Ontario court upholds condo rule banning Airbnb and short-term rentals

Bob Aaron in Legal

Toronto Condos-Nov 9 2013

Condo owners who rented their suite for short-term stays violated the building’s rules, an Ontario court ruled earlier this month.

The Ottawa condo’s single-family restriction, covered in the board’s declaration, was breached when the unit was rented out through websites such as Airbnb, Expedia and hotels.com.

Although the decision is being treated by the condominium community as groundbreaking, it reaches the same conclusion as two, pre-Airbnb rulings involving short-term rentals of “furnished travel apartments” in a King St. building in Toronto.

In the Ottawa case, the owners of a luxury downtown condo unit advertised it on nine websites for rentals as short as one night. Although one listing asked guests to “be discreet about mentioning Airbnb to anyone in the building,” 13 guest reviews were posted online.

The condominium declaration in the building says units can only be used as single-family dwellings. Last May, the board also enacted a rule that restricted tenancies to a minimum of four months.

Justice Robert Beaudoin held that the owners, “who have leased their unit, on a repeated short-term basis in a hotel-like operation, are in breach of the declaration.”

Single-family use, he wrote, “cannot be interpreted to include one’s operation of a hotel-like business, with units being offered to complete strangers on the Internet, on a repeated basis, for durations as short as a single night.”

The Ottawa ruling mirrors two Toronto decisions dating back to 2001 and 2002, in the days before Airbnb.

The two cases involved the owners of various units in the Metropole, a 314-unit luxury condominium project at King and Yonge Sts., across the road from my office.

In the first case, two owners leased 44 of their units in the building to rental operations carrying on business as Glen Grove Residences and Apartments International. Building owners noticed greatly increased foot traffic from short-term occupants entering and leaving the building.

The judge ruled that Glen Grove Residences was in violation of a rule that prohibited transient use and tenancies for less than three months. It was also in violation of the condominium declaration because the hotel-like use of the building caused a significant increase in the building’s insurance premiums.

In the second case, Apartments International operated a similar leasing service but went ahead and sued the condominium corporation for damages, alleging interference with their business and their economic interest.

The condo corp. successfully applied to a different judge to dismiss the case and, again, the judge had no difficulty finding that the rental prohibitions were valid and the action was dismissed.

In the wake of these decisions, condo owners are on notice that the courts will enforce prohibitions against short-term rentals that are included in condominium rules and declarations.

Bob Aaron is Toronto real estate lawyer. His Title Page column appears on this blog, Move Smartly, and in The Toronto Star. You can follow Bob on Twitter @bobaaron2 and at his website aaron.ca Email Bob 

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