Municipal — Short-Term Rentals – Registration Requirement – Ultra Vires

Pursuant to former G.S. § 160A-424(c), the defendant-city was prohibited from requiring the owner of rental property (1) to obtain permission from the city to lease or rent or (2) to register rental property with the city. The General Assembly’s 2019 recodification of the statute to G.S. § 160D-1207(c) and its slight amendment of the statute did not eliminate these prohibitions. The trial court properly determined that it was statutorily impermissible for the city to require a short-term rental owner to obtain a permit to rent under G.S. Chapter 160D, Article 11 or 12; to obtain a permission to rent under the same Articles; or to register the property as a rental with the government.

We affirm the trial court’s striking of these provisions of the city’s ordinance. However, we reverse the trial court’s striking of severable provisions of the city’s ordinance that do not depend on registration, permits or permission.

Before its recodification, § 160A-424(c) barred cities from “[requiring] any owner or manager of rental property to obtain any permit or permission … to lease or rent … or to register rental property with the city.”

The defendant-city nevertheless enacted an ordinance to restrict short-term rentals to specific zoning districts, to require at least 400 feet of separation between short-term rentals, and to cap the total percentage of short-term rentals at two percent of residential parcels. To implement the separation and cap requirements, the ordinance required short-term rental operators to register their properties. A lottery was held, and plaintiffs were unsuccessful, as another property within 400 feet of their townhouse drew a lower lottery number.

Shortly before plaintiffs filed this declaratory judgment action, the General Assembly recodified § 160A-424(c) to G.S. § 160D-1207(c). Section 160D-1270(c) substituted “local government” for “city” and prohibited a local government from adopting or enforcing “any ordinance that would require any owner or manager of rental property to obtain any permit or permission under Article 11 or Article 12 of this Chapter from the local government to lease or rent residential real property or to register rental property with the local government.”

The new language “under Article 11 or Article 12 of this Chapter” does not change the statute’s preemptions. Article 11’s statutes explicitly refer to “permits” and other approval mechanism. Article 12’s statutes contemplate other forms of governmental approvals, i.e., permissions. Thus, applying the statutory cross-reference to both “permit or permission” and treating them together results in a general prohibition against requiring government approval to lease or rent, however required under Articles 11 or 12, that aligns with the structure of those Articles.

We agree with the trial court’s interpretation of § 160D-1207(c) as prohibiting local governments from requiring a short-term rental owner to obtain a permit to rent under Articles 11 or 12, a permission to rent under the same Articles, or to register the property as a rental with the government. The provisions of the city’s ordinance requiring such a registration—as well as any provisions that are inseverable from that initial registration requirement—are preempted by § 160D-1207(c) and its unambiguous predecessor § 160A-424(c).

However, the ordinance includes a severability clause, and several parts of the ordinance do not violate § 160D-1270(c). Such requirements – like requiring one off-street parking space per bedroom – are permissible and remain in effect.

Affirmed in part, reversed in part, and remanded.

Schroeder v. City of Wilmington (Lawyers Weekly No. 011-082-22, 26 pp.) (Lucy Inman, J.) Appealed from New Hanover County Superior Court (Kent Harrell, J.) John Branch, Andrew Brown, Ari Bargil and Adam Griffin for plaintiffs; Cosmo Zinkow, Robert Hagemann and Meredith Everhart for defendant. 2022-NCCOA-210