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Old Lyme, Connecticut Short-Term Rental Regulation: A Guide For Airbnb Hosts

Old Lyme, Connecticut

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What are Short-Term Rental (Airbnb, VRBO) Regulations in Old Lyme, Connecticut?

Old Lyme, a coastal town in southeastern Connecticut, has some regulations in place for short-term rentals like those listed on Airbnb and VRBO. These rules aim to balance the economic benefits of short-term rentals with preserving the character of residential neighborhoods.

Starting a Short-Term Rental Business in Old Lyme

To operate a short-term rental in Old Lyme, property owners must adhere to the town's zoning regulations. The Old Lyme zoning code defines a "Bed and Breakfast" as a single-family dwelling that rents up to four rooms to transients on a short-term basis and may include serving meals as an accessory use.

Properties with more than four but no more than 40 rooms for short-term rental are classified as "Inns." Both Bed and Breakfasts and Inns are subject to additional zoning requirements.

In 2020, Old Lyme received complaints about parking violations and noise disturbances at a property purchased for use as an Airbnb. In response, the Planning and Zoning Commission formed a working group to draft an ordinance specifically addressing short-term rentals.

While Old Lyme does not currently have a separate ordinance for short-term rentals, property owners must still comply with existing zoning regulations based on the number of rooms rented. The town is actively working on developing more specific rules to govern the short-term rental industry.

Investors on the BiggerPockets forum have discussed the viability of short-term rentals in Connecticut, noting that properties near beaches, lakes, mountains, casinos, airports, or other attractions tend to perform well. However, they caution that regulations can vary significantly between towns.

In summary, Old Lyme allows short-term rentals in residential properties, subject to limitations on the number of rooms. Prospective short-term rental operators should carefully review Old Lyme's zoning code and stay informed about any new ordinances the town may adopt to regulate this growing industry. Consulting with local officials is advised to ensure compliance with all applicable rules.

Short-Term Rental Licensing Requirement in Old Lyme

To legally operate a short-term rental in Old Lyme, property owners must obtain a zoning permit or special permit from the town. The specific requirements are outlined in Section 315-8.3 of the Old Lyme Zoning Regulations.

The short-term rental permit application process involves several steps:

  • Submit a completed application form to the Town of Old Lyme. The application must include a floor plan showing the area of the main structure and the short-term rental unit, egress, and parking. A property layout plan detailing water and sewage disposal is also required.
  • Obtain approval from the Ledge Light Health District, the local health department. This involves a review of the septic system and well water, which requires a separate fee paid to the health district. Proof of satisfactory health review must be submitted with the short-term rental application.
  • Attest that all smoke, fire, and carbon monoxide alarms are properly installed, tested monthly, and operational. The Fire Marshal's office may require a safety inspection, especially if morning meals are served to guests.
  • Pay the applicable permitting fee to the Town of Old Lyme. Additional fees may apply if selling goods or services beyond lodging and morning meals, subject to regulations for customary home occupations.

The Zoning Enforcement Officer will review the application and inspection results, potentially requiring an additional in-person inspection before issuing the short-term rental permit. Permits must be renewed annually, which requires updated inspections and permits.

Failure to comply with Old Lyme's short-term rental regulations can result in penalties, including:

  1. Immediate revocation of an existing permit
  2. Denial of permit renewal
  3. Issuance of a cease-and-desist order
  4. Other enforcement actions as provided by law

The town may also pursue other legal or equitable remedies or create a citation hearing procedure to obtain compliance with the regulations. Operating a short-term rental without the required permit is subject to enforcement action.

In summary, Old Lyme requires all short-term rental operators to obtain a zoning permit or special permit, which involves submitting an application, passing health and safety inspections, and paying associated fees. Annual permit renewal is mandatory, and operating without a valid permit can lead to fines and legal action by the town.

