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Free to Rent: Victory for Property Owners in the Tarheel State

This September, IJ scored a victory for property owners in Wilmington, North Carolina, when a judge there struck down a city ordinance that deprived property owners of their rights under an abusive amortization scheme.

IJ clients David and Peg Schroeder are lifelong members of the Wilmington community. After retiring to the mountains, they bought a townhome in Wilmington to preserve their ties to family and friends. Being sure to purchase where vacation rentals were allowed, they renovated the home for dual use as a personal residence and vacation rental.

Then Wilmington changed the rules on the Schroeders: The city enacted an ordinance making it illegal to use a property as a vacation rental without government permission, imposing a hard 2% cap on the number of properties that would be allowed to offer vacation rentals, and declaring that no property could rent within 400 feet of another vacation rental property.

To implement the ordinance, Wilmington entered property owners into a raffle. Winners were granted an exclusive privilege to rent. Losers lost their rights. Under the ordinance, the Schroeders were losers—forfeiting their right to rent as well as tens of thousands of dollars in improvements. The city allowed the Schroeders one year to “amortize” their lost investment.

Readers of Liberty & Law may recognize “amortization” as an underhanded tactic that municipal governments use to take property without paying owners any compensation. Using amortization, a city gives a property owner a limited time to continue using their property for its current use before extinguishing that right. The result? Rather than compensate a property owner, the government forces the owner to work to pay themselves. That is unconstitutional.

Fortunately for the Schroeders and other losers in Wilmington’s scheme, a North Carolina judge agreed. The court ruled that Wilmington’s ordinance was illegal, freeing the Schroeders to rent their property. The city is appealing the ruling, but IJ will fight until we’ve vindicated once and for all the principle that cities cannot strip property owners of their rights—including the right to rent—without compensation

Adam Griffin is an IJ constitutional law fellow.

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