In a recent unpublished decision, the North Carolina Court of Appeals provided further insight into how restrictive covenants interact with the state’s Marketable Title Act.
In Charlotte Christian Assembly of the End time Message, Inc. v. Romanelli, No. COA24-1023 (N.C. Ct. App. July 2, 2025) (unpublished), the North Carolina Court of Appeals upheld enforcement of a restrictive covenant on an 162-acre tract of land (the "Original Tract") that required the land to be used for residential or agricultural purposes only (the "Resident-Use Restriction"). The Resident-Use Restriction was enacted by the original property owners in 1957 (the "Original Agreement").
The court upheld the restrictive covenant based on the residential-use exception to the Marketable Title Act. The Marketable Title Act generally extinguishes certain interests such as restrictive covenants that were created more than 30 years ago, subject to certain statutory exceptions. N.C. Gen. Stat. § 47B-2-(c). Specifically, the Act excludes "Covenants applicable to a general or uniform scheme of development which restrict the property to residential use only, provided said covenants are otherwise enforceable." N.C. Gen. Stat. § 47B-3(13).
Background: The Disputed Restriction
The Plaintiff purchased real property within the Original Tract and sought release of the Resident-Use Restriction from the other property owners who had previously purchased plots within the Original Tract (collectively, "Defendants"). Prior to the Plaintiff’s purchase, the property owners agreed to amend the Original Agreement on four specific occasions to release four sold-off plots from the Resident-Use Restriction to allow construction of an orphanage, church, a greenway, and a fire station. The amendments to the Original Agreement specifically provided that the release did not affect other plots on the Original Tract, which were still subject to the Resident-Use Restriction.
The Plaintiff began construction of a church on its newly purchased property before obtaining releases from all Defendants and thereafter filed a Complaint seeking injunctive and declaratory relief to continue building the church. The Plaintiff argued the Resident-Use Restriction was no longer enforceable under the Marketable Title Act because there had been a "substantial change" within the community on the Original Tract because of the four non-residential use plots, or, in the alternative, that enforcement would be inequitable. The Defendants argued that the Plaintiff’s property was subject to the Resident-Use Restriction and filed a motion for summary judgment. The trial court granted summary judgment for the Defendants and the appellate court upheld that order.
The court rejected the Plaintiff’s argument that the Resident-Use Restriction was no longer enforceable because: (1) the Original Agreement was never violated (given the four non-residential use plots obtained valid releases from the Resident-Use Restriction); and (2) the remaining sixteen plots in the Original Tract remained residential or undeveloped. The court concluded:
"Because the four non-residential use properties within the Original Tract do not ‘destroy the essential objects and purposes of the [Original A]greement,’ the Resident-Use Restriction remains enforceable under the Marketable Title Act."
The court also dismissed the Plaintiff’s argument that enforcement would be inequitable, noting there were no prior violations of the Resident-Use Restriction by other property owners.
Implications
Romanelli follows the North Carolina Supreme Court’s 2022 decision in C Investments 2, LLC v. Auger, 383 N.C. 1 (2022), which confirmed that only residential-use restrictions within a general scheme of development qualify for the exception under N.C. Gen. Stat. § 47B-3(13), not other types of covenants.
Romanelli affirms that a residential-use restriction can remain enforceable under the Marketable Title Act, even if enacted decades ago, so long as:
- There has not been a substantial change in the development;
- The covenant has been historically enforced; and
- Any non-conforming uses were formally released.
However, it is notable that the Court of Appeals did not address the agricultural-use portion of the Resident-Use Restriction, which is not covered by the statutory exception. Under C Investments 2, an argument could be made that a covenant containing both residential and non-residential restrictions, such as agricultural-use limitations, does not qualify for the exception and may be fully extinguished under the Act.
This decision underscores that the law surrounding the Marketable Title Act continues to develop, and future cases may further refine how courts interpret mixed-use or partially released covenants.
