Jul 2023
Condo Rentals 101: A Guide to Short-Term and Long-Term Rentals in 2023
By Nathan Henderson and Slonee Malhotra
Canada’s rich natural beauty and distinct culture have made it an admired destination for tourists. Toronto, Vancouver, and Montreal are some of the nation’s most popular destinations, attracting millions of visitors yearly.[1] Traditionally, these tourists would book a room in a hotel to stay in during their trip. But the rise of the sharing economy and the advent of services such as Airbnb and VRBO have resulted in more people seeking accommodation through short-term leases rather than conventional hotels.[2] While the longevity of these services remains uncertain, their current impact on Canada’s housing market and the implications they present for owners and developers of condominiums are notable.
What is a Short-Term Lease/Rental?
A short-term lease, colloquially known as a short-term rental, is generally defined as lasting for a period of a single day to several weeks. In contrast, a long-term rental usually lasts for a period of several months to a year.[3]
Some municipalities have their own, specific classification of what constitutes a short-term rental as well. For example, in Toronto, a short-term rental is defined as receiving payment in exchange for renting out the entirety or part of a dwelling unit for less than 28 consecutive days.[4] Meanwhile, the Region of Waterloo defines a short-term rental as reservations for a dwelling that last 29 nights or fewer.[5]
Both short-term and long-term rentals are distinct from hotels, which are defined in the Hotel Registration of Guests Act as “a separate building or two or more connected buildings used mainly to cater to the needs of the travelling public by the supply of food and also by the furnishing of sleeping accommodation of not fewer than six bedrooms as distinguished from any other building or connected buildings used mainly to supply food and lodging by the week … or of furnishing living quarters for families and having a dining room or restaurant.”[6]
Restrictions and Regulations
Provincial Legalisation
The short-term rental boom has had a palpable impact on Canada’s housing market and tourism industry. As this new industry’s popularity has grown, municipalities and condominium corporations alike have passed rules and legislation to govern it. Some regions welcome the proliferation of transient accommodation, seeing it as a means to attract new tourism and grow the local economy. Conversely, other regions view short-term rentals as adding more fuel to an already hot housing crisis, resulting in tens of thousands of homes being removed from Canada’s long-term rental market at a time when supply already cannot keep up with demand.[7] In 2017, the Ontario government passed a regulation known as the Transient Accommodation Tax that empowered municipalities to collect an additional tax on short-term rentals.[8]
Then there is the Condominium Act and the Residential Tenancies Act to consider, two pieces of provincial legislation that govern specific leases in Ontario. The Condominium Act provides guidance and support for condo corporations to keep track of leases in their buildings. Per section 83, within 10 days of entering into a lease, renewal, or termination of the same, unit owners must notify the condo corporation and provide the corporation with the lessee’s name, the owner’s address, and a copy of the lease or renewal or a summary of it in the form prescribed by the Minister; and provide the lessee with a copy of the declaration, by-laws and rules of the corporation.[9] This applies to any lease, no matter the length of the duration. Providing these details supports the condo corporation’s ability to record the names of all the unit holders and the details of lessees in the building; both of which it is required to do.[10]
If you have questions, please reach out to one of our qualified Real Estate lawyers such as Nathan Henderson
(nhenderson@sorbaralaw.com)
Short-term rentals are governed by the requirements set out within the Condominium Act, even though these rentals are not specifically addressed in the legislation. To complement and build on the provisions set out in the Condominium Act, corporations could change their rules or by-laws to further regulate tenancies that span less than a particular length of time.
Conversely, the Residential Tenancies Act only applies to residential tenancies (ie. not commercial leases) in specific circumstances. For instance, it does not apply to living accommodation intended to be offered to the travelling or vacationing public or occupied for a seasonal or temporary period in a hotel, motel or motor hotel, resort, lodge, tourist camp, cottage or cabin establishment, inn, campground, trailer park, tourist home, bed and breakfast vacation establishment or vacation home, among other factors.[11] For people planning to rent out their condo, it is important they ensure the nature of their rental fits within the exempted categories. Failure to do so means they will be governed by the Residential Tenancies Act.
