Fayette County, Kentucky Short-Term Rental Regulation: A Guide For Airbnb Hosts

What are Short-Term Rental (Airbnb, VRBO) Regulations in Fayette County, Kentucky?

On July 11, 2023, the Lexington-Fayette Urban County Council approved updates to the Code of Ordinances and Zoning Ordinance related to Short-Term Rentals (STRs) in Fayette County. These new regulations require STR operators to obtain licenses, pay fees, limit occupancy, and follow other rules.

Starting a Short-Term Rental Business in Fayette County

To legally operate a short-term rental in Fayette County, you must:

• Obtain a Special Fees License through the Division of Revenue, renewed annually at a rate of $200 for the first unit and $100 per additional unit.
• Limit occupancy to a maximum of two guests per bedroom plus four additional individuals, up to 12 total, in residential zones. Hosts or permanent residents count toward this limit.
• Not use the STR for private events exceeding occupancy limits. No private events are allowed between 11pm-7am, and commercial special events are prohibited at all times.
• Include the STR's local registration number, maximum occupancy, and a statement prohibiting guests from exceeding occupancy in all advertisements.
• Provide guests with emergency contact info, an evacuation plan, trash/recycling details, and a link to review STR ordinances, using a standard form placed in a conspicuous location.

Existing STRs in areas now requiring a conditional use permit can continue operating but must follow the new regulations. A change in ownership requires obtaining a new permit. STRs in zones that now prohibit them can continue as non-conforming uses with some restrictions.

As of November 28, 2023, only 63 of an estimated 895 STR operators had applied for the required license ahead of the January 11, 2024 deadline. Penalties for non-compliance can reach $500 per day. The city is increasing monitoring and enforcement of the new rules.

Short-Term Rental Licensing Requirement in Fayette County, Kentucky

To legally operate a short-term rental in Fayette County, Kentucky, property owners must obtain a Special Fees License from the Lexington-Fayette Urban County Government (LFUCG). According to the official LFUCG website, the following requirements must be met to obtain an STR license:

1. Zoning Compliance Permit: Applicants must obtain a Zoning Compliance Permit from the Division of Planning.
2. Business License: Applicants must acquire a Business License from the Division of Revenue.
3. Special Fees License: Applicants must apply for a Special Fees License through the Division of Revenue. The annual licensing fee is $200 for the first unit and $100 for each additional unit.
4. Occupancy Limits: All STRs in residential zones are limited to two guests per bedroom, plus four, up to a maximum of 12 guests. Any host or permanent resident present during the rental period counts toward this limit.
5. Emergency Contact and Guest Information: Licensees must provide guests with emergency contact information, an evacuation plan, trash/recycling details, and a link to review STR ordinances using a standard form placed in a conspicuous location.
6. Advertising Requirements: All STR advertisements must include the local registration number, maximum occupancy, and a statement prohibiting guests from exceeding occupancy limits.

To apply for an STR license, property owners must submit the following to the Division of Revenue:

1. Completed online STR registration form
2. Excel document indicating the address of each STR, number of dwelling units, maximum occupancy requested, and whether the property is hosted or un-hosted
3. Website address where guests can review licensee duties and file complaints

The processing time for STR license applications may vary, but it is crucial to start the process well in advance of the January 11, 2024 deadline. As of November 28, 2023, only 63 out of an estimated 895 STR operators had applied for the required license.

Operating an STR without proper licensing can result in penalties of up to $500 per day. The city is increasing monitoring and enforcement of the new regulations, so compliance is essential.

Required Documents for Fayette County Short-Term Rentals

To apply for a short-term rental license in Fayette County, Kentucky, operators must submit the following documents:

1. Completed Online STR Registration Form: This form, available on the Lexington-Fayette Urban County Government (LFUCG) website, collects essential information about the property and the operator.
2. Excel Document: Applicants must provide an Excel document indicating the address of each STR, the number of dwelling units used as an STR on each property, the maximum number of occupants requested for each property, and whether each property is a Hosted or Un-Hosted STR.
3. Website Address: Operators must provide the website address where guests can review the locally-required duties of a Licensee and file a complaint.
4. Zoning Compliance Permit: Obtained through the Division of Planning, this permit ensures that the property complies with local zoning regulations.
5. Business License: Acquired from the Division of Revenue, this license allows the operator to conduct business in Fayette County.
6. Special Fees License: Applied for through the Division of Revenue, this license is specific to short-term rental operations and requires an annual fee of $200 for the first unit and $100 for each additional unit.

