Wednesday, 19 October 2016

Airbnb and Ontario tenants. Is it legal for tenants to rent out their units?




Whether tenants can rent their units out on Airbnb is a question that I am being asked more and more.  Landlord's are calling me expressing concern that there are strangers in their buildings and that other tenants are complaining about them.  The "strangers" it turns out are Airbnb guests who are paying to use a tenant's apartment for a short period of time.  Much like a hotel/motel.

The presence of Airbnb guests can be problematic for landlords.  These guests are often "partying", often are in louder groups, are entering other units when they get "lost", use common area facilities and services more intensely, and basically treat the apartment building like a hotel.   Regular full time tenants resent the change in feeling and atmosphere that these Airbnb guests bring with them and there are more instances of inappropriate behavior and hence a feeling that the building is less safe.

In this context, I'm asked, can the landlord stop a tenant from renting out their apartment on Airbnb?

The short answer, in my opinion, is an easy and unequivocal yes.  My legal opinion is that it is illegal for tenants, whose tenancies are subject to the Ontario Residential Tenancies Act, to rent out their apartments on Airbnb--with, or without, a landlord's consent.   The prohibition, of course, is not just in relation to Airbnb.  The prohibition applies equally to any "sharing" site that operates in the manner of Airbnb.

As people reading this likely know, Airbnb provides a software platform that facilitates the renting of apartments, homes, (residential properties), to prospective short term guests.  The platform is structured much like a hotel booking site and the terminology on the site makes one think of the hotel booking process.  The owner of the apartment/condo/house makes some money renting out the home for a short period of time and the person renting it gets a place that is generally nicer and cheaper than a typical hotel room.

THE REASON IT'S ILLEGAL

It should be noted that my opinion about the illegality of renting out a unit on Airbnb applies only to tenants renting out their units.  This opinion is not intended to speak to the legality of "owners" or commercial tenants renting out residential units on Airbnb.

The sections of the Residential Tenancies Act (RTA) that I will refer to are the following: s. 2(2)[definition of sub-let], s.97[sub-letting], s. 64 [termination-lawful right] and section 134(3) [illegal additional charges].

     Section 2(2) of the RTA provides as follows:

For the purposes of this Act, a reference to subletting a rental unit refers to the situation in which,

a) the tenant vacates the rental unit;

b) the tenant gives one or more other persons the right to occupy the rental unit for a term ending on a specified date before the end of the tenant’s term or period; and

c) the tenant has the right to resume occupancy of the rental unit after that specified date.

 
What should be clear from reading this definition of sub-let is that this is what a tenant who is renting on Airbnb is doing.  They are advertising their unit for rent for a short period of time.  When it is rented, the tenant vacates the unit while it is to be occupied by the Airbnb guest who the tenant is authorizing to occupy the rental unit.  The Airbnb contract then has an end date at which time the Airbnb guest will "check out" and the tenant resumes occupancy of the rental unit.


Tenants do not have the legal right to sublet their apartments in Ontario without the consent of the landlord.  Section 97 of the RTA deals with sub-letting a rental unit and it provides as follows: 

                           A tenant may sublet a rental unit to another person with
                           the consent of the landlord ...

The noteworthy part of the section for the purpose of this opinion is the highlighted part and that is with respect to "consent". A tenant may not sublet a rental unit without first obtaining the consent of the landlord. The failure to obtain consent is contrary to the RTA and as it is a direct violation of the provisions of the RTA it may be characterized as an illegal act.  An illegal act in the landlord and tenant context does not mean only a criminal act.  An illegal act in Landlord and Tenant law is any act that is contrary to law.

Subletting without consent is also an infringement of a landlord’s lawful right, privilege or interest as recited in section 64 RTA as a ground for termination. This latter violation is the basis for serving an N5 on the tenant for renting out the unit on www.airbnb.ca .  How subletting without consent is an interference with a lawful right, privilege or interest may be characterized in different ways.  The obvious ways are that the landlord's economic interests are interfered with by affecting the other tenants' feeling in the building, changing the use of the building from apartment to hotel, and the presence of airbnb guests also changes the "risk" in the building likely impacting insurability.

ILLEGAL ACT

I think that the most powerful objection to a tenant renting out their unit via Airbnb is founded in the illegality of profiting from the inflated rental of the unit.  Interestingly, I think that the sections I'm about to discuss can not be overcome or waived even with the landlord's consent. 

Section 134(3) of the RTA provides as follows:


Unless otherwise prescribed, no tenant and no person acting on behalf of the tenant shall, directly or indirectly,

(a) sublet a rental unit for a rent that is payable by one or more subtenants and that is greater than the rent that is lawfully charged by the landlord for the rental unit;

                                     (b) collect or require or attempt to collect or require from any person
                                   any fee, premium, commission, bonus, penalty, key deposit, or other
                                   like amount of money, for subletting a rental unit, for surrendering
                                   occupancy of a rental unit or for otherwise parting with possession of
                                   rental unit.


