Are Short-Term Rentals a Lodging Business?

A legal conundrum underlying the Short-Term Rental (STR) discussion is whether STRs (like Airbnb and Vrbo) are home businesses or not.

The answer is:

• Yes – for licensing, insurance, incorporation and taxing
• No – for zoning, building codes, and public hearings
• And definitely don’t ask how they differ from hotels for any of the above.

The issue was raised in the February 13 City Council meeting. Per Lakewood Zoning Ordinance Article 14, the definition of a home business is “any occupation of a service character which is clearly accessory to the main use of the premises as a dwelling unit, and which does not change the residential character.”

Citing the zoning definition, City of Lakewood attorneys advise that STRs are not a home business at all, because the business in question is dwelling.

Business: “the activity of making, buying, or selling of goods or providing services in exchange for money.”

Britannica.com

The convoluted argument is summed up in the proposed, “Business and License Regulations for Short-Term Rentals” wherein it states: “due to the residential nature associated with operating an STR, the use of a primary residence as a Short-Term Rental shall not be considered either a major or minor home business as those terms are defined within the Zoning Ordinance.”

So in the business regulations for STRs, it states STRs are not a home business.

Regardless of what you may think of that legal argument, it has been rendered moot by the recently passed amendment to allow short-term rentals in a non-owner-occupied residence (you don’t live there, you just rent it out).

Reside: to dwell permanently or for a considerable time

dictionary.com

Per zoning ordinance definitions, the main difference between a home/residence and a hotel/motel is the transitory nature of the stay. It seems logical to assume that with no one residing at the home, it is no longer a residence.

Another indication of a change in purpose is when property is owned by a business. Many rental owners form a business and register with the Secretary of State as legal protection. In that scenario, the business owns the property.

The purpose of the building has now shifted into a transitory-stay, business nature, rather than residential. It is lodging, just like a hotel. Hotels are required to have a lodging facility license and follow certain rules.

Jefferson County also considers short-term rentals to be a residential use. They only allow STRs on properties over one acre in size, with adequate parking, and special exception approval.

Jeffco’s definition also neglects to address the difference between long-term residential use, and the transitory lodging use that characterizes hotels, motels, bed and breakfasts. Advocates of de-regulation will point out that all of these businesses may benefit from being zoned residential, with residential building codes, and/or no public hearing for a lodging license.  

It may be necessary for Lakewood to revisit the decision that STRs are not a lodging business, even a home business, with the inclusion of non-owner-occupied rentals. These houses will not be serving their primary purpose of being a residence. They will be transitory lodging for visitors – with all the associated pros and cons.

This is one example of the items that may be reviewed before the March 13 meeting.