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Legal issues with Airbnb

Airbnb lawHome sharing is on the rise. Internet-based platforms such as Airbnb connect travellers with owners or occupants willing to rent out their under-utilized spaces, ranging from entire home rentals to living room couches. In the last two years alone, 11,000 Ontarians listed their homes on Airbnb, attracting more than 375,000 visitors. This growth has implications for hosts and the regulation of residences.

Some municipalities prohibit short-term rentals with exceptions for licensed bed and breakfasts and hotels. Other cities limit the number of nights per year a home can be rented, reinforcing the notion that different rules should apply when renting secondary residences or commercial properties. Consider that in Toronto 30 per cent of hosts have multiple listings. For some, this is no longer seen as “home sharing”, but rather small business.

Owners who rent their spaces take a risk that any insurance claim arising from their rental will be denied if they lack proper coverage. Airbnb has introduced its own Host Protection Insurance program, yet the option of extending coverage through the owner’s insurance provider may also available. If you plan to permit short-term rentals at your property, Daniel & Partners LLP recommends that you ensure you have sufficient coverage by discussing this with your insurer or insurance broker.

Another trend is that long-term rental tenants are subletting the property they rent through Airbnb and other services without their landlord’s consent. This could lead to eviction. Even if permission is obtained, this type of rental may violate the Ontario Residential Tenancies Act because a tenant is not permitted to sublet their unit for an amount greater than they are being charged by their landlord.

Condominiums also face issues with the regulation and enforcement of short-term leasing policies and regulations. Some condo managers encounter situations where tenants never intend to occupy their unit. Instead, tenants are looking to profit by charging more money per night to travellers through Airbnb or similar services. Depending on the language contained in a condominium’s declaration concerning the permitted use of units, short-term leasing may be restricted. However, if a declaration does not contain this language, the high percentage vote required to amend declarations may pose a barrier. Condominium boards may still adopt rules setting out what is permissible and the consequences of their breach, including fine or eviction. As an alternative to banning short term rentals, condo corporations may consider charging fees and placing limitations on hosts and guests in an effort to bring home sharing practices above board.

Challenges in tax compliance arise from this transformation in home use. Airbnb refuses to share rental information with government by citing privacy concerns for its customers. Through a voluntary approach, Ontario expects the company to inform its users of their obligations and to encourage them to report their income. If you plan to rent your property, Daniel & Partners LLP recommends that you speak with an accountant to ensure you fully understand the tax implications.

Home sharing brings a host of new challenges with respect to implementation and compliance of by-laws and regulations. The team at Daniel & Partners LLP has extensive experience working with property owners, municipalities and condominium corporations. We can assist with amending by-laws or drafting declarations that fit your needs. We can help you draft rental agreements that deal with short-term subletting. Similarly, if you are interested in knowing your rights and obligations as a potential host, you can discuss your concerns with one of our real estate lawyers.

Blog post written by Michael Liddiard, summer student.