Leighton Realty Blog

We received a status update from a member of the Committee on Joint Revenue on Beacon Hill today. As of 10:30 this morning House Bill 2853 was put into a study order. Historically, when bills go to study, they are not acted upon. You may recall that Brewster and Provincetown were the 2 towns that voted “Yes” to imposing a 9.7% tax on vacation rentals. However, the State of Massachusetts must approve this bill in order for the towns to levy the tax. It is unlikely that the towns will get the go-ahead, which is very good news for rental property owners!

Take a look at the Cape Cod View article with the following title:

“Cape homeowners discover the advantages of renting out their residences.”

Take a look at the Cape Cod Times article in the Sunday paper about tips for sprucing up a rental property.

http://www.capecodonline.com/apps/pbcs.dll/article?AID=/20100207/LIFE/2070307

Also, the Department of Energy has begun launching the program details for the State Energy Efficient Appliance Rebate Program. With this program you can get $50 – $200 per appliance when you buy new, energy efficient ones. It is part of the federal government’s $300 million State Energy Efficient Appliance Rebate Program that puts money in your pocket when you replace your old models. Check out this website to see the specific details of your state’s program: http://www.energysavers.gov/financial/rebates/state_MA.cfm

Massachusetts Appliance Rebates

The Commonwealth of Massachusetts will implement a mail-in rebate program that will help residents replace older, inefficient appliances with new, ENERGY STAR® qualified and ultra-efficient appliances. Advance rebate reservation is required. The program is tentatively scheduled to take place in March 2010. If funds are not depleted, Massachusetts will continue the program in April 2010. For refrigerators and freezers, consumers must purchase from participating retailers that will recycle the replaced units and provide proof of recycling for consumers to submit. Other replaced appliances must be recycled according to state law.

Eligible products include:

• Refrigerators
• Freezers
• Clothes washers
• Dishwashers

This is a good year to think about upgrading appliances.

During the week of October 25-28, 2009, members of the Leighton Realty Rentals team attended the national conference for the Vacation Rentals Management Association (VRMA) in Washington DC. We found the sessions to be informative and motivating. The organization has traditionally been focused on educating its members on operational topics while providing a forum for networking and bench-marking. However, it recently has expanded its focus to developing into a sophisticated marketing and PR machine with a proactive approach to the evolving vacation rentals industry. We all have witnessed and experienced how technology has impacted the airlines and the hotel industries.  Technology has forced greater transparency and has provided consumers with greater access to information, which has shifted the balance of power over to the consumer. This shift in power has forced companies to be more competitive and in some cases consolidate, which in turn leads to fewer choices for the consumer. Customers of both the airline and hotel industries have experienced and tolerated deterioration in the quality of service and a marked decrease in customer satisfaction. In this economy, consumers are willing to forego choices and service in the name of getting the lowest price. Airline travel is considered a commodity and the customer sees little differentiation between the airlines. Hotels have not reached that point to the same degree because they recognized the trend early and made tremendous quality improvements. In this environment, the key is to figure out a way to provide the best perceived value for the lowest price before the consumer views the product or service as a commodity. The VRMA recognizes that these trends are also taking hold in the vacation rentals industry. Guests are demanding a higher level of service and higher quality rental properties than ever but on a lower budget. In order to accomplish this tall order, vacation rental companies are forced to find ways to operate more efficiently and owners are forced to continuously invest in their rental properties. We are at a crossroads – we either embrace the changes and hop onto the technology train or we choose to ignore what is happening and get left behind at the station. Leighton Realty Rentals has embraced the technology train and will continue to seek out opportunities to grow our market. We are also confident that our owners understand the critical role that they play in maintaining the quality of their rental properties and will continue to invest in improvements.

On Oct 19th at the Town Meeting, Brewster voted an overwhelmingYES on the Local Options Tax effective July 1, 2010, which allows Brewster to collect an additional meals tax of .75% and room tax of 2% from customers dining in food establishments or staying in hotels/B&B’s located in Brewster. This is on top of the statewide tax hike in July from 5% to 6.25%. At this point, the tax does not apply for rentals of private homes/condos, since the towns have to wait for the State to allow it. Brewster is again the tax pioneer as the only town on Cape to pass the Local Options Tax so far. As you can imagine, many local businesses are not happy with this as it is believed that this has put Brewster at a further competitive disadvantage relative to other towns. The direct impact to rentals would be an even greater tendency for renters to cook in their rental properties rather than eating out.

The above should not be confused with the Occupancy Tax for private vacation rentals. As you know, over the past year or so, we have been following the progress of the occupancy tax bill on Beacon Hill that would allow towns to impose an occupancy tax on vacation rentals of private homes. You may recall that last fall, the towns of Brewster and Provincetown voted in favor of imposing this tax locally should the bill pass on Beacon Hill, while Harwich voted no. Other towns around the Cape have decided to hold back on a vote until after Beacon Hill has made its decision. Of the total 9.7% tax, the breakdown was 5.7% allocated for the state and 4% for the town. Whether or not the additional 2% Local Options Tax that Brewster just passed earlier this week would apply is not known at this point.

