Denise Lash Condo Law

Managing short-term condo rentals

Finding balance in the shared economy
Monday, October 7, 2019
By Denise Lash

The explosive growth of online short-term rental websites has caused considerable controversy and concerns for condominium corporations. While some investor owners are listing their units on these websites in order the maximize the revenue generated from their units, many resident owners do not welcome short-term condo rentals.

Short-term rentals have several negative ramifications. In addition to detracting from the sense of community that many permanent residents desire, they can raise concerns about safety with so many strangers coming and going at all hours. Moreover, short-term rentals can lead to increased wear and tear on the common elements, lead to inappropriate behaviour by short-term renters interferes with the quiet enjoyment of residents, and generally create a situation where the condominium becomes, in effect, an unlicensed, unregulated hotel.

While short-term rental websites may have started with homeowner hosts trying to generate extra income by renting out a spare bedroom, things have certainly changed. Many short-term rental accommodation listings and revenue come from hosts who  are commercial operators running a full-time rental business within their residential units.

At the present time in Ontario, there is no legislation that regulates or restricts short-term rentals. While the City of Toronto adopted regulations to license, register, and regulate short-term rental companies and impose a municipal accommodation tax on short-term rentals, those regulations are not in effect pending the outcome of an appeal of the City’s zoning by-law amendments permitting short-term rentals. With no governmental regulation in place, it is up to condominium corporations to implement measures to address the concerns resulting from short-term rentals. Different measures will need to be taken depending on whether the corporation’s declaration prohibits or permits short-term rentals.

Condos with declarations that specifically prohibit short-term rental
If a condominium declaration prohibits short-term rentals, the corporation has a statutory duty to enforce the declaration. There is no option to turn a blind eye and  allow short-term rentals.The corporation should ensure that residents are familiar with the corporation’s documents by circulating the provisions that prohibit short-term
rentals to each owner and resident and posting them in elevators or on bulletin boards reminding residents of the prohibition. Residents should be directed to immediately inform on-site security or property management if they suspect that units are being used for short-term stays and to document all observations. Front desk security/concierge staff should be vigilant and watch for people coming and going from the building with suitcases.

If short-term rentals are suspected, the management or the concierge should look at the short-term rental websites to see the online advertisement being used to market the unit. Any evidence that is gathered will assist with enforcement. Corporations should promptly notify offenders in writing of their non-compliance and demand that use of the unit for short-term stays cease immediately. If the non-compliance continues, the matter should be escalated to legal counsel where the complaints, advertisements, or incident reports gathered will assist with effective and timely enforcement (and recovery of all legal fees).

In order to make it more difficult from a practical perspective to rent units on a short-term basis, the corporation can enact rules that limit access to key fobs to owners and residents. Fobs should be issued in person only to those whose identity and residence has been verified by two pieces of original government-issued photo identification and only one per person.

Condominiums with declarations that permit short-term rentals
Some condominium declarations specifically permit short-term rentals, while other declarations are silent about short-term rentals. In either case, the corporation can take steps to amend the declaration to prohibit short-term rentals. In order to do so, the written consent of the owners of at least 80 per cent of the units must be obtained.

This is a high threshold that is very difficult to obtain, especially if there are a large number of investor owners who do not want to be limited in the rental of their units. If the declaration is silent about short-term rentals, the corporation can enact rules that prohibit short-term rentals.

Enacting rules is easier than amending the declaration. Notice of the proposed rules must be given to the owners, who will have the opportunity to requisition a meeting. If a meeting is requisitioned, the owners will vote against the rules. The threshold is the majority of votes cast by owners present at the meeting either in person or by proxy. If the threshold for the vote is not obtained, the rules will come into effect. If no meeting is requisitioned, then the rules become effective 31 days after the board has given notice of the rules to the owners.If the declaration specifically permits short-term rentals, the corporation cannot take any steps to prohibit short-term rentals.

However, corporations whose declarations permit short-term rentals can enact rules that regulate them. Such rules could provide for the following:

• Require short-term rental hosts to enter into an agreement with the corporation before making the unit available for short-term rentals.
• Require hosts to obtain and provide written proof of insurance coverage for short-term rentals.
• Require hosts to provide the names and addresses of the short-term renters and the duration of their stay.
• Prohibit short-term renters from using any of the facilities or amenities of the corporation.
• Require hosts to obtain at their cost a special short-term renter key fob and prohibit the host from providing any other key fob to short-term renters.
• Prohibit hosts from using front desk security/concierge to drop off and pick up key fobs.

Corporations can also enrol in Airbnb’s Friendly Buildings program, as this will give the corporation more control over the Airbnb activities in the condominium. The program implements a number of measures that will benefit the corporation:

• The corporation will be provided with information about which units are being rented through Airbnb, the dates that guests check in and out and the number of guests.
• All guests will be required to provide government-issued ID to Airbnb.
• Airbnb will conduct checks on guests and will only allow Airbnb guests who have 100% positive reviews.
• Airbnb’s property and liability insurance will be extended to cover the corporation and the common elements.
• The corporation will receive a portion of the revenue from the rentals to compensate for the increased wear and tear on the common elements and increased security costsresulting from short-term rentals.
• Airbnb will refuse to allow hosts to use its booking platform if there are too many complaints (e.g., nuisance, noise) generating from the rentals.
• The program gives condominium management the right to approve or decline each host’s listing before it goes live on the site.
• Once a condominium is registered as an Airbnb-friendly building, hosts cannot become an Airbnb host outside the program. Whenever a resident in the condominium decides to host and enters their address in the Airbnb system, they are automatically routed to the condominium hosting rules and commission percentage payable to the condominium corporation.

Many condominiums whose declarations permit short-term rentals have realized that short-term rentals are here to stay and that rather than trying to ban them outright. Therefore, it makes more sense to take measures to regulate them and give the corporation some control over the short-term rental activities in the condominium.

Denise Lash is the Founder of Lash Condo Law. This article first appeared in CondoBusiness Magazine September 2019. 

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