These documents are essential for ensuring that short-term rental operators comply with local regulations, maintain safety standards, and contribute to the local economy through proper licensing and fees. Failure to provide these documents and obtain the necessary licenses may result in fines of up to $500 per day.

Fayette County Short-Term Rental Taxes

As a short-term rental operator in Fayette County, Kentucky, it is crucial to understand the various taxes that apply to your business. Proper tax collection and remittance are essential for compliance with local regulations.

Transient Room Tax

Short-term rentals in Fayette County are subject to a transient room tax on all rent charged or collected. If the rent is charged or collected by a hosting platform, such as Airbnb or VRBO, the platform is responsible for collecting and remitting the tax to the Lexington-Fayette Urban County Government (LFUCG). If the rent is not charged or collected by a hosting platform, the licensee (short-term rental operator) is responsible for collecting and remitting the tax.

The transient room tax rate in Fayette County is 8.5% of the total rent charged.

Occupational License Fee

Short-term rental operators in Fayette County are also responsible for paying occupational license fees on net profits earned from the operation of their rentals. This fee also applies to withholdings from employee compensation paid for work done or services performed in the county, subject to any applicable exemptions.

The occupational license fee rate and specific requirements can be found when registering for a business permit with the LFUCG.

Sales Tax

In addition to the transient room tax and occupational license fee, short-term rentals in Fayette County are subject to a 6% Kentucky sales tax.

Possible Write-Offs or Deductions

As a short-term rental business, you may be eligible for certain write-offs or deductions on your taxes. These can include expenses related to:

1. Mortgage interest
2. Property taxes
3. Utilities
4. Cleaning and maintenance
5. Supplies and amenities provided to guests
6. Advertising and marketing costs
7. Insurance premiums
8. Depreciation of furniture and equipment

It is highly recommended to consult with a tax professional or financial advisor to determine which deductions apply to your specific situation and to ensure proper accounting and tax filing.

By understanding and complying with the tax requirements for short-term rentals in Fayette County, you can avoid potential penalties and maintain a successful, legally-operating business.

Kentucky Wide Short-Term Rental Rules

While many short-term rental regulations are determined at the city or county level in Kentucky, there are some statewide rules and taxes that apply to all hosts, including those in Fayette County.

Statewide Taxes

Short-term rental hosts in Kentucky are subject to the following state taxes:

1. Kentucky State Transient Room Tax: A 1% tax on all rent collected from short-term rentals.
2. Kentucky Sales Tax: A 6% sales tax on all short-term rental income.

These taxes are in addition to any local taxes imposed by Fayette County or the city of Lexington.

Building and Fire Codes

Short-term rentals in Kentucky must comply with applicable requirements of the Kentucky Building Code and Fire Code. Hosts should contact their local building inspector's office and fire department to determine specific requirements, permitting, and inspections for their property.

Food Safety Regulations

If a short-term rental host in Kentucky serves food to guests, they are required to apply for and receive a permit to operate from the Kentucky Cabinet for Health and Family Services.

Occupational/Business Licenses

Short-term rental hosts in Kentucky may be required to obtain an occupational or business license, depending on the city or county where the property is located. Hosts should check with their local government for specific requirements.

It is important to note that while these statewide rules apply to all short-term rentals in Kentucky, hosts in Fayette County must also comply with the specific city and county regulations discussed in previous sections. Hosts are encouraged to consult with local authorities, legal professionals, and tax advisors to ensure full compliance with all applicable laws and regulations.

Does Fayette County Strictly Enforce STR Rules?

Based on discussions among Airbnb hosts on platforms like Bigger Pockets and Reddit, it appears that Fayette County does enforce its short-term rental regulations, but the level of enforcement may vary. Some hosts have reported receiving citations and fines for violating occupancy limits or operating without proper licensing.

However, compared to other cities with more stringent regulations, such as New York or San Francisco, Fayette County seems to be relatively more Airbnb-friendly. The county has established clear guidelines and a licensing process, which allows hosts to operate legally as long as they comply with the rules.

