J. Justin Wilson
J. Justin Wilson · September 16, 2020

Wilmington, N.C.—Today, North Carolina Superior Court Judge Richard K. Harrell ruled that Wilmington’s vacation rental law violates a North Carolina statewide law prohibiting municipalities from requiring rental permits. The decision is a win for Peg and David Schroeder, who filed the lawsuit challenging Wilmington’s ordinance imposing a 2% overall cap on vacation-rental properties and requiring a 400-foot separation between vacation rentals. To decide who could rent their properties under these restrictions, the city forced property owners to enter into a lottery that raffled off the owners’ lifetime right to rent. The winners were able to rent their properties, while the losers—including the Schroeders—were stripped of their right to do so—even if they had been renting their properties without incident for years.

“Today’s decision marks an important victory for property owners and property rights in North Carolina,” said Ari Bargil, an attorney at the Institute for Justice (IJ), which represents the Schroeders. “The decision makes it crystal clear that North Carolina cities cannot impose unnecessary permitting or registration requirements on vacation rentals.”

For the Schroeders, the decision means that they will be able to keep the property they purchased in part because they wanted to offer it as a vacation rental.

“What a relief,” said David Schroeder. “We bought our home with the intent of occasionally renting it. When we lost the lottery, our only remaining options were to sell our home or file a lawsuit. We sued because we knew that Wilmington’s law was clearly illegal.”

“We lived our entire adult lives in Wilmington before retiring to the mountains,” said Peg Schroeder. “We built businesses here, and raised our kids here, and we bought this house in Wilmington because we wanted to maintain roots here. But we could not afford a second home unless we would be able to rent it when we’re not using it. If not for this decision, we would have had to sell our house.”

In recent years, cities nationwide have tried to confront the issue of how to regulate vacation-rentals. In response, the North Carolina General Assembly passed a law providing that cities could require permits or registrations from owners whose properties proved problematic in some way. Everyone else, the General Assembly instructed, should be left alone.

“We were very conscientious about how we rented and who we rented to,” continued David Schroeder. “We only rented to mature adults, we didn’t allow more than four people at a time, and we had the consent of our neighbors. As a result, we never had a complaint. There was no reason for the city to take away our right to rent out our very own property.”

“According to the trial court’s ruling, the city exceeded the scope of its authority by requiring registration with the city before anyone could offer their property as a vacation rental,” said IJ Constitutional Law Fellow Adam Griffin. “This ruling affirms that there is a check on local governments that stops them from imposing onerous regulations on law-abiding property owners like the Schroeders.”

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