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MUNICIPAL REGULATION OF SHORT TERM RENTAL ACCOMODATIONS

By Matt Leask                                                                                                                                                                                                                                    

Short term rental websites such as Airbnb provide an increasingly popular service to the travelling public, but the short-term rental market is not without its pitfalls. Most people would have heard about the couple in Calgary who rented out their house in the Calgary area and came home to find damage in the range of $150,000. Guess what? The owner’s insurance didn’t cover them for occupation by short term renters. In what was undoubtedly a public relation move, Airbnb reportedly covered the bill, but you can bet others won’t be so lucky.

The short-term rental market operates in a legal grey zone, meaning there are no clearly defined rules and regulations. As a result, renting out your home or condo could get you into hot water. The Provincial government tabled Bill 131 titled “Opportunities in the Sharing Economy Act, 2015” last year. Bill 131 seeks to amend the Municipal Act, so that property owners cannot be required to obtain licenses provided they have proper insurance, and the renters do not stay at the property for more than 120 days in a calendar year.

Bill 131 is currently on hold with the Standing Committee on Finance and Economic Affairs. In the absence of Provincial legislation, municipalities continue to use tools such as zoning and licensing by-laws to regulate their local short term accommodation markets. In an area like Niagara, where tourism is such a major part of the local economy, we may see more municipal by-laws that attempt to control the ability to offer short term rental accommodations in residential areas. Noise complaints from aggrieved neighbours are often the catalyst for municipalities to take action against the property owners renting out their house.

Municipal Zoning By-laws typically function by prohibiting all uses of land in a defined area, except those that are expressly authorized. The argument has been made that providing short term accommodation in exchange for money, does not fit within the typical definition of residential use, or residential occupancy which is permitted in residential zones, and therefore municipalities are entitled to prohibit this type of use in residential zones without even changing their by-laws. A recent case suggests it is not so easy for municipalities.

The Township of Puslinch brought an application against the owner of a detached dwelling on the shores of Puslinch Lake seeking an order restraining the owner’s use of the property as a tourist establishment. The property owner used the vacation property for her own use, and rented it out on a short-term basis when she was not there. The Town argued that this contravened the zoning by-law, as it was not a residential use. The town was responding to several complaints about noise from the short-term renters. The Superior Court of Justice concluded that the Puslinch by-law did not regulate the use of the property for short-term accommodation. The by-law was found to be vague, uncertain and insufficiently specific with respect to its regulation of short-term accommodations. The major problem was that the Town tried to use its existing by-laws to address a new problem. The by-law was never intended to prohibit short-term rentals, and the municipality could only regulate this type of use with clear and specific language in a by-law.

The import of this court decision, is that municipalities that want to deal with short-term rentals using zoning by-laws will have to pass by-laws that clearly define whether or not short-term rentals are permitted in a given zone. By-laws in other municipalities have held up to judicial scrutiny because they clearly define what a short-term accommodation is, and limit the types of properties on which those uses are permitted.

Municipalities also have other tools at their disposal for regulating short-term rentals, such as the power to require licenses for the carrying on of any business, and the power to enact property standards by-laws. Property owners who plan on renting out their house or condo to a short-term renter should determine whether such a use is permitted under the applicable zoning by-law. Your neighbours may not always be as welcoming of your travelling house guests as you are.

Matthew Leask is an Associate Lawyer at Lancaster, Brooks & Welch LLP, practicing within the Corporate and Commercial law department. Matt may be reached at 905-641-1551.

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