When you consider the point of renting out an apartment on Airbnb, you quickly realize that the tenant is doing so for the purpose of making money.   The money that a tenant can make on Airbnb, over the course of a few weekends can pay the entirety of the rent and still leave the tenant with money left over.  The daily, weekly, or monthly, rents obtained through Airbnb vastly exceed the rent that the tenant pays to the landlord.

Section 134, above, makes it clear that it is illegal for a tenant to sublet a rental unit for any sum of money that is greater than the lawful rent for the unit.  Further, almost all of the advertisements I have read on Airbnb require the payment of a security deposit or other deposit.  These are clearly illegal under section 134((3)(b).

As the amount being charged to Airbnb guests exceeds what is being charged to the tenant, the collection of that rent is illegal and contrary to the RTA.   Interestingly, this is illegal, even if the landlord gave the tenant consent to sublet the unit.

The "sub-tenants" who rent from the tenant, through Airbnb, are entitled to apply to the Ontario Landlord and Tenant Board for a refund of the money that they paid that is in excess of the lawful monthly rent that was charged to the tenant.  This is set out in section 135(3) which provides: " A subtenant may apply to the Board for an order under subsection 1 ... .  Subsection 1 of section 135 provides that an application may be made for the return of money collected illegally.

In the context of this section it is not difficult to see the policy reason for preventing a tenant from being able to earn money from their rental unit in this way. Tenants would become landlords and speculate in rental units and ultimately, when subtenants had real problems the actual tenants could disappear without accountability.

Based on the foregoing it is my legal opinion that the activity of Ontario tenants renting out their units on www.airbnb.ca or similar websites, is not permissible and in fact is contrary to the Ontario Residential Tenancies Act.

Michael K. E. Thiele
www.Ottawalawyers.com


 

 

6 comments:

  1. I don't know Ontario's tenancy legislation. Here in Vancouver about a quarter of units listed on AirBnB (according to City of Vancouver data that went to city council in the last month) are not entire units, but only an extra room or sometimes sharing a room. Where a tenant gets a roommate or shares their room, in BC that isn't considered a sublet. Instead, it's a licence to an occupant. Thus, I think that here the subletting provisions of the Act wouldn't be engaged by such a rental. What do you think of that sort of argument in the Ontario context?

    ReplyDelete
    Replies
    1. Hi Joshua: As you can see from my answer to the comment below, sharing an apartment with a roommate is not a "sublet" in Ontario either. The definition of sublet explicitly requires the tenant to move out of the unit. I know nothing about BC law, but based on what you say, it seems to be similar to Ontario.

      I'll acknowledge that creating a "roommate" out of an Airbnb guest doesn't create a basis for termination on the theory of an illegal sublet on the assumption that the tenant actually does not vacate. If the "not vacating" is a sham then I do think the Ontario legislation has a way around the wording of any licence/contract that would appear to create a "roommate" arrangement or which would retain a right (vis a vis the Airbnb guest)for the tenant to be present in the unit during the Airbnb guest's stay.

      As I mention in the response below, it is possible that the landlord's attack on the Airbnb guest situation could be supported in other sections of the RTA. To explore how that attack might occur we would need a specific fact scenario to apply the law against. As I mention briefly, query what the landlord might be able to do by characterizing the repeated short term roommates as the tenant running a bed & breakfast out of his unit---of course you need more than just a "bed & breakfast". Can the landlord establish that a "bed & breakfast" business affects insurability of the building? Do the bed & breakfast guests bother the other tenants? If any of these (or other) issues exist there are statutory grounds of termination aside from illegal sublet.

      Thanks for the comment.

      Michael K. E. Thiele
      www.ottawalawyers.com

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    2. Thanks. Makes sense. The other thing I haven't really thought through here is that many BC municipalities have bylaws against renting accommodation for less than one month without a bed and breakfast permit. I don't know whether violation of a municipal bylaw could be used as a basis to evict in appropriate circumstances.

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  2. Michael...

    Great article - except for one thing.... A lot of AirBnB posts are not for the entire unit... if I have a bedroom available, there's nothing stopping me from renting that bedroom out short-term or long term, because I am still occupying the rest of the house/apartment.

    Correct or incorrect?

    Robert

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    Replies
    1. Hi Robert: An interesting point. As you have gathered from my article, the "illegality" is premised on there being a sublet--as defined in the RTA. What you are describing with the tenant remaining in possession is not a sublet. Regardless of "airbnb", tenants have for ages advertised "shared accommodation" and have looked for roommates to share the costs of rent and living. Getting such a "roommate" through Airbnb or other platforms--even a newspaper--is not contrary to the RTA on the basis described in this article.

      Tenant's are entitled to have roommates. Short term or long term it doesn't matter. There is nothing illegal about having a roommate per se.

