
 273 N.C. 116, 159 S.E. 2d 536 (1968). In
 
 Fritts,
 
 the plaintiffs purchased an option on a tract of land containing 49 lots. The defendant agreed to deliver a deed with full covenants and warranty against encumbrances. At the time the parties entered into the option contract, an ordinance of the City of Gastonia prohibited the transfer or sale of land by reference to a subdivision plat without obtaining the city’s approval of the plat. After exercising the option, plaintiffs advertised an auction sale of the 49 lots. The City of Gastonia enjoined the sale for failure of plaintiffs to obtain approval of the plat. Plaintiffs then brought suit for breach of warranty against encumbrances contending that the existence of the ordinance constituted an encumbrance. The North Carolina Supreme Court rejected plaintiffs’ contention on the grounds that:
 
<blockquote id="b170-6">
 “A restriction upon the use which may be made of land, or upon its transfer, which is imposed by a statute or ordinance enacted pursuant to the police power, such as a zoning ordinance or an ordinance regulating the size of lots, fixing building lines or otherwise regulating the subdivision of an area into lots, is not an encumbrance upon the land within the meaning of a covenant against encumbrances . . . being distinguishable in this respect from restrictions imposed by a covenant in a deed. (Citations omitted.) Thus, the
 
 existence
 
 of the Subdivision Standard Control Ordinance ... at the time the option
 
 agreement
 
 was executed did not cause the title of the defendant to be subject to an encumbrance . . . .” (Emphasis added.)
 
 Id.
 
 at 119, 159 S.E. 2d at 539.
 </blockquote>

 In the case
 
 sub judice,
 
 however, plaintiffs do not contend that the
 
 existence
 
 of the municipal ordinance constituted an encumbrance on the property, but contend that a violation of the ordinance, existing at the time of the conveyance to plaintiffs, constituted an encumbrance. There are no North Carolina cases which consider whether an existing violation of public restrictions on the use of real property constitutes an encumbrance. There is
 
 *143
 
 a split of authority among the jurisdictions which have considered this question. Annot., 39 A.L.R. 3d 362 § 2 (1971). The majority of the jurisdictions have held that, although the existence of a public restriction on the use of real property is not an encumbrance rendering the title to the real property unmarketable, an existing violation of such an ordinance is an encumbrance within the meaning of a warranty against encumbrances.
 
 Lohmeyer v. Bower,
 
 170 Kan. 442, 227 P. 2d 102 (1951), (minimum side lot violation);
 
 Oatis v. Delcuze,
 
 226 La. 751, 77 So. 2d 28 (1954), (non-conforming building);
 
 Moyer v. De Vincentis Construction Co.,
 
 107 Pa. Super. 588, 164 A. Ill (1933), (violation of set-back requirement).
 
 See Hartman v. Rizzuto,
 
 123 Cal. App. 2d 186, 266 P. 2d 539 (1954), (violation of rear-yard requirement);
 
 Miller v. Milwaukee, Odd Fellows Temple, Inc.,
 
 206 Wis. 547, 240 N.W. 193 (1932);
 
 Genske v. Jensen,
 
 188 Wis. 17, 205 N.W. 548 (1925). Annot., 39 A.L.R. 3d 362 §§ 5-6 (1971).
 

 We hold that the existing violation of the minimum side lot requirement as set forth in the ordinance of the City of Hope Mills, constitutes an encumbrance within the meaning of the covenant against encumbrances contained in the plaintiffs’ warranty deed.
 

 The summary judgment for defendant was improvidently entered. The judgment is reversed and the cause remanded for proceedings consistent with this opinion.
 

 Reversed and remanded.
 
<judges id="b171-9">
 Chief Judge MORRIS and Judge ARNOLD concur.
 </judges>
</opinion>

Yes, an existing violation of a municipal land use ordinance at the time of conveyance constitutes an encumbrance. The court distinguished this case from prior precedent, such as Fritts v. Gerukos, which held that the mere existence of a public land use restriction is not an encumbrance because all property is subject to the police power. The court reasoned that there is a critical difference between the existence of a restrictive ordinance and an existing violation of that ordinance. By adopting the majority view from other jurisdictions, the court held that a pre-existing violation is a burden on the land that restricts its use and marketability, thus qualifying as an encumbrance that breaches the seller's warranty.

Yes. The existing violation of the minimum side lot requirement as set forth in the ordinance of the City of Hope Mills constitutes an encumbrance within the meaning of the covenant against encumbrances contained in the plaintiffs' warranty deed because it imposes a restriction that affects the use and transferability of the land. While the mere existence of a municipal ordinance regulating the use of real property does not constitute an encumbrance, an actual violation of such an ordinance at the time of conveyance does. This distinction is supported by the majority of jurisdictions that have considered this question, including cases from Kansas, Louisiana, Pennsylvania, California, and Wisconsin. In Fritts v. Gerukos, the North Carolina Supreme Court only addressed whether the existence of an ordinance constituted an encumbrance, not whether a violation of that ordinance would constitute one. An encumbrance is defined as 'any burden or charge on the land and includes any right existing in another whereby the use of the land by the owner is restricted.' The existing violation of the municipal ordinance clearly falls within this definition as it restricts how the property can be used and potentially subjects the owner to enforcement actions. Therefore, the summary judgment for defendant was improvidently entered, and the case must be reversed and remanded for further proceedings.

Wilcox v. Pioneer Homes, Inc.

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