Note that simply listing a rental on a short-term rental platform does not necessarily mean it is exempted from the Residential Tenancies Act. For instance, a tenant may list their rented unit as a short-term or long-term rental, provided they receive the consent of their landlord.[12] In such instances, the Residential Tenancies Act applies, imposing restrictions on the tenant such as responsibility for damage to the unit or condo and the possibility of eviction if someone whom the tenant permitted to be in the unit substantially interferes with others’ reasonable enjoyment or safety in the condominium.[13]
Municipal by-laws
Municipalities throughout Ontario are enacting new by-laws to respond to the influx of short-term rentals on the market. In Toronto, platforms/rental companies such as Airbnb and VRBO must purchase a licence from the City, pay a one-time application fee of $5,321.85, and pay an ongoing fee of $1.06 for every short-term rental night booked through them. This licence must be renewed annually.[14] Individuals looking to rent their condo, otherwise called operators, need to register with the City for $53.22 and are required to collect and remit a six percent (6%) Municipal Accommodation Tax (MAT) on all rentals.[15] These operators are also limited to only renting out their principal residence, and may only do so for up to 180 days a year.[16] As of May 1, 2023, the City of Toronto approved 6,243 short-term rental registration applications.[17]
The Region of Waterloo—which encompasses the City of Waterloo, Cambridge, Kitchener, North Dumfries, Wellesley, Wilmot, and Woolwich—has also taken steps to address the wave of short-term rentals. Similar to Toronto, the Region recently passed a by-law requiring all rentals that are 29 nights or shorter to collect a four percent (4%) Municipal Accommodation Tax (MAT).[18] In the City of Waterloo, low-rise residential rental units require an annual licence to ensure safe accommodations, regardless of whether they offer long-term or short-term rentals.[19]
In Woolwich Township, there are even more restrictions on short-term rentals, which it defines as a dwelling unit that is used to provide sleeping accommodations for less than 28 consecutive days per rental within the principal residence of the short-term operator.[20] These rentals may only be offered a total of 6 times or 112 days each year, whichever occurs first. Moreover, an operator must receive a certificate of occupancy from the Woolwich Township before use as a short-term rental can commence[21]
If you have questions, please reach out to one of our qualified Real Estate lawyers such as Slonee Malhotra
(slonee@sorbaralaw.com)
Wellington County—which is comprised of Guelph/Eramosa Township, the City of Guelph, Puslinch, Minto, Mapleton, Centre Wellington, and Wellington North—has no umbrella restriction on short-term rentals. However, some of the individual municipalities within the County have by-laws governing such rentals. Guelph/Eramosa Township has prohibited all rentals that are less than 30 consecutive days.[22] The City of Guelph has a four percent (4%) Municipal Accommodation Tax (MAT) that applies to all hotels, motels, bed and breakfasts and shared accommodations (such as short-term rentals on Airbnb and VRBO).[23] Furthermore, Guelph’s city council recently approved a licensing model for Guelph's short-term businesses, with a bylaw earmarked to go into effect on July 1, 2023.[24] There is also the Township of Puslinch, which we wrote about in a previous article, that was involved in an Ontario Superior Court course surrounding its zoning by-laws that purported to regulate short-term rentals. The Township of Puslinch has since prohibited short-term rentals, which it defines as “the use of a building or structure or any part thereof that operates or offers a place of temporary residence, lodging or occupancy by way of concession, permit, lease, license, rental agreement, or similar commercial arrangement for any period less than thirty (30) consecutive calendar days, throughout all or any part of a calendar year;” though this excludes motels, hotels, bed and breakfast establishments, hospitals, or similar.[25]
Condo Corporations
Condo corporations should consider updating their declarations if short-term rentals are not mentioned within them or if the wording is unclear. However, in most cases, this will require the written consent of at least 80% of the owners of units in the condo.[26] In amending their declaration, some corporations may decide to place requirements on short-term rental operations, such as additional deposits or fees resulting from the increased use of elements in the building’s common areas.[27] Other corporations may seek to ban the use of units for transient purposes altogether. Section 58(1) of the Condominium Act allows the condo board to make, amend, or repeal rules to promote the safety, security, or welfare of the owners and of the property or prevent unreasonable interference with the same.[28] A rule banning short-term rentals would fall under section 58(1), and as seen in the case of Kumar v Toronto Standard Condominium Corporation No. 2492, such a rule can be upheld provided it does not contradict any provisions on the same within the declaration (and by extension, other condominium documents registered on title) and that the rule is administered in accordance with the Condominium Act.[29] Considering how onerous the process of amending a condominium declaration is, condo corporations can far more easily institute a rule on short terms rentals instead, provided the rule is in compliance with the Act and does not contradict the terms of the declaration or other registered condominium documents.
