Thursday, February 29, 2024

City doles out nearly $1M, concluding short-term rental litigation

The City of Wilmington’s litigation with the Schroeders about its short-term rental ordinance has come to an end, costing the city nearly $800,000. (Port City Daily/file)

WILMINGTON — Ongoing litigation with the city and a couple who filed suit for its short-term rental practices has finally come to a close.

Thursday, the New Hanover County Superior Court awarded the plaintiff’s motion in Schroeder v. City of Wilmington, ordering the city to cover $306,619 total in charges and attorney fees. The city has also reimbursed more than $500,000 to residents who had previously registered accommodations as short-term rentals.

READ MORE: City required to refund more than $500K in short-term rental fees

ALSO: City makes court ruling official on short-term rental ordinance, considers future distinction within districts

The city’s short-term rental ordinance has been a topic of contention since issues surrounding the unregulated practice were brought to the attention of local officials more than seven years ago. After three years of research, the city enacted a zoning ordinance in January 2019 regulating short-term rentals through a registration process.

To maintain a 400-foot separation requirement and 2% cap on the number of rentals allowed within residential areas, the city implemented a lottery system for homeowners looking to register a rental.

David and Peggy Schroeder applied for the permit after renovating a house for $75,000, specifically to use as a rental, only to lose out in the lottery. A neighbor in close proximity received one instead. After losing an appeal with the city’s board of adjustment, national law firm Institute for Justice backed the couple’s case.

In 2020, a Superior Court ruled certain provisions within Wilmington’s short-term rental ordinance were unconstitutional, revoking its ability to require registrations. In April, the city announced it would no longer be requiring property owners to register their homes as rentals and agreed to reimburse anyone who had already paid in.

Nearly $450,000 in registration fees had been collected since the program’s inception and participants incurred $10,189 in third-party processing fees. Per the general statute, 6% of accrued interest, or $57,867, was added to the refundable amount, totaling $511.484.

City Council unanimously voted to amend the short-term rental ordinance on Aug. 2 and will no longer enforce the separation or cap requirements, either. All other provisions of the ordinance remain in effect, including parking and insurance requirements, bedroom maximums, ground floor restrictions in the Central Business District, necessitating a local manager, and nuisance-related conditions.

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