Q & A: Straight Answers to Hard Asked Questions
Question from Resident of East End Toronto Condominium, Name Withheld
Our condo recently went through a rule change to make all of our rentals a minimum of one year. This has allowed us to rid ourselves of illegal short-term rentals, but not without some issues. We originally had our property manager call 311 at the City of Toronto for assistance, but that was not helpful. No one came or returned our calls. We then went through our corporate lawyer and we were able to force the owners to comply with our building rules. After doing some research on this topic we found that the City of Toronto created a by-law to regulate illegal short-term rentals, but it appears they haven’t put resources in place to police the by-law. There are a lot of people upset about this online. Can you comment on what is actually happening for us? Thank you in advance.
Answer
Thank you for your question. We wrote about this in our Fall/Winter 2020/2021 Riskboss Magazine edition. At that time, Air B&B estimated that about two-thirds of their short-term rentals occurred in residential condominiums in Toronto. This means that it is very likely that as you read this, your condominium community may be impacted by illegal short-term rentals and not even know about it.
Mandatory registration for short-term rentals in Toronto commenced on September 10th, 2020, and became mandatory across the city. That means that all property owners/tenants that want to engage in short-term rentals have to registrar not only themselves, but also each and every tenant and also, pay administrative fees imposed by the City called Municipal Accommodation Tax (MAT). Is this occurring? Are people registering themselves and their tenants? Overwhelming, the answer appears to be no. Is the City effective in policing noncompliance? It appears that the answer is also no.
The City provided statistics effective September 30, 2023, on their efforts. According to the City 15,737 registration applications were submitted since the inception of the program in 2020. Of that, 1,292 applications were denied, 4,218 applications were cancelled, 1,299 applications are still under review, and 846 licences were revoked. 3,414 complaints were received by the City since 2020 and according to their records 96% of those cases have been closed. Of those, only 153 charges have been laid. 153 charges represent a 4% success rate.
15,737 applications for Toronto bylaw shortterm licenses may seem like a massive bureaucratic effort, and in fact, it appears it is when you look at this in a broader context. Compared to Airbnb’s available units, let alone other short-term rental applications, this is just a drop in the bucket. For example, according to December 2023 data from AirDNA, there were 235,000 active short-term rental listings on Airbnb and Vrbo across Canada over the last 12 months.
In October 2023, the City began evaluating the implementation of the short-term rental bylaw to examine its progress and identify areas for improvement through public consultation. On February 27, 2024, the City of Toronto announced that they are reviewing the by-law, and a report will be published by the Planning and Housing Committee. City officials know that short-term rentals create high rents and low housing vacancy rates. In an effort to bring short-term rentals back into the long term marketplace, Toronto is looking to reduce that availability dramatically by reducing the opportunity for residential unit owners to operate short-term rentals to only 180 days a year.
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. Short-term 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 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.
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.
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