Crises expose the cracks in society and this one certainly has. Airbnb short-term rental units have flooded onto GTA rental markets as owners scramble to recover financially.
What’s New Under 2020 Toronto Regulations
No doubt Airbnb owners are hurting. Short-term rentals got shut down between March and June because of COVID-19. Anywhere between 8,000 and 10,000 units flying under Toronto city hall’s bylaw radar got called up short again in September when the city required them to register. Owners now have to occupy a property before renting out spare bedrooms or vacant suites and display registration numbers in ads. Travel agencies like Expedia or Tripadvisor that promote the units will need a business licence to operate.
Disrupting Ghost Hotels
The new rules are meant to shut down “ghost hotels”, short-term rentals with no property owner on site. A Nepean couple used to Airbnb guests partying at all hours and parking on the lawn of the modest, brick home next door were appalled when several partiers were wounded, one critically, during a 6 a.m. brawl. An Ottawa condo owner who leased out his unit while studying in New York was told Airbnb can’t prevent his renter, who denies it, from subletting to overnight guests. The condo, one of seven multi-lister “John” is offering in Ottawa and Montreal, rents for $71 nightly.
Paying Taxes to Operate a Bnb
Compare that to $2,500 a month for an average rental. Even with the four per cent municipal accommodation tax property owners are now forced to collect, that’s a lot of spare change. Regulation cuts into profits, a Burnaby couple discovered. Their Airbnb subleter sued them for lost revenues when the city slapped a fine against the illegal rental. The owner agreed to let Tong Heintz Sun use the home for short-term rentals, believing his claims to be a law student and experienced Airbnb host. Sun slammed the owner with a lawsuit when the city issued a $400 fine. An unintimidated judge tossed Sun’s lawsuit.
Regulating Airbnbs for Safety
Toronto’s regulations come at a time when violent incidents, including a deadly shooting at a downtown condo, are raising questions about how safe AIrbnb units are for neighbours and residents. ‘Chair Girl’ picked up 40,000 new followers after a Snapchat video showed her tossing a chair off a 45th-floor balcony. Vancouverites are still abuzz over a weekend party where guests were transported by helicopter onto an Airbnb lawn and volunteer firefighters were called in to revive an overdosing guest.
Legal Woes for AIrbnb Owners
What is an Airbnb house anyway? An Airbnb house can be a room, secondary suite, whole house, berth on a houseboat, or whatever your municipality permits. Visitors may be regulated by local bylaws, such as how long they can stay, or where they can park. Using the Airbnb website ensures reservations are paid in advance.
Wild parties aside, you could be taking on more than you realized when you rent your property as an Airbnb.
1. Insurance Tangles
Your property insurance may not cover you if a guest is injured on your premises or your possessions are stolen. Standard insurance policies are meant for your personal home and may be void if you operate an income property on the side. While Airbnb does offer host protection insurance, the $1 million liability coverage won’t replace lost earnings for an injured guest or valuables like rare art, jewellery or collectibles. You’ll need home sharing insurance from agencies like Aviva, Duuo, April or Square One that specialize in short-term rental coverage, on top of your own.
2. Floods, Fires and Fiascos
Setting off the building sprinklers by smoking weed in bed is sure to cause a row with the neighbours. Let’s face it. You can’t guarantee your guests won’t park in the wrong stall or let their kids tag the pool deck. Three to seven per cent of Airbnb rentals are problematic. Have you thought about how you will handle rude guests, refund requests, bed bugs or neighbours who gripe?
3. Breaking the Rules
Condo rules are meant to be followed and that means you better check the bylaws before listing your unit on Expedia. Not only could that get you fined, but you may not be able to hold your guests’ feet to the fire if you break the rules yourself. Condo boards have good reason to rachet up the heat on you. Upkeep for common areas like elevators and lobbies goes way up when non-residents use a building as a hotel. That results in higher strata fees and special assessments for other owners and could make the building less attractive to potential buyers.
4. The Tax Man Cometh
Running an Airbnb can be lucrative. Canada Revenue Agency will want their share. Keep accurate records unless you want to be audited come tax time in April. While income properties come with built-in deductions, you’d be well advised to get advice from an accountant or tax service before filing your taxes.
On second thought, maybe buying a food truck wasn’t such a bad idea after all.
You Asked Us
1. Is it a good idea to Airbnb your home?
Your neighbours may not agree, but if you don’t mind tidying between guests, being an Airbnb host can be rewarding. Playing host gives you extra cash and you get to meet new people. Listings are free, and you only pay a service fee if a guest reserves through the Airbnb website. Besides, Airbnb makes it easy by collecting the rent. A Host Damage Protection Program insures your home for some, but not all damages.
2. Can you permanently live in an Airbnb?
You and your family can live there permanently if you’re the hosts, and guests can sometimes arrange month-to-month accommodation through Airbnb. Some communities, like Toronto, restrict permanent occupants to the host and their family.
3. How do you make a house an Airbnb?
Start by contacting your municipality for licensing, zoning, and bylaw requirements. Some communities like Toronto only allow Airbnbs in the host’s principal residence, a secondary suite, or laneway home they occupy. For example, apartments, condos, or bed and breakfasts can be used as Airbnb properties in Toronto, but not second homes, investment properties, or vacation rentals.
The Ontario Fire Code applies to rental spaces, and your unit may also have to comply with the Ontario Building Code.
Log in to airbnb.ca to register and list your property. You’ll need good quality photos, and a concise description of your home and any services like breakfast or tea and coffee you plan to offer.
Ask an Ontario Lawyer About Buying an Airbnb
Axess Law Ontario real estate lawyers give you legal about buying a home for short-term rental use. Book an online video conference appointment by dialing toll-free to 1-877-552-9377 or 647-479-0118 in Toronto or use our online booking form. Convenient video call or in person appointments at our Toronto, Scarborough, Vaughan, Etobicoke, Ottawa, Mississauga Winston Churchill or Mississauga Heartland law offices are available 7 days a week, day or evening.
Click here to learn more about Axess Law’s real estate law services.
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