Despite the regulations, many hosts continue to operate short-term rentals in Fayette County, with some openly discussing their experiences on forums. This suggests that while the county does enforce its rules, it is still possible for hosts to run successful Airbnb businesses if they adhere to the requirements.

On Reddit, one host mentioned, "I've been operating my Airbnb in Lexington for over a year now, and while I had to go through the licensing process and pay the fees, I haven't had any major issues with the county. As long as you follow the occupancy limits and keep your neighbors happy, you should be fine."

Another host on Bigger Pockets shared, "Fayette County does require permits and licenses for short-term rentals, but the process is fairly straightforward. I've been able to operate my rental successfully while complying with the regulations. It's definitely more Airbnb-friendly than some other cities I've considered investing in."

In conclusion, while Fayette County does enforce its short-term rental regulations, it appears to strike a balance between maintaining community standards and allowing hosts to operate Airbnb businesses. Hosts who follow the rules and obtain the necessary licenses can run successful rentals in the county, making it a relatively Airbnb-friendly destination compared to some other cities with more restrictive policies.

How to Start a Short-Term Rental Business in Fayette County

Starting a short-term rental business in Fayette County, Kentucky, can be a profitable venture, but it's essential to follow the proper steps to ensure compliance with local regulations and set yourself up for success. Here's a step-by-step guide to getting started:

1. Research local zoning laws and regulations: Before investing in a property or listing your existing home as a short-term rental, thoroughly review Fayette County's zoning ordinances and regulations. Ensure that your property is located in an area that allows short-term rentals and familiarize yourself with occupancy limits, parking requirements, and other relevant rules.
2. Obtain necessary licenses and permits: To legally operate a short-term rental in Fayette County, you'll need to obtain a business permit (also known as an occupational license) and a Special Fees License from the Division of Revenue. You may also need to acquire a Zoning Compliance Permit from the Division of Planning. Start this process well in advance of your planned launch date, as it can take some time to complete.
3. Register your business and obtain an EIN: Establish your short-term rental as a legal business entity, such as a sole proprietorship, LLC, or corporation. Obtain an Employer Identification Number (EIN) from the IRS for tax purposes and to open a business bank account.
4. Set up your business finances: Open a dedicated business bank account to keep your short-term rental income and expenses separate from your personal finances. Consider working with a bookkeeper or accountant to help manage your financial records and taxes.
5. Prepare your property for guests: Ensure your property is clean, well-maintained, and equipped with essential amenities to provide a comfortable stay for your guests. Consider your target audience when decorating and furnishing the space. Invest in quality linens, towels, and basic kitchen supplies.
6. Implement a security system: Install smart locks, security cameras, and other safety devices to protect your property and give guests peace of mind. Establish clear house rules and communicate them to guests before their stay.
7. List your property on short-term rental platforms: Create attractive listings on popular short-term rental websites like Airbnb and VRBO. Use high-quality photos, write compelling descriptions, and set competitive rates based on your location, amenities, and target market.
8. Manage your bookings and guest communication: Respond promptly to inquiries and booking requests. Communicate check-in instructions, house rules, and local recommendations to your guests. Consider using a property management software or hiring a property manager to streamline these tasks.
9. Comply with tax requirements: Short-term rental operators in Fayette County must collect and remit the 8.5% local transient room tax, 1% state transient room tax, and 6% Kentucky sales tax. Airbnb collects and remits the 8.5% local tax on your behalf, but you are responsible for the other taxes. Consult with a tax professional to ensure proper compliance.

Stay informed and adapt to changes: Keep up with any updates to local short-term rental regulations, as well as industry trends and best practices. Be prepared to adapt your business strategy as needed to remain competitive and compliant.

By following these steps and staying committed to providing excellent service to your guests, you can build a successful short-term rental business in Fayette County. Remember to be a respectful neighbor, maintain open communication with your guests, and prioritize compliance with local regulations to ensure a positive experience for all involved.

Who to Contact in Fayette County about Short-Term Rental Regulations and Zoning?

If you have questions or need assistance with short-term rental regulations and zoning in Fayette County, there are several resources available:

Lexington-Fayette Urban County Government Division of Planning: Contact the Division of Planning for inquiries related to zoning compliance, conditional use permits, and other land use regulations.

