State licensing proposed for rental homes
Some Bethel-area innkeepers are supporting a legislative bill that would require rental homes, camps and condos to meet the same state lodging licensing criteria that inns and hotels do.
The requirements could include complying with life safety, water testing, wastewater, rubbish disposal, laundering, food, ADA, fire sprinkling and other codes, according to state and tourism officials.
“I think that would be devastating,” said the owner of a business that rents properties for individual owners.
The business owner, who did not wish to be identified, said the cost of compliance with the requirements would stop those owners from renting their properties. “If you need to be a hotel, I couldn’t do what I do,” the owner said.
But Kathy Thrall, owner of the Inn at the Rostay, says it’s getting harder and harder to do what she does because of the competition from rentals that don’t have to pay to be in licensing compliance.
Thrall and several other Bethel innkeepers wrote letters or went to Augusta last week to testify in favor of LD 330, a bill introduced by Sen. John Patrick (D-Rumford), which would remove current exemptions for lodging places.
A summary of LD 330 states in part, “Current law requires lodging places to be licensed by the Department of Health and Human Services; lodging houses may be licensed by the municipality under the direction of state law. Private homes, when not more than 5 rooms are let, rooms and cottages where not more than 3 rooms or cottages are let, and fraternity and sorority houses affiliated with educational institutions are exempt from licensing bythe State. Lodging houses with fewer than 5 lodgers are exempt from municipal licensing.
“This bill removes the exemptions from state licensing of lodging places, private homes and inns, requiring them all to be licensed by the State, and repeals the authority of a municipality to license lodging houses since it will now be done by the State.”
Patrick said he introduced the bill after hearing from Bethel and Rumford innkeepers. Last week’s hearing took place before the Health and Human Services Committee.
Thrall said then that her tax, insurances, utilities and mortgage are set at commercial rates, and “these unregulated, unlicensed properties are taking away from my potential rentals. Very often in the winter, during ski races at Sunday River, Mt. Abram or Black Mountain, my establishment is virtually empty while the area rental houses are full. I have lost many of my ‘regular’ ski team groups to local unlicensed houses because they can offer more affordable deals than I can. The state in turn loses sales tax revenue if this housing establishment chooses not to pay their sales tax. Almost every lodging establishment in Bethel is for sale because it is no longer possible to make a profit in the lodging industry.”
She gave an example of a Bethel inn that she said wanted to increase its number of rentals by renovating an upper floor.
“The state required that they put in a sprinkler system, fire doors and escape routes,” said Thrall. “This was too costly.”
Later, she said, the property was sold and the current owner “now rents out the entire same house with no restrictions or requirements.”
Thrall also described a large home that she said sleeps more than three dozen people, has many amenities and rents for weddings and other functions, but has no license.
Chad McGrew of the River View Resort in Bethel said the problem Thrall described “has grown worse with each passing year as outside owners build mansions capable of sleeping dozens of people and have no intent of ever using the facility as a home.”
Other local inns supporting the legislation included the Bethel Inn, the Chapman Inn and the Norseman Inn.
Thrall proposed that to address the problem, the definition of a lodging establishment be “any building that offers sleeping accommodations for four or more persons.”
Also testifying last week was Greg Dugal of the Maine Innkeepers Association. He said the 2009 recession increased the numbers of homes offered for rent as owners sought new sources of cash.
Dugal said Friday that he believes the workload of taking on many more rental properties would be more than state inspectors could handle.
He suggested that a compromise might be found by making a distinction between overnight lodging of two or three nights, and casual rentals for longer periods of time, with the overnight lodgings requiring licensing.
McGrew offered another option: notifying homeowners “that if they offer lodging of more than two rooms, or to more than, say, eight people, they will be forced to meet certain state standards and pay sales tax, and then making it clear that the state intends to enforce stiff penalties on people caught not doing so would bring in a sudden influx of revenues.
“Clearly there would need to be some new guidelines and powers granted to those in charge of enforcing sales taxes on lodging facilities, but I can assure you that people trying to cheat would have a large contingent of watchdogs in the lodging businesses surrounding them.
“The state also needs to consider the ramifications of continuing business as usual. Sooner or later one of these houses with 25 people partying in it will burn with loss of life. The homeowner’s insurance will not cover the liability and the state will be forced to act. Wouldn’t it be more mature to act before?”
On the day of the hearing, Patrick said he proposed the bill to bring the issue forward for discussion, “to give businesses the opportunity to have a voice.”
He said details of the bill could be worked out in the committee.
State Rep. Jarrod Crockett (R-Bethel) said LD 330 would have a very serious effect locally.
“This bill is dangerous to hundreds of people who own hunting camps, fishing camps, condos and vacation homes in our area,” he said. “It means huge financial losses for not just the owners but anyone connected to these rental properties which includes caretakers, carpenters, cleaning personnel, realtors, banks holding mortgages, and the list goes on and on.
“At a time when money is tight and people need jobs, elected officials should be promoting business rather then crushing it. LD 330 as it is written is a terrible piece of legislation. It is hard to imagine a worse possible time to propose this bill.”
Fran Head, owner of Maine Street Realty & Rentals in Bethel, said the expense for home, condo, and camp owners to meet licensing requirements would have a great impact.
“As it is they pay for rental insurance, property tax, our fee, and any upkeep required,” she said. “If there were more licensing costs added to the small homes, camps or condos most of the people renting would have to sell.
“Many of our clients are renting in order to keep these second homes. Many plan to retire to their properties here in Maine.
“Our lawmakers need to understand that putting more burden on rental properties is not going to help our economics.
“It will make it hard for many second-home owners to keep their properties. If the state collects 7% lodging tax on most of the vacation rentals, then why rock that boat and overburden owners?”
Several years ago Thrall was involved in supporting a similar bill but, she said, it was not successful.
A work session on LD 330 is scheduled for March 14 at 1:30 p.m. at the Cross Building, adjacent to the State House.