Wilmington’s short-term rental restrictions already cost taxpayers, could now cost more in legal fees

Wilmington’s short-term rental restrictions already cost taxpayers, could now cost more in legal fees
Published: Jun. 21, 2022 at 3:36 PM EDT
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WILMINGTON, N.C. (WECT) - Wilmington’s now-invalid short-term rental restrictions and the subsequent lawsuit filed by Wilmington homeowners Dave and Peg Schroeder could end up costing the city from legal fees, the loss of registration fees, and interest that will be paid back to homeowners.

After more than two months without response, the City of Wilmington has provided at least some of the information requested by WECT to learn more about the total impact of the city’s fight against short-term rentals.

The City Council has already agreed to return the fees collected from the illegal permits the city required for several years, as well as interest with a total cost around $511,484.

While the city held off on spending those fees after the lawsuit was filed, the repayment of the fees and interest will be taken from the city’s General Fund.

That’s just part of the cost the city’s actions.

“According to the City Attorney’s Office, the City has spent approximately $175,000 on outside counsel for the Schroeder case,” Deputy City Clerk Heather Padgett said.

In North Carolina, a state law allows a judge to award attorney fees to plaintiffs who are successful in a lawsuit against a local government.

“In any action in which a city or county is a party, upon a finding by the court that the city or county violated a statute or case law setting forth unambiguous limits on its authority, the court shall award reasonable attorneys’ fees and costs to the party who successfully challenged the city’s or county’s action,” according to the law.

For more than two years, the national law firm The Institute for Justice litigated the case on behalf of the Schroeder’s, and those fees add up.

“Peg and David Schroeder won. After litigating with the City of Wilmington for over two years, both this court and the Court of Appeals held that the City exceeded its authority and unlawfully interfered with Peg and David’s property rights. In light of this victory, Peg and David now respectfully move this Court to award them their attorneys’ fees and costs … Peg and David have computer their attorneys’ fees to be $380,705 and their total costs to be $2,055.26. However, in exercise of sound billing judgement, Plaintiff’s counsel seeks only $304,564.20,” according to the Schroeder’s motion to recover attorney fees.

The City of Wilmington does not comment on ongoing litigation, and at this time, no motion for a hearing has been set, it’s also possible the city and IJ settle outside out court.

As for other records requested --- including closed meeting minutes from the times City Council discussed implementing the short-term rental restrictions --- the city has not provided anything. It is unclear if the city has withheld any emails WECT requested, and if so, what reason they have to do that.

However, since the litigation is technically still ongoing, it is likely any emails between city council and attorneys could still be considered confidential until the case is closed.

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