UPDATE: Judge grants City’s motion for a stay, effective immediately

WILMINGTON, N.C. (WECT) - The City of Wilmington filed a motion in Superior Court Thursday asking Judge Harrell to enter a stay on the order he signed on Tuesday, September 16, which would repeal City Code Section 18-331 relating to whole house, short-term rentals in residential and historic districts.

According to a statement from the City of Wilmington, the judge granted the City’s motion for a stay, which is effective immediately and until the appellate process is complete.

A Superior Court judge ruled Tuesday that the City of Wilmington’s short-term rental laws that were put in place two years ago to restrict the number of rentals in the city are illegal.

Earlier this month, the national law firm Institute for Justice took over a case filed against the city by Peg and Dave Schroeder, homeowners who were told they could no longer rent the home they had purchased to do just that.

“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,” according to a press release from the Institute for Justice.

On Tuesday, Superior Court Judge Richard Harrell announced his decision declaring Wilmington City Code 18-331 (d)(8) 'void and unenforceable’ due to the fact state law expressly prohibits municipalities from requiring the registration of rental properties.

“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.”

The Schroeders had lived many years in Wilmington when they decided they wanted to retire in the mountains, but they did not want to leave Wilmington behind for good so they decided to buy a second home. The only catch was, they were going to rent it out on a short-term basis to help them afford it.

“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.”

A spokeswoman for the city of Wilmington released the following statement regarding the judge’s ruling:

In light of the Judge’s recent ruling relating to short-term whole-house rentals in residential and historic districts within the City of Wilmington, City Council, in consultation with the City Attorney’s Office, will review the ruling and consider an appropriate way forward over the next few weeks. Staff will request Council enter into a closed session to discuss the ongoing litigation as early as October 5, at which time we hope to be able to provide further comment.

Vacation rentals have become a topic of contention not only in Wilmington by across the state and country.

“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,” according to the Institute for Justice.

“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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