Wilmington Vacation Rental Law Overturned by North Carolina Court of Appeals

A North Carolina appeals court struck down parts of Wilmington’s short-term rental ordinance that required landlords to register their rental properties.

The court opinion partially upheld a 2019 decision by a New Hanover County judge in ruling that the city’s short-term rental ordinance violates state law by requiring landlords to s register with the city to rent out their properties.

The debate over short-term rentals has raged over the past decade since the launch of online home rental platform Airbnb.

In North Carolina, state law prohibits local governments from requiring “lease or rental permits and approvals” and “records of rental properties“, according to the court opinion, which was released Tuesday.

Instead of overturning the entire rental order, as the New Hanover judge did in 2019, the appeals court ruled that parts of the order unrelated to the rental license or at check-in can remain in place.

This means Wilmington can keep parts of the ordinance that, for example, require landlords to provide at least one parking space for each bedroom, post emergency numbers and other information inside the unit. rental, to prohibit the kitchen in the rooms and to restrict accommodation throughout the house. in some zoning districts.

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The decision revolves around an ordinance the Wilmington City Council approved in February 2019 in an effort to limit the impact of short-term rentals on neighborhoods and the city’s housing market, the City said. certain rulers and residents of the city.

Supporters of the ordinance have expressed concern that the rentals could disrupt residential neighborhoods by attracting new people and potentially reducing housing options for permanent residents of the city.

The debate over short-term rentals has centered on accusations that Airbnb has the ability to flood popular areas of the city with tourists and thus harm the sense of community and distort property values.

The owners countered that switching from long-term to short-term rentals meant more profit.

The ordinance passed in Wilmington required at least 400 feet of separation between short-term rentals. It also capped the percentage of short-term rentals at 2% of residential lots inside the city’s corporate limits in 1945 and 2% outside the limits.

The separation and capping requirements meant that rental operators had to register their properties with a registration system created by the city, which distributed registrations by lottery.

David and Peg Schroeder were operating a short-term rental in a townhouse they owned in Wilmington when the ordinance was approved in January 2019. They tried to register their property but ended up losing because another property in less than 400 feet attracted a lower number.

They appealed to the Wilmington Board of Adjustment, which upheld their denial of registration. They then filed a lawsuit in New Hanover County in October 2019.

That court struck down the order in its entirety, but dismissed Schroeder’s constitutional claims. The City of Wilmington then appealed the decision to the state appeals court, as did the Schroeders.

To reach its decision on Tuesday, the court had to sift through “three competing interpretations and applications,” from the city of Wilmington, the Schroeders and the New Hanover court.

David and Peg Schroeder are plaintiffs in a lawsuit challenging the City of Wilmington's short-term rental rules.  The North Carolina Court of Appeals issued a decision in the case on Tuesday.

Ultimately, the court’s opinion rejected the specific legal interpretations presented by the City of Wilmington and the Schroeders. He also ruled that the New Hanover court should not have overturned the entire order, only the licensing and registration portions.

“After reviewing the wording of the statutes, we find that Wilmington’s registration requirements for tenancies, and the provisions of the ordinance inseparable from them, are prohibited by state law and therefore invalid,” a writes the Court of Appeal.

The court’s decision was announced by a press release from the Institute for Justice, a nonprofit public interest law firm, which represented the couple.

“We are thrilled,” Peg Schroeder wrote in the release. “We knew all along that what Wilmington was doing was clearly illegal. It’s a shame that it took more than 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 must follow the law. »

The city still has the option to appeal the decision to the North Carolina Supreme Court.

Reporter Emma Dill can be reached at 910-343-2096 or [email protected]

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