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Condo owners could face liability from short-term rentals

Armand Conant
John De Vellis

Some condominium corporations are struggling to address the growing popularity of short-term rentals, Toronto condominium lawyers Armand Conant and John De Vellis write in The Lawyer’s Daily.

“They create a significant problem for condominium corporations, from increased wear and tear on common elements, increased security costs, disruption and general anxiety as residents complain that what they thought was their home has been turned into a hotel,” say Conant, head of the condominium law group with Shibley Righton LLP, and De Vellis, who also sits on the firm’s condo group.

They say it’s often a tenant — not the owner — who offers the unit for rent, adding that a veritable “cottage industry has blossomed” where people rent from unit owners on a long-term basis and then lease to others for short-term stays.

Sometimes they are featured on specialty websites but in other cases, the tenant has created their own online portal where they list "a number of units at various locations, all available for rent on a hotel-like basis," Conant and De Vellis explain. "Often the owner has no idea what is happening to their unit."

Tenants who sublet may “run afoul” of the Residential Tenancies Act, 2006, which states that a rental unit may only be sublet with the consent of the landlord, Conant and De Vellis say. It also states that they cannot charge more than they pay in rent to the owner.

“For condominium unit owners, these unlawful sublets are not just a nuisance, they may create a big financial headache,” they write.

“That’s because most condominium corporations have indemnity clauses in their declarations that make the owner responsible for all costs incurred by the condominium corporation, including legal costs, in the event the owner or the owner’s tenants breaches the condominium corporation’s declaration, bylaws or rules.”

Most condominium declarations stipulate that units can only be used as private, single-family residences.

Conant and De Vellis say the courts have defined a “single family” as a “social unit consisting of parent(s) and their children, whether natural or adopted, and includes other relatives living with the primary group.”

They cite a 2016 Ottawa case, where the court ruled that leasing a unit on a repeated, short-term basis was a violation of the single-family-use restriction in the declaration.

The court said, “’Single-family use’ cannot be interpreted … with units being offered to complete strangers on the internet, on a repeated basis, for durations as short as a single night … [and] is incompatible with concepts as ‘check in’ and ‘check out’ times, ‘cancellation policies,’ ‘security deposits,’ ‘cleaning fees,’ instructions on what to do with dirty towels/sheets and it does not apply to credit card payments.”

Not only were these cited in the case, Conant and De Vellis write, they’re also typical of how many units are advertised online.

They say many corporations have passed rules that set a minimum rental period for units and the courts have upheld minimums as lengthy as four months.

Conant and De Vellis also write that the Condominium Act, 1998 “requires that an owner of a leased unit notify the condominium when a unit is leased, provide the name of the tenant, a summary of the lease, and provide the tenant with a copy of the condominium’s declaration, bylaws and rules, none of which is followed in a typical short-term-lease scenario.”

Some declarations, particularly in buildings close to entertainment centres, allow short-term rentals, they say.

“This prevents the condominium corporation’s owner-elected board from passing rules providing minimum rental periods or otherwise prohibiting short-term rentals.”

In a recent case, the court denied a corporation’s attempt to have the provision declared invalid.

“The condominium had argued that the declaration had impermissibly granted a right, which would amount to a positive covenant, but the court disagreed, stating that the declaration simply defined the scope of the restrictions on the use of the property by making clear that the short-term leasing are not restricted uses,” write Conant and De Vellis.

“The bottom line for owners is they must be aware of what they are buying. If owners are expecting to live in a community of long-term residents, they should be sure that the declaration does not prevent the board from regulating short-term rentals. On the other hand, if there are restrictions against short-term rentals, owners need to be vigilant in not allowing their units to be used in that manner.”

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