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Is your vacation rental legal?

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The City of Bozeman requires vacation rentals to be permitted.  This is an interesting article that ran in last Sunday’s paper about the issue.

by Amanda Ricker

When the housing market collapsed in Bozeman, Phil Sgamma feared the bank would foreclose on his home. He began renting to tourists to make ends meet.

“It did pretty well during the summer,” Sgamma said.

But a few months ago, the neighbors complained. They told city officials they had bought homes in what they thought would be a quiet neighborhood with neighbors that did not change every five or seven days. They worried having a vacation rental next door would affect property values.

Sgamma’s home is one of more than 140 short-term vacation rentals in the Bozeman area listed at, an online marketplace that connects travelers with alternative accommodations.

But under city code, vacation rentals are not allowed in single-family neighborhoods without a special permit. Last week, Sgamma received the first such permit the city has ever granted.

“People who are using their homes as guest homes — there are some potential consequences for using it this way without the proper permits,” said Brit Fontenot, director of community relations and economic development for the city of Bozeman. “It’s an allowable use … people just have to go through the process.”

Requires commission approval

When Sgamma’s vacation rental came to the city’s attention, Sgamma said he spent $2,000 to prepare and file the necessary paperwork to get a conditional use permit. The permit is required for “extended stay lodging,” or renting a property for less than 30 days.

Six neighbors had written letters asking that Sgamma’s application be denied. Still, the City Commission voted 4-1 to approve the application, but with conditions — including one that Sgamma would only be allowed to rent the house for another 2.5 years and he could not sell the permit with the home.

Sgamma had offered to eventually stop renting out the home as a compromise. The permit normally runs with the land.

“I don’t want to be the bad guy in the neighborhood,” Sgamma told commissioners. “I’d like to try to operate it for a few more years until I try to sell it is what I’m asking, just to try to sort of find some common ground.”

Other conditions Sgamma will have to comply with include having no more than 10 overnight guests at the vacation home, no more than two vehicles parked in the driveway and no more than 20 total guests on the property at one time. Camping on the lawn is prohibited, and there can be no bonfires and outdoor activities must end by 10 p.m. Bozeman city staff modeled the conditions after rules in cities such as Steamboat Springs, Colo., and Lake Tahoe, Calif.

Sgamma must also post his phone number on any advertising signs outside the home, so neighbors can call him with concerns.

Commissioners Carson Taylor and Chris Mehl said the neighbors didn’t expect to have a vacation rental in their neighborhood because it’s not zoned for that use.

“I’m persuaded by the (neighbors’) testimony and the letters that have been written,” Taylor said. “But I’m also persuaded by the applicant and that he got caught up in a bad market … So, I’m interested in allowing him to dispose of the property without going under.”

Deputy Mayor Jeff Krauss said he feels for the neighbors and their expectation that they wouldn’t live next to a vacation rental, but he said it’s not much different than having long-term renters next door, which is allowed anywhere in the city.

“You could have four unrelated people and their four unrelated girlfriends staying together in a house,” he said. “And then you could have 10 unrelated cars there and their dogs … Whether it’s a vacation rental or a rental home, those are some of the issues we run into.”

Sgamma must adhere to conditions far above and beyond what would be required of a long-term rental property, Krauss said.

Mayor Sean Becker cast the lone “no” vote on Sgamma’s application. He said he would have preferred fewer conditions.

“We do have a ton of these (vacation rentals),” Becker said. “It’s kind of the nature of our community. We have a lot of tourists … I don’t want to sacrifice our neighborhoods for tourism, but I don’t think that’s the case.”

Growing trend

Nationwide, the use of private homes for tourism is growing.

Hotels and resorts still claim the majority of travelers — 43.6 percent, according to a study compiled in 2011 by HomeAway. Nearly 20 percent of stays are with friends and family. Next are vacation rentals, with 12.2 percent of the market. Bed and breakfasts have only 2 percent.

Now, the trend is gaining scrutiny from City Hall.

Cities have tried to minimize conflicts between permanent residents and tourists. Officials want to ensure that vacation rentals are safe and are managed and regulated on a level playing field with other lodging options. And, cities have tried to protect the availability of affordable rental housing, rather than have it all rented to tourists for larger profits.

Chicago and New York City have created ordinances defining vacation rentals and outlining penalties for operating them without the proper permits.

In 2012, New York City started enforcing a law that makes it illegal to rent out your home or apartment for a period of less than 30 days. Fines range from $1,000 for a first offense to $20,000 for repeated violations.

Hotels, motels and bed and breakfasts must be licensed and inspected. They also pay special lodging taxes and fees.

Daryl Schliem, president of the Bozeman Area Chamber of Commerce, said Bozeman lodging facilities, which must be registered with the state, pay a 7 percent state tax. The tax helps fund the operation of convention and visitor bureaus across Montana.

The 26 hotels and motels in Bozeman also pay a bed tax of $1 per night per guest, Schliem said. Bozeman collects about $425,000 a year from the bed tax and the money is used to help lure more vacationers to town.

Sandra Hodge, president of the Bozeman/Belgrade Lodging Association, said the group hasn’t taken an official stance on the issue of vacation rentals. But, she said, as a starting point, hoteliers would want vacation rentals to be licensed and to operate in a fair and open business environment.

Sgamma said he thought the permitting process he went through was fair.

“I thought it was a reasonable process,” he said. “Not every house in R-1 (single-family) areas are probably feasible for that kind of thing, but it’s a case-by-case basis.”

Not a priority

The City Commission talked earlier this year about putting the creation of regulations for vacation rentals on the city’s list of goals. But commissioners limited the list to 12 items for the next two years, and the issue wasn’t a high enough priority.

Still, both Deputy Mayor Krauss and Mayor Becker said last week that the city should get a handle on the matter.

“I think this is one of those things like food trucks where we appreciate the entrepreneurship of people and their willingness to find new ways to support themselves and we need to be open to that, but at the same time, we have health and safety provisions in place for competitors and we need to look at the reasons why we did that,” Krauss said.

The city has an obligation to protect tourists’ health and safety, he said.

Becker suggested the city ask vacation rental owners to apply for permits and let them operate without a host of conditions, unless the neighborhood has an issue. That way the city knows where these rentals are located, they’re compliant with city code and the owner has some accountability for the way the rental is run.

Now, the process remains complaint-driven. If the guests staying at your vacation rental are loud or anger the neighbors, and you’re caught operating without a permit like Sgamma, the city may require you to stop renting the property and apply for city approval to continue doing so.

“Let’s face it. If all your neighbors are good with it, and you only do it on occasion, what’s the reason for the city coming down on you?” Krauss said. “But once it comes to the city’s attention, and there’s an issue, then I think whatever has to kick in, has to kick in.”

Amanda Ricker can be reached at or 582-2628. She is on Twitter at @amandaricker.

via Is your vacation rental legal? – The Bozeman Daily Chronicle: City.