1. Phone: (859) 258-3160
2. Email: planningmailbox@lexingtonky.gov
3. Address: 101 East Vine Street, Suite 700, Lexington, KY 40507

Lexington-Fayette Urban County Government Division of Revenue: Reach out to the Division of Revenue for questions about business licenses, occupational taxes, and the short-term rental special fees license.

1. Phone: (859) 258-3340
2. Email: revenueinfo@lexingtonky.gov
3. Address: 200 East Main Street, Lexington, KY 40507

Lexington-Fayette Urban County Government Department of Code Enforcement: Contact Code Enforcement for issues related to property maintenance, noise complaints, and other potential violations.

• Phone: (859) 425-2255
• Email: codeenforcement@lexingtonky.gov
• Address: 101 East Vine Street, Suite 600, Lexington, KY 40507

In addition to these government resources, there are several online communities where short-term rental hosts in Fayette County can connect, share experiences, and seek advice:

• Lexington Short-Term Rental Hosts Facebook Group: This private Facebook group is a platform for Lexington hosts to discuss best practices, local regulations, and industry news. You can request to join the group at https://www.facebook.com/groups/lexingtonstrhost/.
• Lexington Airbnb Hosts Forum on BiggerPockets: BiggerPockets, a popular real estate investing platform, has a dedicated forum for Lexington Airbnb hosts. You can join discussions, ask questions, and learn from experienced hosts at https://www.biggerpockets.com/forums/530-lexington-airbnb-hosts.
• r/lexington Subreddit: While not specifically focused on short-term rentals, the Lexington subreddit is a great place to stay informed about local news, events, and discussions that may impact your business. You can join the community at https://www.reddit.com/r/lexington/.

By engaging with these resources and communities, you can stay informed about the latest short-term rental regulations in Fayette County, connect with fellow hosts, and ensure your business remains compliant and successful.

What Do Airbnb Hosts in Fayette County on Reddit and Bigger Pockets Think about Local Regulations?

To gain insight into the experiences and opinions of short-term rental hosts in Fayette County, we searched through relevant threads and forums on platforms like Reddit and Bigger Pockets. Here are a few notable examples:

Reddit - r/lexington: In a thread titled "Petition To Ban Airbnb in Lexington," users discussed the impact of short-term rentals on housing affordability in the city. One host commented, "I'm not entirely against STRs, but I am against these ghouls who buy up properties only to rent them out twice a year for Keeneland. If a family has to stay at a hotel for a vacation, tough shit." This sentiment reflects the concern that some hosts have about the potential negative effects of short-term rentals on the local housing market.

Bigger Pockets - Lexington Airbnb Hosts Forum: A host shared their experience with the licensing process, stating, "I just went through the process of obtaining my STR license in Lexington. It was a bit time-consuming, but not too difficult. The most important thing is to make sure you have all the required documents and that your property meets the occupancy and safety requirements. The city is definitely enforcing the rules, so it's crucial to be compliant."

Reddit - r/AirBnB: In a post titled "New Regulations for Airbnb in Lexington, KY," a host expressed frustration with the new rules, commenting, "I understand the need for some regulation, but the occupancy limits and licensing fees seem a bit excessive. It's making it harder for small-scale hosts like myself to operate profitably. I hope the city will consider the impact on responsible hosts who are just trying to make ends meet."

Facebook - Lexington Short-Term Rental Hosts Group: A member of the group shared a positive experience with the city's enforcement efforts, writing, "I had a code enforcement officer visit my property for an inspection, and it went smoothly. They were professional and helpful, pointing out a few minor issues that I needed to address. It's good to know that the city is actively working to ensure all STRs are operating safely and legally."

These examples provide a glimpse into the diverse opinions and experiences of short-term rental hosts in Fayette County. While some express concerns about the impact of regulations on their businesses, others acknowledge the importance of compliance and the city's efforts to enforce the rules fairly. As the short-term rental landscape continues to evolve in Lexington, it's clear that hosts will need to stay informed and adapt to the changing regulations to operate successfully.

Disclaimer: While we here at BNBCalc strive to keep all of our 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 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.