Real Estate

Toronto faces challenges to license landlords and control AirBnBs

Any bylaws introduced to licence landlords and control the proliferation of AirBnB units in Toronto will almost certainly face legal hurdles and court challenges, says Toronto real estate lawyer Peter Neilson.

Neilson, a partner with Shibley Righton LLP, says Toronto's quest to control AirBnBs and landlords also opens up the proverbial legal can of worms, he says, since it could conceivably impinge on homeowners’ property rights.

“There are so many variables,” Neilson says. “You have a condo owner who lets out a unit through AirBnB and it’s likely no one in the building would be happy about that including the property management. But you’d have to consult the condo corporation declaration and rules to see if it is specifically barred.

"Certainly in some of the older condos, which were incorporated long before AirBnB came along, it wasn’t even envisioned. And some condos purposely don’t have no-rental clauses because they want to attract investors as buyers,” he notes.

Toronto city council has been lobbied furiously by the Greater Toronto Hotel and Restaurant Association and the unions representing hotel workers who claim larger than average vacancy rates are the result of AirBnB, according to a story in the Toronto Star.

They want city council to regulate AirBnBs and to ensure taxes are collected and remitted, reports the Star.

The question becomes where to draw the line and what mechanism could be used to enforce it, says Neilson.

“It could be through a zoning amendment, for example,” he says. “That’s fine if someone owns several properties and lets them through AirBnB. That’s a business. But what about a property owner who lives in the unit, has a spare basement apartment or duplex unit and doesn’t want to get entangled with a long-term rental and is happy with AirBnB users?”

In the bigger picture it also opens up questions around whether the money from AirBnB operations is being declared to the Canada Revenue Agency and whether it's being claimed as a principal residence or not for capital gains purposes, he says.

It’s a similar issue around the city’s investigation as to how and if it should regulate landlords. After a series of media stories about units in poor repair and with bug infestations grabbed headlines, Toronto councillors have asked staff for a report and draft bylaw and will likely vote on the proposal in December 2016.

One of the proposals is to create a program like the Toronto Dine Safe scheme which posts a pass/fail score according to City of Toronto Health regulations for restaurants.

The issue again, says Neilson, is where the line will be drawn and how small landlords will be dealt with and how condo owners who rent their units as an investment will be subject to any regulations.

“It is certainly going to prompt some court challenges on both fronts because it does cross over into the area of property rights,” he says.

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