Happy New Year? What Landlords Need to Know About “AirBnB”

It has never been easier for tenants to earn additional cash by subletting their rental units on a short-term basis to transient occupants. Websites like AirBnb, Kijiji and Craigslist put tenants in touch with people seeking short term rentals, but want to avoid staying in a hotel or bed and breakfast. Landlords have legitimate risk management concerns when tenants run commercial sublet operations in apartment buildings. Unless you are diligent about searching online, or another resident complains, you may never find out that your tenant is using these sites – until something goes wrong.

The primary risks for landlords are for the security of residents of the building, security of the property, insurance/liability issues, and the “quiet enjoyment” for other residents of the building. A lack of subtenant screening and “cash only” financial terms increase liability exposure for landlords and other residents. Short-term renters may only be at the property for a day or two, but their behaviour can be disruptive and you may be dealing with the consequences long after they leave. If something does go wrong, you can seek recovery from your tenant, but that may not cover all of the costs. If you make a claim under your own insurance policy, your insurer may raise concerns or deny coverage if the unit is used as a “hotel” by your tenant.

Most short-term rentals occur in major urban centres, like Toronto; however, the AirBnB website shows that there are units for rent all over Ontario. Unless your municipality has a by-law prohibiting short-term rentals or requiring a license to operate short-term rentals (i.e. Niagara Falls), don’t expect any help from government. In fact, the municipality may prosecute you, as “owner”, asserting that your property does not comply with zoning by-laws, or the requirements for hotels under the Fire Code and/or the Building Code. There may also be property tax consequences if the use is determined to be “commercial”, not “residential”.

What Can You Do To Mitigate Risk?

A well drafted industry lease (LPMA, FRPO, GTAA, WRAMA, HDAA) prohibits commercial uses of the rental unit; consequently there is the option of serving an N5, thus preserving the head tenancy but prohibiting the commercial subletting operation. Alternatively, section 234 (x) of the Residential Tenancies Act (RTA) prohibits tenants from subletting a rental unit for an amount that is greater than the lawful rent. B and B arrangements are often priced per day or per week, so it is likely that the sum charged by the tenant exceeds the lawful rent, in which case a tenant’s breach of this section is also a “serious” offence under the RTA.

Landlords and property managers should be diligent about monitoring short-term rental websites and take action against tenants who attempt to sublet their units in this manner. A properly drafted N5 and a lease prohibition on commercial uses of the rental unit should cull the practice in your building, but if it doesn’t, it is our view that an LTB Member would find the breach of the lease or the RTA to be serious enough to warrant eviction.

Questions? Contact Joe Hoffer, Kristin Ley, Paul Cappa or Laura McKeen.


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