Ontario court holds that condominium validly prohibited short-term rentals
December 23, 2016
BY Kevin Zakreski
Short-term rentals, which are often enabled by online services, have become an increasing concern for strata corporations. A recent court decision from Ontario illustrates the conflicts that may arise when owners engage in short-term rentals and the tools that strata corporations may have to deal with the issue.
Ottawa-Carleton Standard Condominium Corporation No. 961 v Menzies, 2016 ONSC 7699, involved a 244-unit residential condominium located in downtown Ottawa. The applicant in the case was the condominium corporation. The respondents were “an Ottawa lawyer and his wife,” who were “the registered owners of unit 2601,” and a private corporation they controlled, which leased the unit.
The condominium corporation learned that the unit was listed for rent on a number of websites. The court described these listings in the following terms:
The unit was made available for stays as short as a single night. Just as with any hotel, the listings for the unit provided for a “check in” and check out” times, had deposits and cancellation policies, and provided for a cleaning fee and credit card payments. The listings specifically granted access to the condominium’s amenities, gym, meeting areas and unit 2601 had no less than 13 reviews of guests who leased it in recent months.
The condominium’s declaration (roughly the equivalent of a BC strata plan) “provides that its residential units are to be occupied ‘only for the purpose of a single family dwelling which includes a home office […] and for no other purpose.’ ” [Ellipsis inserted by the court.] Further, in response to concerns about short-term rentals, “the Board of Directors decided to adopt a rule further defining a length of tenancies which would be acceptable. The Board opted to fix such minimal tenancies to four months.”
The respondents objected to this rule (roughly the equivalent of a bylaw in British Columbia) and commenced these proceedings. They raised five “preliminary issues” for the court. One of these issues went to the heart of the short-term rental dispute. It was framed as follows: “Do the Declaration, and the Rules prohibit the form of short term rental or other uses engaged in by the Respondents?”
The court began its analysis of this question by defining “single family”:
In the absence of a definition in the condominium documents of what constitutes a “single family,” the courts have defined a “family” as a “social unit consisting of parent(s) and their children, whether natural or adopted, and includes other relatives if living with the primary group.”
With this definition in hand, the court concluded that the respondents were in breach of the declaration:
Based on the evidence before me, there is no doubt that the Respondents, 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” 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. Single family use is incompatible with the concepts of “check in” and “check out” times, “cancellation policies,” “security deposits,” “cleaning fees,” instructions on what to do with dirty towels/sheets and it does not operate on credit card payments.
Further, the court found that the condominium corporation’s rules were valid restrictions on the right to rent a unit:
Rules preventing short-term leasing that are not so overly restrictive as to completely negate or fundamentally alter the right of owners to lease their units to traditional tenants have been found valid and in compliance with s. 58 of the Act. Specifically, rules requiring that leases be in excess of 4 months have been found to be valid and enforceable.
In conclusion on this issue, the court held “that the Declaration and the Rule validly prohibit the form of short term rental or other uses engaged in by the Respondents.”
