There’s no doubt that the internet has changed the way we live forever. Instead of hailing a cab, we whip out our smartphones and open up Uber. Hungry for something but don’t want to leave the house? Instead of calling for more pizza, find something adventurous on Skip The Dishes. When was the last time you’ve struggled with those Green P Parking machines lining our streets like a robotic army? Tap the app and head off to your dinner.

One of the markets being overtaken by the use of the internet is Short-Term Rentals. Apps like Airbnb, HomeAway, VRBO, and Booking.com have exploded on the scene. For a fraction of the costs, its users can stay in a home, and skip the usual costs and obligations of hotel life.

Yet, despite its benefits to the user, these Short Term Rental Sites are causing no end of headache to homeowners and tenants alike. Groups booking these residences are usually there for a “Good time, not a long time”. As a result, the units have a reputation of noisy neighbours, stenches of garbage, and a used-and-abused common area situation.

These issues aside, is it legal for someone to rent out their space on Airbnb? And, if so, is it regulated by the city?

The answer is that it depends on the situation. Like most things in life, context matters.

Homeowners

If you own a home in Toronto that is not governed by any board or regulating body whatsoever, you’re free to list it on Airbnb. The regulations on such listings are currently up for debate. In January 2018, The City of Toronto approved regulations that would, among other things, require rental companies to get a license. They would also have to pay a special short-term tax on each sale of 4 per cent. One might note that this is like the regulation of other services, such as the popular ridesharing service Uber.

These regulations are still under appeal by the Local Planning Appeal Tribunal. The closing statements for this appeal are scheduled for October 15, 2019. Regulations remain unenforced until an appeal decision is made.

Condo Buildings

A Condo building, in the eyes of the Provincial and Local Government, is a corporation. Condos are valid once they’re incorporated. This process of incorporation includes registration of a Declaration (a set of documents outlining condo by-laws) and a Description (usually architectural and other building plans) with the Land Registry Office.

This is notable because your Condo Building’s by-laws may prohibit subletting. Recently, by-laws of condos have been amended to prohibit short-term rental sites like Airbnb. Some by-laws go as far as to even mention them by name. Before determining whether you should list your condo on Airbnb, its best to check the by-laws first.

Tenants and Short Term Rentals

The Residential Tenancy Act (RTA) governs most rentals in Ontario. The Landlord and the tenant adhere to “Ground rules” in this act. Both parties receive rights in certain situations. The Act addresses Subletting, beginning with an express definition of a Sublet as follows:

“For the purposes of this Act, a reference to subletting a rental unit refers to the situation in which
a) the tenant Vacates the Unit
b) the tenant gives one or more other persons the right to occupy the rental unit for a term ending on a specified date before the end of the tenant’s term or period; and
c) the tenant has the right to resume occupancy of the rental unit after that specified date.

The Act permits subletting by the tenant with the express consent of the landlord.

From this definition, its clear that any tenant choosing to list their rented property on AirBnb or similar site, is engaging in subletting. It then goes without saying that, if a Landlord doesn’t want Airbnb, or any subletting in their unit by a tenant, the Landlord can state so.

Tenants – The Catch

The RTA does place certain restrictions with respect to tenants and subletting.

Section 134(3) States:

Unless otherwise prescribed, no tenant and no person acting on behalf of the tenant shall, direclty or indirectly,

(a) sublet a rental unit for a rent that is payable by one or more subtenants and that is greater than the rent that is lawfully charged by the landlord for the rental unit;

(b) collect or require or attempt to collect or require from any person any fee, premium, commission, bonus, penalty, key deposit, or other like amount of money, for subletting a rental unit, for surrendering occupancy of a rental unit or for otherwise parting with possession of rental unit.

While this section of the RTA is left broadly to interpretation, one might consider collecting a nightly Airbnb rate higher than the monthly rate of the rent against the terms of the RTA. This could mean that Airbnb by a tenant could be considered illegal even with the consent of the landlord. It’s best to check with a legal professional, as this is reviewed on a case by case basis. Have legal questions? Why not contact one of our lawyers today for a free consultation on this or many other topics!

What This Means for the Real Estate Market in Ontario

A recent report published by the Urban Politics and Governance Research Group at McGill university illustrates Airbnb’s impact on rentals.

Entire-Home Listings make up most of Toronto’s “short-term” market. These listings represent 83% of revenue generated by all short-term rentals. The report concludes that the effects of regulating the market could add another 1.6 per cent of long-term rental units to Toronto’s pool.

Short Term Rental Availability in Toronto (Source, UPGO McGill)

Whether you’re using Airbnb to meet your mortgage payments, or using it for extra side income, regulations could wreak havoc on your approach. However, reducing the Airbnb pool would mean quieter neighbours, and an improvement in property enjoyment in neighbourhoods.

Our advice? If you are deciding to rent out your property, its nice to check with your neighbours, and lay down some strict ground rules for your guests.