Managing Short-Term Rentals in Ontario Condominiums: Legal Considerations and Best Practices

Short-term rentals, facilitated by platforms like Airbnb and Vrbo, have become increasingly popular in Ontario, particularly in urban areas. While these rentals can provide unit owners with additional income, they also introduce challenges for condominium communities. Managing short-term rentals requires a careful balance between respecting owners' rights and maintaining the safety, security, and harmony of the condominium community. This article explores the legal landscape surrounding short-term rentals in Ontario condominiums and offers strategies for effective management.

Relevant Legislation and Legal Framework

1. Ontario's Condominium Act, 1998

The primary piece of legislation governing condominiums in Ontario is the Condominium Act, 1998 (the "Act"). The Act grants condominium corporations the authority to create, amend, and enforce rules and bylaws that regulate the use of units, common elements, and assets of the condominium.

Under the Act, condominium corporations have the power to:

• Establish Rules: Condominium boards can create rules to prohibit or restrict short-term rentals, provided these rules are reasonable and consistent with the Act and the condominiums declaration. Rules typically address issues like noise, security, and the use of common elements.
• Enforce Bylaws: Bylaws that impose more significant restrictions on unit use, such as minimum lease terms, may be introduced, but they require approval from a majority of unit owners.

2. Municipal Regulations

Many municipalities in Ontario have enacted bylaws specifically targeting short-term rentals. The next section provides a detailed look at the regulations in Ontario’s top municipalities for short-term rentals.

Condo corporations need to be aware of and aligned with these municipal regulations when drafting their rules and bylaws.

Declaration Language and its Implications

In Ontario condominium declarations, various types of wording can be used to define the permissible uses of units, which is critical in the context of short-term rentals. Common examples include restrictions such as units being "restricted to private single-family dwellings" or permitting "residential use as permitted as per city bylaws." Some declarations may go further, specifying that units can "be occupied and used only for residential purposes, or for the business of providing transient residential accommodation on a furnished and/or unfurnished suite basis, with or without ancillary maid, cleaning, and/or laundry services, through short-term or long-term license/lease arrangements." These distinctions in wording significantly impact the enforceability of rules against short-term rentals, guiding both condominium boards and residents in understanding the limitations or allowances within their building.

Are Short-Term Rentals a Problem?

Short-term rentals pose significant challenges that distinguish them from traditional hotel operations. Unlike hotels, these rentals avoid the considerable costs associated with brick-and-mortar investments, licensing fees, and regulatory compliance. They are not subject to commercial taxation, nor are they bound by maintenance, fire code, insurance, or staffing obligations. Essentially, these operations skirt around responsibilities that hotels must adhere to, creating an uneven playing field and shifting the burden onto the condominium and its residents.

 The consequences of such operations are far-reaching. Unit owners, whether directly involved or simply aware of the extent of their tenants’ activities, inadvertently contribute to a situation where the condominium community bears the brunt of increased wear and tear. Common areas, such as parking lots, exercise rooms, pools, meeting rooms, and elevators, experience heightened usage and deterioration, while a reduced sense of ownership and community cohesion often follows.

Security concerns also arise as short-term renters, complete strangers to the established community, gain access to the building. This perceived lack of security can lead to unease among residents. Moreover, the influx of luggage, maid carts, and constant move-ins and move-outs mimics the demands of a hotel environment, placing additional strain on condominium staff and resources. The lifestyle envisioned by the condo’s original design and intent becomes increasingly difficult to maintain, leading to conflicts over the “hotel-like” nature of these operations.

Ultimately, the not-for-profit condominium community finds itself subsidizing what is effectively a for-profit enterprise. This situation can result in a host of issues, from increased enforcement demands on local authorities to a decline in property values, noise disturbances, and even vandalism. As condominiums transform into quasi-hotels, the character of the building changes, often to the detriment of long-term residents and the overall quality of life within the community.

Case Law History of Short-Term Rentals in Condominiums

The legal framework governing short-term rentals in condominiums has been shaped by significant case law, providing valuable guidance for condominium boards navigating these issues.

One of the foundational cases in this area is MTCC No. 1170 v Zeidan (2001), where the court upheld condominium rules that prohibited short-term rentals. This case established that, although short-term rentals could be considered residential use according to city by-laws, the impact on the community, including security concerns and insurance implications, justified such restrictions. This decision affirmed the authority of condominium corporations to impose minimum tenancy requirements, which in this instance was set at three months, to maintain the character and security of the building.

Following this, MTCC 1385 v Skyline Executive Properties Inc., (2005) further clarified the meaning of “Private Single-Family Residence” by prohibiting commercial or transient use in condominiums. The court ruled that these restrictions did not necessarily have to be explicitly stated in the Declaration; they could be effectively imposed through other governing documents like the by-laws or rules. This case highlighted the challenges posed by entities exploiting legal loopholes to operate short-term rental businesses in condominiums and underscored the importance of clear and enforceable rules.

Another key case is Ballingall v CCC No. 111 (2015), which addressed multiple aspects of short-term rentals in condominiums. The court supported the enforcement of single-family use provisions in the Declaration and allowed rules to modify this definition where necessary. The case also provided guidance on the concept of grandfathering, suggesting a transition period of three to five years to phase out non-compliant rental practices. Additionally, it emphasized the importance of board members acting in good faith when enforcing condo rules, particularly in contentious areas like short-term rentals.

Lastly, Kapoor v TSCC No. 2450 (2019) is a recent and pivotal case where the court upheld a condominium’s rules prohibiting transient or hotel-like operations. The court reinforced that no-minimum lease provisions and single-family use provisions could be validly interpreted to prohibit short-term rentals, thereby providing condo boards with a solid legal basis to regulate these practices in their communities.

These cases collectively illustrate the evolving legal landscape surrounding short-term rentals in Ontario condominiums. They provide crucial insights for condo boards seeking to enforce or develop rules that address the unique challenges posed by short-term rental platforms while maintaining the safety, security, and character of their communities.

Conclusion

Short-term rentals in Ontario condominiums present a complex mix of opportunities and challenges. By understanding the legal framework and implementing effective management strategies, condo corporations can protect the interests of their communities while accommodating the rights of unit owners. The key lies in creating a balanced approach that respects the diverse needs of all stakeholders.

For condo boards navigating this issue, it is essential to stay informed about evolving laws and to seek legal guidance when necessary. Proactive management can help ensure that short-term rentals enhance, rather than disrupt, the condominium community.