Real Estate

Airbnb-condo deal requires further study: Conant

By Kathy Rumleski, AdvocateDaily.com Staff

A deal between Airbnb and a Toronto condominium — believed to be a first in Canada — should be carefully studied to understand the legalities, says Toronto condominium lawyer Armand Conant.

“We will absolutely see more of these agreements. But once you start saying your building is available for short-term rentals, that raises many issues,” Conant tells AdvocateDaily.com.

“Since condo corporations are not-for-profit corporations, raising income from this type of arrangement could possibly be a problem," he says.

Critics say in a Toronto Star article that the agreement essentially makes the condo development a hotel.

Conant, a partner with Shibley Righton LLP and head of its condominium law department, tends to agree.

“Once the board of directors of the condo corporation says, ‘Hey, this is a way to make bucks for the condo corporation,’ it has the potential of making these buildings similar to hotels.”

Although not common, he says there are some condo corporations whose declarations state that residential units can be rented for short-term or even daily use.

These buildings are usually near event venues, such as the Air Canada Centre. In these cases, the developer does it for marketing purposes, Conant says.

“If that’s in your declaration, you’re deemed to have read it when you bought it. I can understand that," he says.

“When they buy a condo, most people believe they have purchased in a residential building and not a hotel.”

Some of the complaints about having short-term rental units in condos are noise and cleanliness as more people come and go, The Star article indicates. It reports that the condo will get a five- to 15-per-cent royalty, which Conant says will help pay for extra maintenance services that are now needed.

“There may be no net loss for the extra cleaning perhaps, but extra noise and damage to the building are different issues,” he says. “What if someone is coming in for a rock concert and afterwards they go back to the unit and party?”

He says that will interfere with the quiet enjoyment of other residents.

“The fact you’re getting money to cover extra costs doesn’t matter. If I’m going to reside there, I did not buy into living in a hotel.”

It also raises issues about the building code, fire safety requirements, zoning and property taxes, he says, adding, could your property assessment classification change from residential to commercial?

Conant says there are two remedies for owners who are against the use of the building for short-term rentals.

“You can go to court and argue the board had no legal power to sign that agreement, or someone has to organize owners to try to remove the board and replace it with a board that would either terminate the agreement or, if possible, avoid entering into one in the first place.”

He says both options are expensive and could drag on for some time.

Conant says he can see why it may be appealing for condo boards to enter these types of agreements as it might help lower common element fees marginally, but that's the very issue that might affect the corporation's not-for-profit status.

“There is always pressure on a board to keep those fees as low as possible. That leads to directors looking for other sources of income for the corporation," he says.

"Being a condo lawyer — and having been a condo director for six years — I can understand that boards should always look at ways of keeping fees as low as reasonably possible while maintaining the services in the building and protecting the market value of the units, but I wonder if an Airbnb partnership is worth the revenue," says Conant.

“You’re changing the fundamental nature of a residential building and, in my view, that outweighs the fact that they can get extra royalties from Airbnb.”

Conant says he’s not necessarily against these types of short-term rental agreements, but a board must carefully consider the rights of the owners and residents before inking a deal with the hospitality company.

He adds that "this will all have to be considered in light of the new City of Toronto zoning by-law, which comes into effect on June 1, that will allow short-term rentals if certain rigorous conditions are met."

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