An N.C. Superior Court Judge has ruled that Wilmington’s vacation rental code violates a state law prohibiting municipalities from requiring rental permits, according to an announcement Wednesday. 

A news release stated that the decision is a win for Peg and David Schroeder, who filed the lawsuit in October last year challenging Wilmington’s ordinance imposing a 2% overall cap on vacation-rental properties and requiring a 400-foot separation between vacation rentals.

“We’re just really relieved,” said David Schroeder in a Zoom call Wednesday afternoon.

Peg Schroeder added, “We’re ecstatic. We can’t afford to keep it [their vacation rental townhouse in Lion’s Gate, a neighborhood near Wrightsville Beach] if we can’t rent it. It’s where we go to gather with our children and grandchildren so that would have been a big loss."

According to a city statement on the ruling Wednesday, "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." 

In April 2019, 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,” stated a news release from the Institute for Justice, which represented the Schroeders.

The Arlington, Virginia-based IJ is a national nonprofit special interest law firm.

“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. “The decision makes it crystal clear that North Carolina cities cannot impose unnecessary permitting or registration requirements on vacation rentals.”

In recent years, cities nationwide have tried to confront the issue of how to regulate vacation-rentals, the release stated. 

According to the release, “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.”

The Schroeders said their renters were mainly vacationers but also a lot of parents visiting their children at the University of North Carolina Wilmington.

“We were very conscientious about how we rented and who we rented to,” David Schroeder said in the release. “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.”

IJ Constitutional Law Fellow Adam Griffin said, “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. 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.”