A court ruling released last week strengthened the position of condominium corporations in Ontario who are struggling to enforce restrictions on short-term rentals. The judge in Ottawa-Carleton Standard Condominium Corporation No. 961 v. Menzies found that offering Airbnb-style accommodations could not be considered a ‘single-family use,’ but a commercial use.
“What’s new, and what is a game changer, is that we argued that the language in the declaration already prohibited these kinds of short rentals from day one,” said condominium lawyer Rodrigue Escayola, who represented the condominium corporation in the case. “When the length of leases are regulated by rules, owners try to attack the rule by saying the rule is unreasonable, or they can say, ‘When I bought, this rule didn’t exist, so I should be grandfathered.’”
In the case of Ottawa-Carleton Standard Condominium Corporation No. 961 v. Menzies, the board had passed a rule setting a four-month minimum for leases after observing an uptick in short-term rentals. A lawyer who co-owned a unit with his wife wrote the corporation a letter asserting that the rule was ‘illegal,’ among other things, and advised that he intended to pursue an injunction and sue for damages.
The corporation told the unit owner that he could properly challenge the rule by collecting the signatures of at least 15 per cent of the owners to force an owners’ meeting on the matter. Instead, the unit owner filed a court application, the 30-day deadline to challenge the rule expired and the corporation proceeded to take enforcement measures. The corporation later filed a counter-application asking for an order to comply.
Justice Robert Beaudoin found that the rule validly prohibited short-term rentals, as did the declaration, which restricts units to ‘single family dwelling’ use. As a result, the judge concluded that the owners’ use of the unit violated both the declaration and rule, and ordered them to comply.
“‘Single family use’ cannot be interpreted to include one’s operation of a hotel-like business, with units being offered to complete strangers on the Internet, on a repeated basis, for durations as short as a single night,” he wrote in his ruling.
“Moreover, ‘single family use’ could not have contemplated including the use of a unit to house out-of-town witnesses and experts for trial preparation or the unit being offered on silent auctions or to hold a law firm’s office functions and Christmas parties.”
Escayola, a partner at Gowling WLG, observed that the decision could have implications for condominium corporations across Ontario and beyond. Most residential condominium corporations have declarations that contain provisions limiting units to ‘non-commercial,’ ‘residential’ or ‘single-family’ uses, he said. There are some newer corporations whose governing documents expressly allow short-term rentals, he added.
B.C.’s version of the declaration, called the strata plan, often sets similar restrictions on the use of units, noted Lisa Frey, an associate with the Vancouver office of Gowling WLG. But unlike in Ontario, restrictions on the use of units can be further defined in the bylaws, not the rules. That has posed a roadblock in the western province, as its laws require a higher threshold of support from owners for bylaws to succeed.
“Here, more recently, stratas have tried to pass bylaws that would prohibit the use of units for short-term rentals like Airbnb,” said Frey, “but getting 75 per cent of people to agree to something is very difficult, and so those have been met with a lot of resistance.”
The recent court ruling could help if the B.C. courts interpret limits on the use of units in the same way. That’s because most strata corporations are regulated by a number of statutory standard bylaws, explained Frey, including one prohibiting strata lots from being used contrary to the use spelled out in the strata plan.
Back in Ontario, the applicability of the court ruling will hinge on the specific language in a condominium corporation’s declaration, Escayola said. He recommended that corporations consult their declaration with their legal counsel.
Escayola will be advising his clients to send a letter informing residents of the court ruling, and what it means for their particular community. After that, he said he would recommend moving to enforce the declaration or rule against any owners who persisted in ignoring restrictions on short-term rentals.
The court ruling may have established that ‘single-family use’ precludes this type of accommodation, but condominium corporations will have to continue to enforce restrictions on a case-by-case basis, diligently collecting evidence to support their claims. That said, Escayola pointed out that the act of advertising short-term rentals leaves a digital paper trail, complete with photos and reviews from guests. In fact, in the recent case, the listing for the unit cautioned guests to ‘be discreet’ about the nature of their stay.
“I don’t want to overstate it, but we may have put a nail in the Airbnb condo coffin,” he said.
Michelle Ervin is the editor of CondoBusiness.