Required Documents for Old Lyme Short-Term Rentals

To apply for a short-term rental permit in Old Lyme, property owners must submit several documents to demonstrate compliance with local regulations. The required documents include:

  1. Completed Application Form: The short-term rental permit application form, available from the Old Lyme Zoning Department, must be filled out completely and accurately.
  2. Floor Plan: A detailed floor plan of the main structure and the short-term rental unit, showing egress and parking, is required. This helps ensure the rental meets safety and occupancy requirements.
  3. Property Layout Plan: A site plan detailing the location of the short-term rental unit, water supply, and sewage disposal system must be submitted. This allows the town to verify compliance with health and environmental regulations.
  4. Health District Approval: Proof of approval from the Ledge Light Health District is required, confirming the rental unit meets local health standards. This involves a review of the septic system and well water, with a separate fee paid to the health district.
  5. Safety Certification: Property owners must attest that all smoke, fire, and carbon monoxide alarms are properly installed, tested monthly, and operational. The Fire Marshal's office may require a safety inspection, especially if morning meals are served to guests.
  6. Proof of Insurance: Evidence of appropriate insurance coverage for the short-term rental property must be provided. This protects both the property owner and the town from potential liabilities.
  7. Permit Fee: The applicable permitting fee must be paid to the Town of Old Lyme. Additional fees may apply if selling goods or services beyond lodging and morning meals, subject to regulations for customary home occupations.

These documents help Old Lyme officials ensure that short-term rentals operate safely and in compliance with local zoning, health, and safety regulations. Failure to provide the required documentation can result in denial of the permit application or enforcement action against the property owner.

Old Lyme Short-Term Rental Taxes

Short-term rental operators in Old Lyme must collect and remit several types of taxes. Understanding these tax obligations is crucial for compliance and profitability.

Room Occupancy Tax

The primary tax applicable to short-term rentals in Connecticut is the room occupancy tax. This state-level tax is set at 15% of the total payment received for occupancy of the room or rooms for up to 30 consecutive calendar days. Beginning on the 31st consecutive day of occupancy by the same person, the tax no longer applies.

Hosts are responsible for collecting this tax from guests and remitting it to the Connecticut Department of Revenue Services. Failure to comply can result in penalties and interest.

Income Tax

Income earned from short-term rentals is generally subject to federal and state income taxes. Rental income must be reported on your tax return, and you may be required to make estimated tax payments throughout the year.

The specific tax implications depend on factors such as the number of days the property is rented, your level of participation in the rental activity, and whether the rental is considered a business or an investment.

Potential Tax Deductions

Short-term rental operators may be eligible for various tax deductions that can offset their rental income. Some common deductions include:

  1. Mortgage interest
  2. Property taxes
  3. Rental insurance
  4. Utilities
  5. Cleaning and maintenance costs
  6. Depreciation of the rental property
  7. Advertising and marketing expenses

Careful record-keeping is essential to substantiate these deductions. Consult with a tax professional to determine which deductions apply to your specific situation and to ensure proper reporting on your tax returns.

In summary, short-term rental operators in Old Lyme must collect and remit the 15% room occupancy tax, report rental income on their tax returns, and take advantage of available deductions to minimize their tax liability. Staying informed about tax requirements and seeking professional advice can help ensure compliance and maximize profitability.

Connecticut-Wide Short-Term Rental Rules

While Old Lyme has its own regulations for short-term rentals, it's important for hosts to be aware of Connecticut's state-wide rules and proposed legislation that could impact their operations.

Currently, Connecticut does not have state-wide regulations specifically targeting short-term rentals. However, a new bill (Bill 335) is under consideration by state lawmakers that would grant municipalities greater control over short-term rentals within their jurisdictions.

If passed, this legislation would allow cities and towns to establish ordinances governing short-term rental properties, such as zoning restrictions, guest occupancy limits, and parking requirements. The bill aims to address concerns raised by residents in various Connecticut communities regarding noise, parking issues, and the impact of short-term rentals on neighborhood character.

While this proposed legislation would empower municipalities to regulate short-term rentals, it would not mandate any specific actions. Each city and town would have the discretion to determine the extent and nature of their local short-term rental policies.

Presently, short-term rental operators in Connecticut are subject to the state's room occupancy tax, which is set at 15% of the total payment received for stays of up to 30 consecutive days. Hosts are responsible for collecting this tax from guests and remitting it to the Connecticut Department of Revenue Services.

Additionally, Connecticut's anti-discrimination laws apply to short-term rentals, prohibiting discrimination based on protected classes such as race, color, national origin, sex, and religion. The Connecticut Commission on Human Rights and Opportunities (CHRO) enforces these protections.