In some cases, new rules may not even need to be passed due to the broad language used in the condo corporation’s existing by-laws. The interpretation of these by-laws can significantly impact what owners can do with their units. For example, a condo corporation only allowing “single-family” dwellings has been interpreted as meaning that a dwelling cannot be used for a short-term rental.[30] However, for greater certainty, the condo corporation should still adopt a new rule to buttress any existing by-laws.
Impact on developers and condo homeowners
The impact of the rules and legislation governing rentals affects condominium developers and potential owners too. As noted in the 2001 case of Metropolitan Toronto Condominium Corp. No. 1170 v Zeidan, the ways in which an owner can make use of his or her condominium unit are impacted by 1) the Condominium Act; 2) a condominium corporation's declaration; 3) a condominium corporation’s by-laws; and 4) rules passed by the condominium board.[31] These sources of regulations are in addition to existing municipal by-laws.
Beyond this, developers and potential homeowners that are considering turning units into short-term rentals must consider additional factors. There may be insurance implications and restrictions from mortgage lenders that limit leasing. Homeowners should also consider how collecting and remitting taxes gained on their rental property is handled (whether personally or by the booking platform they use). Finally, health and safety obligations may have a higher threshold when using a property as a short-term rental rather than exclusively for personal residential use.
Though builder agreements have mostly been silent on short-term rentals, that does not mean that condo corporations are turning a blind eye to their potential. One Toronto condominium corporation made headlines when it became the first to participate in Airbnb’s Friendly Building program. This program claims to allow building owners and managers to establish their own building rules for hosting, gain visibility into Airbnb hosting activity in the community, and leverage tools on Airbnb to share portions of the resident’s reservation income.[32]
Whether you are a developer or an aspiring operator of a short-term rental, it is important to know the rules, regulations, and laws that may have an impact on your investment in a condo. Begin with the provincial legislation in place, then move on to municipal by-laws and finally the declarations or rules of the condominium corporation (if applicable).
If you are a developer or condo owner looking for guidance concerning short-term leases/rentals, please contact Slonee Malhotra (slonee@sorbaralaw.com) or Nathan Henderson (nhenderson@sorbaralaw.com).
[6] RSO 1990, c H.17, s 1.
[9] Condominium Act, 1998, SO 1998, c 19.
[10] Ibid at ss 83(3), 46.1.
[11] Residential Tenancies Act, 2006, SO 2006, c 17, s 5.
[13] Ibid at ss 34, 64(1), 66(1).
[19] City of Waterloo, by-law No 2016-044, Rental housing licensing bylaw (22 August 2016), s 3.
[20] Woolwich Township, by-law No 48-2020, Rental for Short Term Rentals (23 June 2020), s 6.25.1.
[26] Supra note 9 at s 107(2)(e).
[27] Metropolitan Toronto Condominium Corp. No. 850 v. Oikle, [1994] O.J. No. 3055 at para 29 [Oikle]. Kapoor v Toronto Standard Condominium Corp. No. 2450, 2019 ONSC 3461 at para 20 [Kapoor]; Cottage Advisors of Canada Inc. v Prince Edward Vacant Land Condominium Corp. No. 10, 2021 ONSC 1203 at paras 42–44 [Cottage].
[30] Ballingall v Carleton Condominium Corporation No. 111, 2015 ONSC 2484; Ottawa-Carleton Standard Condominium Corp. No. 961 v. Menzies, OJ No. 6302.
[31] [2001] OJ No. 2785 at para 36.