Wednesday, December 14, 2016
Ontario court ruling says condo buildings can ban sharing services such as Airbnb
TORONTO — In a ruling that could have wider implications, an Ontario court has said that condominium corporations have the authority to ban unit owners from renting out their properties on services such as Airbnb or Expedia.
In a 14-page decision released Thursday, Justice Robert Beaudoin of the Ontario Superior Court ruled that the owners of an Ottawa condo unit violated the “single family use” provision in the condo’s “declaration” because they had been making their unit available for short-term rentals on nine web sites, among them Airbnb, Expedia.ca, Kayak.com, hotels.com and Orbitz.com.
“‘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,” Justice Beaudoin writes.
The rule is based on the judge’s interpretation of Ontario’s Condominium Act, but it could have implications in other provinces with similar legislation.
“I would suspect that in most common law jurisdictions — that’s all of them except Quebec — a similar concept would apply,” says, Rod Escayola, the lawyer in the Ottawa office of Gowling WLG who argued the case on behalf of the condo building, Ottawa-Carleton Standard Condominium Corp. No. 961.
Douglas Menzies and his wife Norma White offered stays in their Ottawa condo unit through their private company, DGM Management Corp. The listings offered access to their unit, as well as the condo’s parking, exercise room, pool and common spaces. According to the court decision, the Airbnb listing asked that guests “be discreet about mentioning Airbnb to anyone in the building.”
The condo corp argued in court that making the unit available for short-term stays violated the condo’s “declaration.” This is the legal document that created the condo corp and that limits how unit owners can use the property. The condo corp also argued the rentals breached a rule the building introduced in April that bars unit owners from renting out their properties for terms of less than four months.
Judges have enforced four-month lease minimums in the past, so it was no surprise that Justice Beaudoin confirmed the Ottawa condo corp’s ability to impose the four-month lease limit. What’s important and novel about the Ottawa case is that Justice Beaudoin also found that short-term rentals breached the declaration.
Ontario law allows condo boards to adopt rules that govern things such as the number of pets a unit owners can keep or when residents can use the pool.
Rules can also govern short-term rental periods. Still, unit owners might argue these rules shouldn’t apply retroactively, especially if they’d been renting out their units before the rule kicked in. They might claim a “grandfather” exemption to the short-term rental ban. Banning short-term rentals at the declaration level wipes out that argument. The declaration is the pinnacle in the hierarchy of documents that govern a condo corp. It ranks in a superior position to the rules, and it’s a very difficult document to amend.
Escayola thinks the Ottawa decision gives a condo corp with a “single family use” provision in its declaration the power to enforce bans short-term rentals, even retroactively. Such provisions are a common feature of Ontario condo declarations. Condo lawyers in other parts of Canada will likely study the Ottawa decision to see if the reasoning will apply in their jurisdictions.
“I think it’s going to be a game changer in the province of Ontario.” Escayola said.
The declaration for the 244-unit Ottawa condo on Metcalfe Street has a provision that limits use “only for the purpose of a single family dwelling, which includes a home office … and no other purpose.”
Justice Beaudoin analyzed the phrase “single family use.” He found that it contemplates something more than short-term sleeping quarters or a hotel-like operation. Single family use, he said, is “incompatible” with the concepts such as check-in and check-out times, security deposits, cancellation policies, cleaning fees, what to do with dirty sheets and towels, and credit card payments.
Menzies is a lawyer. The judge considered arguments that the unit was sometimes used for law firm functions, to prepare expert witnesses for trial and to house out-of-town witnesses. He also considered the point that access to the condo unit was auctioned to raise funds for not-for-profit organizations.
The judge rejected those uses as fitting within the definition of single family use. “What has happened in this case is a commercial use of the unit,” he ruled.
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