NC Appeals Court: Wilmington and other Municipalities Cannot Dictate What is a Vacation Rental

by | Apr 15, 2022 | Blog, North Carolina

David and Peg Schroeder (photo above) fought for their property rights; they sued the City of Wilmington, North Carolina, and won — twice.

Wilmington’s Short-term Rental Ordinance Ruled Illegal

In February of 2019, the Wilmington City Council approved an ordinance to limit the number of short-term rentals across various neighborhoods throughout the city. Last week, the core language of this ordinance was struck down by a North Carolina appeals court. In its opinion, the court stated that North Carolina state statute prohibits local governments from requiring permits and permissions to lease or rent properties; and further, state law also prohibits the registration of rental properties.

Unlike the lower trial court ruling for this case in 2020, striking down the entire short-term rental ordinance, the appeals court gave a mixed ruling. This means the City of Wilmington can retain miscellaneous parts of the ordinance that requires short-term rental landlords to provide at least one parking space for every bedroom, to post emergency numbers inside the rental unit, to prohibit cooking inside bedrooms and restrict whole-house lodging in certain districts.

The primary portion of the ordinance that was struck down required at least 400 feet of separation between short-term rentals. It also capped the percentage of short-term rentals at 2 percent of the residential properties inside city limits. Additionally, the ordinance required homeowners to register their properties in order to be ‘eligible’ for short rental; and then, the city assigned eligible short-term licenses by lottery.

The Story of Dave and Peg Schroeder

David and Peg Schroeder, the owners of a short-term rental townhouse, attempted to register their property as a short-term rental in 2019 after the ordinance was passed. The city denied them permission for their property to be used as a short-term rental because it was within 400 feet of another short-term rental already permitted. The Schroeders appealed the Wilmington Board of Adjustment, which upheld the city’s denial. The homeowners then filed their lawsuit. After the Schroeders were successful with the initial trial verdict, the City of Wilmington appealed and received their latest loss on April 5th.

The city now has the option to file for a final appeal to the North Carolina Supreme Court.

The Schoeders’ Reaction to the Court Decision

Peg Schroeder’s reaction to the appeal court’s decision:

“We are overjoyed. We knew all along that what Wilmington was doing was clearly illegal. It’s a shame that it took over two years of litigation to get to this point, but it’s gratifying to see another court tell Wilmington what we’ve been saying all along: Wilmington needs to follow the law.”

Peg’s husband, David Schroeder, expressed his thoughts:

“We’ve always been tied to Wilmington. Even after we moved to another part of the state, the whole reason we bought a short-term rental was so that we could afford to come back and have a place of our own to stay. The City took away our right to do that. Now we’ve taken it back.”

Institute for Justice (IJ) represented the Schroeders in this case. Their attorney, Ari Bargail, stated:

“Today’s ruling is yet another decisive victory for property owners in North Carolina. The North Carolina General Assembly plainly intended to stop these types of ordinances when it passed legislation safeguarding the right to rent out property on a short-term basis. Wilmington officials knew this, but they passed their ordinance anyway. Today’s victory is a long time coming for those who knew that what Wilmington was doing was wrong and decided to fight.”

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