The “sharing economy” has arrived and besides being unavoidable, appears to be here to stay. We have seen this play out most dramatically with UberX and its bitter (though at times comical) battle with Toronto’s taxi industry. Less talked about, though equally disruptive are short-term rental services, the most prominent of them being AirBnB. Clients ask us from time to time how they should govern themselves with their investment properties and whether or not they can rent them out on AirBnB or similar websites.
When considering whether a property can be rented out for short-term stays there are two different issues to consider. The first is whether municipal by-laws allow for such rentals and the second comes into play if the property is a condominium and that is whether the condo corporation’s by-laws allow for such rentals.
It has been reported in the news today that the owner of a residential property at 5 Glenelia Avenue in North York has been charged by the City of Toronto’s municipal licensing and standards department. The property was in the news in the fall of 2015 after a shooting occurred there during an out-of-control house party. It seems that there had been several past complaints about noise and garbage emanating from the property. If convicted, the owner can receive a fine up to $50,000.00.
The City is relying on an old by-law which stipulates that any short-term housing rental in the borough of North York must be for a minimum of 7 nights’ stay. Other boroughs within the amalgamated City of Toronto have similar by-laws and currently there is a draft by-law which will harmonize these rules across the City of Toronto, however the City has not yet finalized its position on this matter and, as such, a new set of by-laws is still pending.
The next issue to consider when deciding whether or not to rent a property out for short-term rentals is whether or not it is a condominium property. Indeed, most properties seen on sites such as AirBnB are condominiums. If the property is a condominium, regard must be given to the particular condo corporation’s by-laws and what their rules are on leasing. Many newly erected condominiums in Toronto are having provisions written in to their by-laws specifically prohibiting short-term leases/rentals. Owners of condominiums who live in their units year-round often complain of the transient nature of neighbouring units being rented out for short-term leases and condo corporations are taking note. Many older condominiums have begun amending their by-laws to prohibit short-term rentals. If an owner is found to be contravening the by-laws of their condominium, the condo corporation may seek relief under the Condominium Act (Ontario) which can be monetary, and in some extreme cases the forced sale of the unit.
Finally, something to consider if you are renting your property out through services such as AirBnB is who you are renting it to. There is anecdotal evidence that a growing trend in Toronto of teenagers or young adults renting out properties through AirBnB with the specific purpose of hosting parties. Turning your residential property into what is basically an event space for dance parties or drug/booze-fests can have a number of consequences. Besides alienating your neighbours, an out-of-control party can lead to property damage. AirBnB advertises a fund to compensate owners for damaged property however there are widespread reports that this is difficult to access and can be arbitrarily withdrawn. More important to consider, though, is homeowner liability. If a renting party sustains any injuries during their stay they may seek to sue the property owner. In the event that this happens, the property owner’s insurer may deny coverage if they were not aware that the home was being used for short-term rentals, leaving the property owner liable for any damage awards.
As we can see, there is much to consider when deciding whether or not to list your property on AirBnB or other similar short-term rental sites. At Rose, Persiko, Rakowsky, Melvin LLP we have a depth of expertise in all aspects of real estate law and are happy to consult with our clients based on their own individual circumstances. If you have any questions, please do not hesitate to call us.
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