The occupancy tax bill (House Bill 2940) was introduced on April 7, 2009 by Cleon Turner and is still in deliberation with the Joint Committee on Revenue. The committee has until the 3rd week of March 2010 to decide the outcome. If the bill should pass, we can expect the effective date to be 30-90 days following the bill’s passage. Given the dire economic situation in our state, there is strong speculation that this bill will eventually pass.

In our continuing efforts to explore new marketing avenues, Leighton Realty Rentals hosted a booth at the Lower Cape Business Expo held on April 4th  at the Four Points Sheridan in Eastham. The event was organized by the Cape Cod Chamber of Commerce to promote the diverse local goods and services that we have available on the Cape. The turnout was excellent and we look forward to participating in other Cape expos.

Lower Cape Cod Home Expo - Eastham

The Cape Cod Times just published this article Room Tax Expansion Sought – April 8th 2009. It is difficult to be sympathetic to the failing newspapers when they are producing news articles like this. This article clearly belongs on the Opinion page instead of headlining the Business Section. If anyone read this without knowledge of the issue, they would believe that there is no controversy and no opposition to the tax. I will provide more specific details of yesterday’s hearing on Beacon Hill at a later date.

The Rental Occupancy Tax hearing in front of the Joint Revenue Committee is scheduled for Tuesday, April 7 at 10:00 am in the Garden Auditorium at the state house. The bill sponsors will be there to present their testimony and the public is invited to testify in front of the committee as well. Anyone who can make the meeting is encouraged to attend. If not, please write to the committee members and express your opposition if you have not already done so.

Points to highlight in your letters:
- Not a uniform tax applied to all Cape towns. Harwich has already rejected it, Brewster and Provincetown accepted it, other towns are waiting
- Extremely difficult to administer.
- Of the 9.7% of their rental amount that they will collect and pay due to this tax, less than half of that (4.0%) will actually go to the towns.
- Lack of ability for fair and uniform enforcement 

Looking ahead:
The committee will not be voting on this issue during the hearing – they will simply digest the testimony. After that, they can call an Executive Session and vote on it any time. If a vote is not forthcoming, a strong indicator for the bill’s liklihood of success will be whether or not Occupancy Tax revenue appears in the State’s budget. The House will release its budget details in 3 weeks and the Senate 3 weeks later. House debate will take place in late April and the Senate’s in late May.

I will keep you posted!

I spoke with the Director of the Joint Revenue Committee on Beacon Hill to get an update on the Rental Occupancy Tax issue. He told me that their committee received the first 400 batch of bills last week Friday, March 6th and that there are more to come. Busy year for the Revenue Committee!! It will be at least another 2 weeks before the calendar of hearings will be published, and at that time that we will know when the bill is up for review and for vote. The bill was sponsored in the House by Sarah Peake and in the Senate by Robert O’Leary – both of Cape Cod. Should the bill pass, it is only properties in Brewster and Provincetown that would be impacted at this point. However, other towns (with the exception of Harwich which already voted no) can expect the vote to come up this Spring.

I have attached the link that lists the members of the Revenue committee:
http://www.mass.gov/legis/comm/j26.htm

I would encourage you all to write to these committee members (as well as you own reps if you are a resident of Mass) to argue your points against the passage of this bill. The Brewster Association of Part-Time Residents has put together the following arguments against the tax in Brewster that could be useful in your letters – no matter which town has jurisdiction over your property.

1. All Cape Cod towns would need to participate to avoid penalizing those that do.  Brewster owners of rental property will have a substantial competitive price disadvantage (9.7% higher)  against owners of similar properties in Harwich, Chatham, Orleans, Eastham, and other Cape Cod towns,  These owners will lose rentals, and Brewster merchants will lose business unless the proposed tax applies to the entire Cape.
2. If the tax only applies to Brewster, it is likely that the Brewster owner will have to pay this tax out of his pocket. He may not be able to collect it from the out-of-state renter unless every Cape property owner is also collecting it.
3. This tax would be extremely difficult to administer.  One can envision a new bureaucracy involved in registration, licensing, and inspection of rental properties which would consume much of the revenues anticipated to be gained from the tax prior to paying the State its piece, and the smaller portion finally reaching the town’s general fund).
4. Of the 9.7% of their rental amount that they will collect and pay due to this tax, less than half of that (4.0%) will actually go to the Town of Brewster.  Do we wish to add onto a vacationer’s rental fee almost $100 on each $1,000 spent on rental of accommodations, and have well less than half of that be of benefit to Brewster?
5. Enforcement will be hard to accomplish.  No one knows how many private rentals there are and compliance among property owners will likely be uneven.  The “honest” owners of such rental units, who already pay personal property tax, real estate tax, state income tax (on Schedule E), and federal income tax (again on Schedule E) will collect and pay another (i.e. fifth tax) on their rentals.  However, the “not so honest” would not be likely to pay this additional proposed room tax, as private renting of a vacation property is the quintessential example of a “cash business”, and as such, taxation involving it is based almost exclusively on the “self-reporting” of revenues.  Taxes and fees have an obligation to be 1) fairly imposed and 2) uniformly collected, and this proposed tax has no provision for the latter.  This proposed tax has very real potential for lack of uniform compliance that would put those who follow the law at a distinct competitive disadvantage (to those who don’t).

I will keep you posted!

If you know anyone interested in renting take a look at Vacation Rentals on Cape Cod

Test text