Federal judge rules on lawsuit that could decide future of NC short-term rentals
A federal judge issued a split decision on a lawsuit that could decide the future of short-term rentals (STR) in North Carolina.
Filed by property owners as well as property management companies, the lawsuit alleges Iredell County’s zoning restrictions on STRs are illegal. STR laws in North Carolina have prompted multiple court cases and division between property owners on both sides of the debate. Some claim rental restrictions infringe on the rights of property owners, others argue as the practice continues to gain momentum there should be more enforcement on what is allowed.
The decision issued by the federal judge means three claims by property owners and rental companies are remanded back to state court --- while two remain in federal court.
At the heart of the case is Iredell County’s enacted zoning ordinance that places news regulations on property owners who rent their homes.
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“The Ordinance also imposes restrictions on the use of the property being rented out. For example, occupancy cannot exceed two persons per bedroom (plus two additional persons); owners may not host events such as weddings, parties, reunions, or other large gatherings…” according to the lawsuit.
Iredell County asked the federal court to take over the case claiming the state did not have full jurisdiction over the complaints. It was a request the property owners and management companies disagreed with.
“Plaintiffs argue that the alleged federal claims in their case are not substantial enough to support jurisdiction in this Court and further urge the Court to decline jurisdiction…” according to the court’s opinion.
The court agreed with both parties involved in the suit.
“In this case, each of the claims in some way requires determinations of North Carolina state law, including complex issues such as preemption, and the application of state law, including the North Carolina Constitution, to local land ordinances,” according to the order.
Two of the other claims however cite federal law including the 4th Amendment, 5th Amendment, and the Due Process Clause of the 14th Amendment. That’s why the judge determined the federal court would assert jurisdiction on those two claims.
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Before the federal court took on the case a state court issued an injunction on the regulations, meaning while the case is heard the rental restrictions are not enforceable for the plaintiffs.
In 2023 the North Carolina Court of Appeals ruled on a lawsuit brought by homeowners in Wilmington, NC against the city’s regulations. The court ruled largely in favor of the homeowners in Schroeder v. Wilmington prompting the city to rollback its ordinances.
“The court plainly struck down the registration program of the Wilmington short-term rental ordinance as preempted by G.S. 160D-1207(c). Moreover, the court struck down other “provisions of the Ordinance [that] are so intertwined with the invalid registration requirement that they are likewise preempted by Section 160D-1207(c).” These include the cap and distance requirements, proof of shared parking prior to registration, the registration termination provisions, posting registration numbers in the rental unit, and the amortization of rentals without a registration,” according to UNC School of Government.
Despite the ruling other cities and counties in the state continue attempts to restrict rentals without a strict state law outlining what local governments can, and can’t do, it’s up to courts to determine whether local restrictions are legal. The federal lawsuit is not the only one pending right now, another homeowner in Iredell County is challenging the county’s ordinance in state court.
(WATCH BELOW: Home where shooting near officers happened is short-term rental, neighbors say)
