With the growing interest in the “sharing economy”, Airbnb and other short-term rental websites are often causing headaches within condominium communities across the province and beyond. In many cases, condominium corporations have had to adopt rules to attempt to regulate the leasing and occupancy of units within their complex. While useful, these rules may have presented limitations, one of which being that some owners were attempting to be “grandfathered” following their adoption.
In a case we argued in Ottawa, a court has changed the landscape by ruling that Airbnb (and similar short-rental service providers) are incompatible with the “single family use” provisions found in most condominium declarations. To our knowledge, it is the first time that such a conclusion is so clearly expressed by the courts. Condominiums have therefore an additional tool to address the challenge of short-term rentals.
We have blogged already on the topic of Airbnb in condominiums. In a nutshell, Airbnb and other web-based short-term leasing applications connect unit owners to individuals wishing to lease their unit on a short-term basis. This is often very lucrative for the condo owner and quite practical for the short-term tenant who gets the comfort and amenities of an entire unit at a hotel price. Unfortunately, this business is often conducted at the detriment of other condo residents who basically see waves of strangers streaming into their home and using their amenities. Short-term rentals increase traffic and reduce the sense of security and community, in addition to imposing a burden on the condominium resources. It also presents a liability risk as the corporation is the “occupant” of the common elements. In case of injury in the common elements, these short-term tenants may turn to the corporation.
In a prior blog we provided some guidance on what condominiums can do when faced with short-term rentals.
The factual background of this case
A very recent case opposed condo owners to a luxury condominium corporation located in the Ottawa downtown core. In this case, the owners leased their unit to a corporate tenant, who in turn very successfully leased the unit on Airbnb. The unit was offered for short-term rentals on no less than 9 different websites. The short-term tenants were offered access to all amenities such as the parking garage, the exercise room, the pool, the meeting rooms and the elevators. The Airbnb listing specifically requested that the guest “be discreet about mentioning Airbnb to anyone in the building”. Over a few months, no less than 13 reviews were posted by guests who leased the unit.
The corporation’s declaration specifically provided that units were to be occupied “only for the purpose of a single family dwelling, which includes a home office… and for no other purpose”. In addition to this, the corporation decided to adopt a rule further defining the length of tenancies which would be acceptable. The board opted to fix such minimal tenancies to 4 months. The rule, which was properly circulated on April 11, 2016, came into effect a month later when no owner requisitioned a meeting to vote on it.
The owners in question brought a court application seeking to declare the rule invalid and seeking damages for loss of profit. The corporation brought a cross-application seeking a declaration that short-term rentals contravened the rule, but more importantly, that they contravened the declaration. Despite the adoption of the rule and the two court-cases, the owners continued to lease their unit on short-term basis.
The judge had to rule on whether the language of the declaration and of the rule prohibited repeated short-term leasing such as the one taking place in the unit.
The judge confirmed that section 7(4)b) of the Condominium Act permits declaration to contain conditions or restrictions with respect to the occupation, leasing and use of units. The judge concluded that the declaration in this case, which limited the use and occupancy of units to “single family dwelling”, specifically prohibited the leasing of units, on a repeated short-term, hotel-like basis. He accepted that a single family “involves more than merely sharing short-term temporary sleeping quarters and shared facilities on a rental basis”. Specifically, Justice Beaudoin wrote:
“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 concept 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.
Airbnb and short-term leasing is incompatible with the “single family” provisions found in most condo declarations @Condo_Adviser
Justice Beaudoin also concluded that a rule prohibiting short-term leases of less than 4 months was valid and enforceable. Indeed, section 58 of the Act authorizes boards of directors to make rules which promote the safety, security or welfare of owners and which prevents unreasonable interference with the use and enjoyment of common elements, units and assets of the corporation. In this case, short-term leasing was therefore prohibited by both the declaration and the newly adopted rule.
This case is, to our knowledge, the first case to clearly recognize that Airbnb and other short-term leasing applications are incompatible with the “single family use” provision found in most condominium corporations. This may mean that a corporation may crack down on short-term leasing regardless of whether the corporation has a rule prohibiting such short-term leases. It may also significantly weaken any owner’s request to be grandfathered following the adoption of a rule. Indeed, the prohibition in the declaration would be seen to have been on title from the beginning.
As most corporations have similar language in their declaration, today’s decision may have ramifications across the province and beyond. Clearly it all depends on the specific language of the declaration. Armed with this recent decision, corporations should review their governing documents and consult with their corporate lawyer to determine the impact this decision may have on them.
We’d be happy to provide you with guidance on how to interpret your governing documents in light of this decision or to help you draft a letter to your ownership regarding this. Don’t hesitate to contact us. Make sure you have the language of your declaration handy when you do.