National law firm takes over case against City of Wilmington’s short-term rental laws

WILMINGTON, N.C. (WECT) - When the City of Wilmington first decided to regulate short-term rentals it faced resistance from residents and homeowners who had purchased properties with the intent of renting them out. There have been appeals made to the city regarding the strict regulations, but for the most part, the city has continued to uphold its rental restrictions, now, the city is facing a lawsuit for them.

On Wednesday, The Institute for Justice (IJ), a self-described libertarian law firm, has taken over a lawsuit against the city on behalf of two Wilmington homeowners.

IJ is a national law firm that “litigates to limit the size and scope of government power and to ensure that all Americans have the right to control their own destinies as free and responsible members of society.”

The case the firm has decided to take is that of Peg and David Schroeder.

“When Peg and David Schroeder decided to retire to the Western Carolina mountains, they knew they didn’t want to leave Wilmington forever, so they made a plan: They’d buy a smaller, more manageable property in Wilmington to serve as a gathering place for friends and family—and when they were not using it, they would offer it as a vacation rental property,” according to a press release from the IJ.

The Schroeder’s found a property and had consulted with an attorney to ensure their home was eligible for rentals before buying it. They went forward with the purchase of the property and put in $75,000 worth of renovations to bring it up to par, but that’s when they got bad news -- Wilmington passed its short-term rental regulations that placed a cap on the number of units that could be rented in a residential area.

“Under the new ordinance, vacation rentals were limited to no more than two percent of properties and every vacation rental property had to be more than 400 feet from the next closest vacation rental. To decide who got to keep their right to rent and who did not, the city conducted a lottery. The Schroeders applied, but because a neighbor drew a lower number, they lost,” according to the press release.

When they found out they would not be able to rent their home, the Schroeders were given one year in ‘amortization’ to rent their home out and recoup the money they had spent, after that they had to cease all rentals.

“Living on a fixed income, the Schroeders couldn’t afford to take their property off of the rental market, so they sued the city. The Schroeders’ case caught the attention of attorneys at the Institute for Justice (IJ)—a nonprofit public interest law firm with extensive experience litigating property rights cases across the country—and now, today, IJ is taking over the case,” according to the Institute for Justice.

A petition for writ of certiorari has been filed against the City of Wilmington in Superior Court, arguing the city’s actions are in violation of state law, and actually are unconstitutional.

“By capping the number of vacation rentals, Wilmington is effectively changing the rules in the middle of the game,” Institute for Justice Senior Attorney Robert Frommer said. “The city’s decision to regulate vacation rentals violates state law, and its use of a controversial tool called amortization to put a ticking time bomb on Peg and David’s rights violates the North Carolina constitution.”

This is not the first time that IJ has filed a lawsuit against a municipality in New Hanover County, in 2018 the law firm worked on behalf of food trucks in the region to sue the Town of Carolina Beach for their right to practice business in the town.