Real Estate

Short-term rentals causing headaches for condo boards

By AdvocateDaily.com Staff

The increasing number of units being used as short-term rentals is causing headaches for condominium boards, says Toronto condominium lawyer Audrey Loeb.

And she predicts those headaches will continue until the Ontario government steps in.

"I just think the government should take a more active role in helping the condominium corporations in terms of legislative modifications," says Loeb, a partner with Shibley Righton LLP.

"I think this mess of short-term rentals and allowing units to be used as hotels is really not the original intent and purpose of condominiums," she tells AdvocateDaily.com.

Loeb says the City of Toronto enacted a bylaw earlier this year that would, among other things, only allow licensed short-term rentals on an owner's principal residence, but it is being challenged this month before the Ontario Municipal Board (OMB). "Whether that will result in anything changing I don't know," she says.

The bylaw states a portion of a unit can be rented if the owner lives in it.

Loeb says these short-term rentals are becoming more popular as an alternative to hotels. With "tons" of condominiums owned by investors, "it's a good way to make a lot of money."

She estimates in an average downtown condominium building in Toronto, 70 to 80 per cent of the units are now probably owned by investors.

While it's making money for investors, condominium boards are struggling with issues of security — "nobody has a clue who's in and out of their buildings," and maintenance — "constant in and out means more wear and tear which results in greater expenses for all unit owners."

The owners of short-term rental units don't have anything but a financial stake in the building as opposed to the long-term commitment of owners who are living there explains Loeb.

"The whole concept of condominiums was you were going to end up with a group of people who were financially in the same set of circumstances and have the same interests in how to live.

"All of a sudden what we've ended up with in Ontario, at least particularly in Toronto, is a group of condominium buildings filled with investors, some of whom rent out to long-term tenants, and some are trying to run short-term rental businesses.

"The interest of somebody who has bought a unit as an investment, especially if they have multiple units, is not going to be the same as someone who buys a condo to live in it."

Loeb says the amount of time that has to be devoted by a condo board's property manager to monitor who might be running these short-term rentals is significant.

"As people get smarter, they do things to disguise the location of the unit so it means the investigative hat has to become more advanced in order to determine if it's actually your building in which they are offering a unit for rent.

"It's a huge operational problem for condominium corporations to stay on top of what's going on in the short-term rental business, to know who's doing it and to get enough evidence to stop it.

"Property managers are supposed to be managing the building, not staying online trying to figure out who's breaking the rules by offering short-term rentals."

Loeb points to a recent CBC story of a Toronto woman who thought she rented her unit to someone who would live in the unit. But the person she rented it to ran a short-term rental business and had about 70 clients.

"At the Landlord and Tenant Tribunal, she was able to get an order terminating the lease with that tenant."

Rental restrictions are not legislated in Ontario, Loeb says.

"The government ended up not allowing condos to restrict rentals and now we have this huge issue of condominiums just being filled with investors," she says.

Loeb says she doesn't see the law changing anytime soon.

"Without the investors, in my view, the condominium market would crash," she says. "The construction industry needs the work and people need accommodations."

Since the last Liberal government re-instituted rent control, "It's going to put even more of a damper on the construction of rental accommodation," Loeb says.

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