City Council candidate Kelley Wiley Lane operated a rental business without a license or a city lodging permit over the summer, according to state and city documents, online rental listings and interviews with Lane. Lane may also owe uncollected sales and bed taxes for some of the transactions.
“If there are things that I need to do to be in compliance, I’ll do them,” Lane said in an interview Friday. “I did not set out to break the law.”
Lane and her husband, Reed Lane, have rented out parts of their property on First Avenue, which includes a small house and a dry cabin, in at least two different ways so far this year.
First, the dry cabin was listed on Airbnb for a nightly rate of $64. The listing showed reviews from nine users who claimed to have stayed on the property in May and June. The listing was taken down sometime on Friday after the Seward Journal contacted Lane and after a conversation about the listing emerged on Facebook.
While the Lanes were out of town in late summer, they rented the property on a monthly basis. Seward Properties managed the rental for them in their absence, Lane said. Nicole Lawrence at Seward Properties confirmed that her company had managed the First Avenue property in July, August and September.
Both city and state law require individuals to hold a business license if they are receiving rental income. This includes long- and short-term rentals, as well as deals arranged through online marketplaces such as VRBO and Airbnb.
Neither city nor state records show any business license for either Kelley Wiley Lane or Reed Lane. Lane said at various times that she thought her property manager’s business license fulfilled the requirement or that the property manager held the business license.
Lawrence said that Seward Properties does not apply for business licenses on behalf of clients. She also said that she knows of few, if any, of Seward Properties’ monthly rental clients that have business licenses of their own.
City Clerk Brenda Ballou and Assistant City Manager Brennan Hickok confirmed that property owners are still required to have their own business licenses even if they use a property manager.
After an interview, Lane produced a section of the city code that exempts individuals from the business license requirement provided that they “engaged in casual and isolated sales … and the sales do not occur for more than 14 days in a calendar year.”
Whether this exemption covers a series of rental transactions over a five-month period is not clear.
Lane ran afoul of another requirement whenever people stayed on her property for short periods of time. Lane said in an interview on Thursday that in at least a few instances, lodgers had spent fewer than 30 days at the property.
The city code distinguishes between “lodging” – short-term rentals of fewer than 30 days – and other kinds of housing. Lodging businesses must hold lodging permits and submit to a safety inspection. The city only issues lodging permits to licensed businesses. Since Lane lacks a business license, she could not have received a lodging permit.
She likely also violated the city’s zoning laws, which generally prohibit lodging businesses in the single-family residential zone, R1. The land use code makes an exception for bed-and-breakfast establishments. Lane said that she believed that any short-term rentals were legal under that exception.
However, the code defines bed-and-breakfast very narrowly as “an owner-occupied and operated single-family residential dwelling where lodging with a meal is provided for compensation on a short-term basis.”
In two conversations with the Journal, Lane said that she had rented out the dry cabin on a short-term basis, believing that this would satisfy the definition of a bed-and-breakfast, since she was living on the same property in a different structure.
However, Planning Assistant Andy Bacon said that bed-and-breakfast patrons should be renting rooms in the main structure on a property, not an accessory structure, as would be the case if customers had rented the dry cabin.
For all of these rental transactions, Lane would have had to pay sales tax. Nicole Lawrence at Seward Properties said that her company had collected sales tax on Lane’s behalf for the three months it was involved. Any short-term rentals would have incurred the city’s four percent bed tax on top of sales tax.
Lane conceded in an interview and on Facebook that she might owe taxes on transactions connected to the Airbnb listing. After Wolfgang Kurtz, another candidate for council, posted a screenshot of the Airbnb listing on Facebook, Lane wrote an apologetic note.
“It now seems that I may need a business license & am seeking to remedy my error asap by acquiring a license,” she wrote. “I am happy to pay all bed & sales taxes necessary as well as any fines. I am sorry to have erred on this matter and hope that folks will reach out with any further questions.”
Although she expressed contrition on Facebook, Lane also suggested in an interview with the Journal that scrutiny of her rental had been drummed up by political opponents in an attempt to torpedo her campaign for office.
“It is often what happens in election cycles, but it’s a distraction technique,” she said. “We need to be focusing on the fact that we need an external audit of our city. Why are our attorney fees double what they are for any other years? Those are real issues. Whether or not I had a very short-term unlicensed businesses is a very tiny thing.”
At a forum for City Council candidates on Wednesday, Lane had responded to a question about unlicensed rental businesses by asking how licensing benefits the property owners.
“I’m interested in making rules that are beneficial to people following them,” Lane said. “What is the benefit to people getting licensed?”
Lane did not disclose at the forum that she had herself run an unlicensed rental business.