CAROLINA BEACH — Following a Superior Court judge’s ruling earlier this week calling Wilmington’s short-term rental regulations ‘void and unenforceable,’ Carolina Beach Town Manager Bruce Oakley said the popular beach destination town will not consider any regulations unless there is a change in state law regarding the issue.
On Tuesday, North Carolina Superior Court Judge Kent Harrell ruled against the city of Wilmington in a lawsuit filed by the owners of a Wilmington property who were denied short-term rental rights of an Eastwood Road home they had purchased for that purpose.
Judge Harrell cited a state law that prohibits any city from adopting or enforcing an ordinance “that would require any owner or manager of rental property to obtain any permit or permission from the city to lease or rent residential real property or to register rental property with the city,” except for those with a certain number of violations within a month or a year, or those that fall in the top 10% of properties with crime or disorder problems.
Oakley said the town has not considered a ban of short-term rentals.
“However, we did discuss a registration program but tabled it to do more research. Based on Judge Harrell’s ruling, I don’t think we will propose any new regulations or registrations unless there is a change in the law,” Oakley said.
The topic has been discussed at the state legislative level in recent sessions, but no bills have been produced. In July 2019, Governor Roy Cooper signed into law The Vacation Rental Act, prohibiting local governments from regulating short-term rentals.
Mayor Leann Pierce and other council members did not respond to an emailed request for comment.
During a January budget retreat, Town Council directed staff to create a short-term rental zoning permit. According to town planner Gloria Abbotts, who presented information for a June 9 council meeting to discuss a proposed amendment, there were 1,007 active short-term rentals on the island at the time.
During the June council meeting, staff proposed a new law to provide the town a way to “easily identify, track, and determine which structures should be paying occupancy taxes and make sure property owners are aware of regulations related to the operation of a [short-term rental] in Carolina Beach.”
If passed, Abbott said the town would track short-term rentals using a registration program, which would require Room Occupancy Tax numbers to ensure each rental is registered with the county and is paying room occupancy taxes. The proposed annual application fee would be $25 per property, she said.
Abbott also clarified the new ordinance would not develop additional regulations for short-term rentals; the town did not present any plans to ban short-term rentals or limit how many were allowed.
“[T]he town does not regulate properties differently based on the duration of lease or rental,” according to Abbotts.
She also said the proposed ordinance is “in accordance with provisions of the North Carolina General Statutes” — although, according to Judge Harrell, that’s not the case, as his ruling specifically cited the illegality of requiring registration for rentals.
However, plans to register short-term rentals were tabled in mid-July as staff continued to work on the proposed law that didn’t ‘jive’ with state law, according to Oakley, as reported by WECT.
Judge Harrell’s Tuesday ruling came several weeks after the Institute for Justice began representing the Wilmington couple, who had challenged the city’s law imposing a 2% cap on vacation rental properties and requiring a 400-foot separation between short-term rental homes. The city runs a lottery program to determine who in a specific neighborhood can rent their properties on a short-term basis.
On Thursday, the city announced it had filed a motion asking Judge Harrell to enter a stay on his order, which he granted later that evening, thereby delaying the actual removal of the city’s short-term rental law until the city had a chance to appeal his order.
The city said the couple, David and Peg Schroeder, would be allowed to rent their home unless the city wins its appeal — but it will keep the law intact for all other city residents, arguing that those who invest in properties with the purpose of renting to vacationers may lose their investments if a possible appeal is successful.
The city said it “will continue to accept registration applications for homestays and whole-house rentals in the same manner that it has since the ordinance was initially adopted.”
The city has not yet filed an appeal, but plans to hold a closed session on October 5 to discuss any potential litigation going forward.
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