Legal Updates

The Next Wave – Illegal Short Term Rentals

By Quintin Johnstone, President/CEO, Riskboss

The Ontario government issued a temporary ban on all short term rental companies from operating during the COVID19 crisis. On June 5th, 2020, the province lifted the temporary ban. Short term rentals are no longer restricted under the Ontario Emergency Management and Civil Protection Act. Short term rentals are regulated by local bylaws so anyone engaging in such activity must adhere to the law in their jurisdiction. Every jurisdiction is different on how short term rentals are administrated and allowed to operate. Before deciding on any process for your community, please make sure you check local rules.

According to Air B&B and the City of Toronto, it has been estimated that two almost thirds of all short term rentals in the GTA occur in residential condominiums. The overriding principle of short term rentals is that tenants will use a property for a clearly defined and often a very short period of time and then leave.

There is no overall definitive time referenced for short term when it comes to the rental of residential condominiums. Some may think that short term rentals are anything less than six months or one year as set out in the governance of many condominiums; however, this is incorrect.

Short term is specifically defined in the bylaws of local jurisdictions and the specific zoning for a building. Ghost hotels within condominiums are units that were never intended to be occupied by a single person or family but moreover were acquired to operate the full-time business of a short term renting. Many jurisdictions, such as Toronto prohibit ghost hotels.

Toronto for example, now clearly defines what short-term rentals are (any rental that is less than 28 consecutive days across the city in principal residences only). Anyone wishing to entertain engaging in such business activity must register with the City of Toronto, register all tenants with the city, pay a local Municipal Accommodation Tax (MAT), register all tenants and obey all local laws. City officials are taking complaints of unregistered short term rentals through the Toronto 311 telephone line.

Registration commenced on September 10th, 2020 and is now mandatory across the city.

Riskboss has been receiving an increasing amount of inquires from property managers and Board members on how this affects residential condominiums in Toronto.

Some residents have misinterpreted the Toronto bylaw to mean that all properties throughout Toronto must allow short term rentals. This is not correct.

According to our analysis, research and opinions received from several prominent GTA condominium law firms, the Condominium Declaration and Building Rules may regulate standards with respect to the minimum rental periods. This means that if you have a resident that wants to engage in short term rentals and your condominium Declaration or Building Rule has a minimum standard of six months or one year, they simply cannot operate such a business in that community.

There are many negative implications of operating such businesses in highrise communities that were never intended and zoned for short term rentals. For example, when an owner takes possession of a newly built property, they have to declare whether it will be used for personal or rental use. Rental use has HST tax implications.

When an owner gets a mortgage and insurance, they also have to declare whether that property is for personal use or a rental property. Undisclosed changes in the intended use may void the mortgage and insurance.

Some short term renters use condominiums for serious criminal enterprises. This is due in part because residents in most urban condominium communities remain anonymous to other neighbours. Anonymity in condominium communities is the new lifeblood for criminals. Most condominium communities are ill-prepared to detect and deter such activities.

Riskboss has revised the comprehensive White Paper on the topic of illegal short term rentals in condominiums entitled, “Risky Business.” It outlines the good, the bad and the ugly of conducting such business in residential condominiums. It also sets out a clear plan to mitigate such activities.

Contact Riskboss to receive a complimentary copy and remember to ask for the no obligation risk tour of your community with one of our accredited experts. Ask also about the Riskboss Illegal Short Term Rental Prevention Program that eliminates such activities.

We are always willing to provide advice on industry best practices and high impact, low cost ideas to mitigate your risk. You will be glad you made the call.