Some Connecticut municipalities, like Norwich, have already enacted local ordinances regulating short-term rentals in response to community concerns. As the state considers a more comprehensive approach, Old Lyme hosts should stay informed about potential changes to state-wide policies and be prepared to adapt their operations accordingly.

Does Old Lyme Strictly Enforce STR Rules?

Old Lyme, like many Connecticut towns, is navigating the balance between supporting short-term rentals and addressing community concerns. While Old Lyme has regulations in place for short-term rentals, the level of enforcement appears to be moderate compared to some other cities.

According to discussions on the BiggerPockets forum, investors have found success with short-term rentals in Old Lyme, particularly with properties near the beach. One user noted that their contacts have houses in Old Lyme that are "booked solid for 4-5 months out of the year."

This suggests that despite the regulations, short-term rental operators are able to run profitable businesses in Old Lyme. The town's proximity to the beach and other attractions makes it an appealing destination for short-term rental guests.

However, Old Lyme has taken steps to address issues related to short-term rentals. In 2020, the town received complaints about parking violations and noise disturbances at an Airbnb property, prompting the Planning and Zoning Commission to form a working group to draft a specific short-term rental ordinance.

While this indicates that Old Lyme is willing to enforce its rules when necessary, the town appears to be taking a measured approach, seeking to develop fair and effective regulations rather than imposing overly restrictive policies.

Overall, Old Lyme can be considered moderately Airbnb-friendly compared to other Connecticut cities. While the town has regulations in place, hosts are able to operate successfully, particularly in desirable locations like beachfront properties. As long as short-term rental operators comply with the town's rules and are responsive to community concerns, they can likely continue to thrive in Old Lyme.

How to Start a Short-Term Rental Business in Old Lyme

If you're considering starting a short-term rental business in Old Lyme, follow these steps to ensure compliance with local regulations and set yourself up for success:

  1. Research Old Lyme's zoning regulations: Review the town's zoning code to determine if your property is eligible for short-term rental use. Old Lyme's regulations define a "Bed and Breakfast" as a single-family dwelling that rents up to four rooms to transients on a short-term basis. Properties with more than four but no more than 40 rooms are classified as "Inns." Ensure your property meets the applicable criteria.
  2. Obtain necessary permits: Apply for a zoning permit or special permit from the Old Lyme Zoning Department. Submit a completed application form, floor plan, property layout plan, and other required documents. Pay the applicable permitting fee and await approval from the Zoning Enforcement Officer.
  3. Comply with health and safety requirements: Schedule inspections with the Ledge Light Health District to ensure your rental unit meets local health standards for septic systems and well water. Install and maintain smoke, fire, and carbon monoxide alarms as required by the Fire Marshal's office.
  4. Register for tax purposes: Register your short-term rental business with the Connecticut Department of Revenue Services to obtain a tax registration number. You'll need this to collect and remit the 15% room occupancy tax on stays of up to 30 consecutive days.
  5. Obtain appropriate insurance: Secure liability insurance coverage for your short-term rental property. Some homeowners' policies may not cover damages or incidents related to rental activities, so consider a separate policy or rider specifically for short-term rentals.
  6. Create a compelling listing: Develop an attractive and informative listing for your short-term rental on platforms like Airbnb or VRBO. Highlight your property's unique features, amenities, and proximity to local attractions. Use high-quality photos and detailed descriptions to set your rental apart from the competition.
  7. Establish house rules and guest communication: Set clear expectations for guests by creating house rules that address noise levels, parking, occupancy limits, and other important considerations. Develop a system for communicating with guests before, during, and after their stay to ensure a positive experience and address any issues promptly.
  8. Maintain accurate records: Keep detailed records of your short-term rental income and expenses, including documentation of permits, inspections, and tax filings. This will help you stay organized, comply with regulations, and prepare for tax season.

By following these steps and staying informed about Old Lyme's evolving short-term rental landscape, you can launch a successful and compliant short-term rental business in this charming coastal town.

Who to Contact in Old Lyme about Short-Term Rental Regulations and Zoning?

