I've got a customer who is selling his house. He had his home inspection. One of the things noted was a 3 wire feeder to a small sub panel for his furnace. This panel now has 5-6 breakers feeding lights, a waterfall pump with a timer, etc. It is fed from a 200amp sub panel that is fed with 4 wires with the grounds and neutrals separated. Obviously it is a code violation however when I explained to him the fix (cutting, patching, drilling) he decided to put it off for the new home owners. What are the potential hazards of this set-up if any?

Could be problems if the potential buyers have a home inspection; depending on how picky they are, they may ask that things like that be brought up to code as part of the terms of sale. This is especially true if they're looking at an FHA loan, they will want pretty much everything to be code-compliant, if it wasn't grandfathered in somehow.

I'm still working on my first cup of coffee. Something is not clicking in my brain. What is the violation? The grounds and neutrals are suppose to be seperate in a sub-panel

if you have two hots, (1) neutral, (1) EGC i don't see anything wrong with this installation. Assuming everything is installed correctly.

The home inspector may have added the rating of the breakers and saw that the size of the feeder doesn't match the total amp rating of the breakers so he/she called it a violation or a hazard.

Then again at the beginning of your post you mention a 3 wire feeder and changed it to 4 wires.

So you have a 200a subpanel with a 4 wire feeder feeding another subpanel with a 3 wire feeder that was originally for the furnace only and now has 120 volt loads connected to it using the EGC as the grounded conductor. Is that right?
I'm sure that as someone able to recognize the code violation, you also recognize the hazard. You either have an uninsulated or undersized conductor being used as a current carrying conductor or you have no grounding at all.

If it is a cable type feeder and If the EGC is being used as a current carrying conductor it is a violation.

Then again, if the feeder is installed in a metallic conduit you still have a 3 conductor feeder but are using the metallic conduit as a EGC and have 2 hots and a neutral then your installation is ok. assuming the EGC is not being used as a current carrying conductor.

The danger of having a 3 wire feeder with a shared EGC and neutral is that you end up with voltage on your ground. Before the exception was removed for separate building feeders the rationalization was that you were providing a local ground electrode system, much like what happens with the service. The fact is, if you actually look at the GEC in your house, you will usually see neutral current there too and that is also demonstrating a voltage drop in that 3 wire SE cable neutral/ground.
The problem inside your house is that you will see a voltage gradient between the grounded case of equipment from this 3 wire sub and a truly grounded item like a cold water pipe in a metal plumbing system.

thanks for the help. I did explain to him that it was a violation, however, in the end it is his decision to have it repaired or leave it. All I can do is inform. Whenever he gets a potential buyer, I guess they will make the final decision as to the repair.

The feeder is a 3 wire cable with the egc going back the egc bus in the main.

Is there a duty to report clause in your state's legislation? The province of BC's Safety Standards act makes that knowledge reportable and if it could be proved you did not report it to the inspection authority you could become label for damages should anyone get hurt. Using the bond wire as a current carrying conductor can set up a shock hazard to non current carrying parts of the bonding system.
I hate talking to my neighbours about electrical matters and tell them to stop before they reveal anything I may have a duty to report.
It is a little like asking the policeman living next door over to your pot party ;-)

In the US I do not know of any law that says you have to report a code violation but if you, as a professional, working on it, may have the obligation to fix it if you touch it. This all gets back to those "rehab" or "existing building" codes we talk about here.

What I use to do when I was in business was, when I saw a problem in a building that I worked on, I would tell the homeowner (or if it was commercial building), the person who hired me. However I would also make note of the problem on my bill on the bottom of the bill. I would say something like :

NOTE: while working on your job I saw "YADA YADA, YADA" which is a violation of NEC??? or I saw a problem that you might want to get fixed. If you need a free quote from me, please call

I was told that if they paid your bill, you know that they saw the message. It would be to your benefit in court.