      There might be other grounds to terminate your tenancy because of the roommate(s)--remember the RTA has numerous broad termination provisions such as the N5 (Substantial Interference with Reasonable Enjoyment), N6 & N7 (Impaired Safety and Illegal Act). The behavior of "roommates" can be the basis for the service of these other notices. Of course, if these people do nothing that permits the service of such a notice then you are likely fine--but this is a risk that you take if you have multiple short term roommates (I suspect that there will be a trouble maker or two among the bunch--even if it is only being loud or rowdy on vacation). Query whether a landlord could successfully serve an N5 if your numerous roommates are characterized as you running a "bed and breakfast" business out of your apartment (i.e. using the apartment for a purpose other than the "usual purposes"). Such an allegation ties into "substantial interference" and also "lawful right interest or privilege".

      I do think that you are correct if there is not technically a sublet which of course requires the tenant not to vacate. However, it is a tricky business if the renting of only a room is a construct to avoid the "sublet" issue--i.e. you never happen to be home when the room is rented to the Airbnb guest. In such a construct I think you would have to be concerned about the Board's power in section 202 RTA to disregard the outward form of any transaction. Regardless of how you structure the arrangement on paper (and hence it doesn't technically look like a sublet) the Board could still find a sublet to have occurred using its power under section 202.

      Generally, I don't mean to be off-putting in relation to legitimate roommates. Having a roommate to afford to pay rent and living expenses is exceptionally common for many many tenants. In fact it is often a necessity. For legitimate "roommate" relationships I don't think that there is any problem under the RTA except to the extent that the tenant is responsible for the actions of the roommate.

      However, characterizing repeated short term hotel like guests through Airbnb advertising is still fraught with risk. Identifying what that risk is will depend on the what the complaint about your guests/roommates is. If your guests are perfectly quiet, you actually never leave, no one is bothered and in fact they are oblivious to what you are doing the likelihood is that you won't have a problem. However, if your serial roommates are somehow causing a disturbance I suspect the technicality of not vacating (to create the illegal sublet), is not going to prevent a Notice of Termination and a subsequent application for termination.

      Thanks for this comment--it was a good one.

      Michael K. E. Thiele
      www.ottawalawyers.com

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  3. Hello, Michaele.

    I found your article while looking for legal advice and if I could, I'd like to ask you something: Can I break a lease with my roommate over drug use?

    Let me explain you a bit more how this happened:

    A few months ago I was looking for a roommate to share expenses and after some consideration, one of my coworkers moved in, we didn't have a written contract since he said he would be here just a few months; the only rules I imposed were to help on the chores, pay rent on time, wash dishes, etc... But the golden rule was "not to bring any kind of drugs to my place". I am the legal tenant, only my name is on the contract given by the landlord.

    After the second month, he wouldn't pay his part of the rent on time, and it went on multiple times. This happened so regularly that my landlord didn't renovated my annual contract and gave me a Monthly contract, instead. So I gave my roommate an ultimatum.

    The next month he didn't pay rent on time again, so I asked him not to pay me rent of that month and leave within 30 days (what his "last month" check" covers), but after I let him know that he had to leave, he became an even worse roommate; he would leave vegetable oil on the floor so i would split up, breaking glasses and plates "unintentionally", leaving garbage inside his room for days and inside the fridge... But the last straw was today (just 10 days before the date he's supposed to leave) when I woke up and my entire place smoked like weed. This is the second time he smokes inside his room (which is next to mine), reeking the whole place. At this point is unbearable for me to keep living with him, but I'm afraid of doing something wrong cause my roommate's sister is a lawyer. So my question is: Can I, the tenant, break the lease with my roommate over drug abuse without having legal consequences?

    I live in Mississauga, ON and I would really appreciate your answer. Thank you in advance Michalel!

    ReplyDelete

IMPORTANT NOTICE

Any answers provided are intended to reflect the Law of Ontario, Canada. The answers are not legal advice and no one should rely on the answers provided as legal advice. The answers are intended to be general information about Ontario Law and are the personal view of the author based on the limited facts provided to the author. The answers may not be legally accurate and may indeed be contrary to the law of Ontario. Answers and conclusions drawn may have been different if facts had been shared that have not been disclosed in the comment/question. This blog is intended to assist people in learning about Ontario Landlord and Tenant Law. However, if you have actual legal problems this blog should under no circumstances replace proper legal advice obtained by retaining a lawyer or licensed paralegal to advise you. Nothing in this blog, comments submitted or answers provided, gives rise to a solicitor and client relationship. Comments are published as submitted and commenters should be aware that if they identify themselves in a comment that their identity will become public upon the comment being published. Comments that have been published may be deleted upon request to the author.

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About Michael Thiele

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Ottawa lawyer and partner at Quinn Thiele Mineault Grodzki LLP.  Graduate of Queen's University in Kingston, Ontario.  Called to the bar in Ontario in 1997.  Undergraduate degree at Colby College, Waterville Maine, U.S.A.