If you have questions about short-term rental regulations or need assistance with the permitting process in Old Lyme, contact the following officials:

Land Use Department

  1. Kim Groves, Land Use Coordinator
  2. Phone: 860-434-1605, ext. 234
  3. Physical Address: 52 Lyme Street, Old Lyme, CT 06371

Zoning Commission

  1. Eric Knapp, Land Use Coordinator
  2. Phone: 860-434-1605, ext. 230
  3. Email: eknapp@oldlyme-ct.gov
  4. Physical Address: 52 Lyme Street, Old Lyme, CT 06371

Planning Commission

  1. Eric Knapp, Land Use Coordinator
  2. Phone: 860-434-1605, ext. 230
  3. Email: eknapp@oldlyme-ct.gov
  4. Physical Address: 52 Lyme Street, Old Lyme, CT 06371

In addition to contacting local officials, short-term rental hosts in Old Lyme may find the following online communities and resources helpful:

BiggerPockets Forum - Short-Term & Vacation Rental Discussions: https://www.biggerpockets.com/forums/530-short-term-vacation-rental-discussions

This forum has a thread specifically discussing short-term rentals in Connecticut, where hosts share their experiences and advice.

Airbnb Hosts Forum on Reddit: https://www.reddit.com/r/airbnb_hosts/

This subreddit is an active community of Airbnb hosts discussing various topics related to short-term rentals.

National Short-Term Rental Association (NSTRA): https://www.nationalshorttermrentalassociation.com/

NSTRA provides resources and support for short-term rental owners and managers across the United States, including state-specific information.

Rent Responsibly - Short-Term Rental Alliance Directory: https://www.rentresponsibly.org/alliances/

This directory lists short-term rental advocacy groups and associations by region, which can be valuable for connecting with other hosts and staying informed about industry developments.

By reaching out to local officials and engaging with online host communities, short-term rental operators in Old Lyme can ensure they have the information and support needed to run successful and compliant businesses.

What Do Airbnb Hosts in Old Lyme on Reddit and Bigger Pockets Think about Local Regulations?

While there are no specific threads or comments from Old Lyme Airbnb hosts on Reddit or BiggerPockets discussing local short-term rental regulations, some relevant insights can be gleaned from hosts in nearby areas:

On the BiggerPockets forum, a user from Old Lyme posted about challenges with heating costs in their multi-unit rental property. They asked for advice on how to fairly pass oil heating costs on to tenants when the building has two shared oil tanks each serving two units. While not directly related to short-term rentals, this highlights some of the unique considerations for rental property owners in the area.

In a separate BiggerPockets thread, an investor from the neighboring town of East Lyme inquired about using commercial equity lines of credit to refinance a portfolio of rental properties. Again, while not specific to short-term rentals, this suggests that local real estate investors are actively seeking creative financing strategies.

On the r/airbnb_hosts subreddit, hosts have discussed proposed legislation in New York that could impact short-term rentals. One host with a property in the Catskills region noted that Airbnb had reached out encouraging them to fill out a form opposing the new rules. While the Catskills are a few hours from Old Lyme, this indicates that Airbnb is actively mobilizing hosts to advocate against restrictive regulations in the broader region.

Another thread on r/airbnb_hosts debated the pros and cons of municipal efforts to regulate short-term rentals. Some argued that reasonable regulations could help curb problematic trends like the proliferation of de facto hotels run by absentee owners. Others maintained that overly strict rules unfairly penalize responsible hosts and deprive communities of the economic benefits of short-term rentals.

While these examples don't speak directly to the Old Lyme market, they provide context on the types of issues and conversations happening among short-term rental hosts in Connecticut and the surrounding areas. As Old Lyme continues to develop its own short-term rental policies, it's likely that local hosts will become more vocal in online forums about their experiences and perspectives.

Disclaimer: While we here at BNBCalc strive to keep all of our city regulation guides updated and accurate with all the latest local laws, we still do not suggest using them as your sole or primary source for local regulations. We also do not recommend you rely on the third-party sources we link to or reference, and we are not responsible for any of the information on these third-party sites. These guides are for entertainment purposes only and only provide basic information and should not be considered as legal advice.

We highly recommend directly contacting the responsible parties for each city and hearing what their officials have to say. Ultimately, it's your responsibility as an investor to ensure you fully comply with the local laws, and it's best to speak with professionals before making an investment decision.

⚡️
Reveal your property’s rental profitability

Buy this property and list it on Airbnb.