Help Clients with Short-Term Rentals Avoid Long-Term Headaches
Issues around short-term rentals (STRs) are complicated! Details vary by province and even municipality. But mostly it comes down to this. Travellers and homeowners seem to love STRs. Local governments and neighbours? Less so.
For keen visitors, STRs represent a unique local experience, different than they could find in a hotel. For homeowners, they can provide a vital extra source of income in a fragile economy.
Local politicians, meanwhile, see them as exacerbating severe housing shortages. (Many homeowners believe long-term tenants hold too much sway in the eyes of the law. With an STR, they retain greater control of their property.) In recent years, municipal governments have increasingly restricted what can become an STR and how they can operate.
That’s where you come in.
STRs have only made Canadian real estate lawyers more crucial to their clients.
This is no get-rich-quick scheme. If any of your home-buying clients create an STR to help with expenses like, say, their mortgage, they’ll need your guidance. Consider:
Mortgaging: Financial institutions may have quite different qualifications and regulations around mortgages for primary residences, recreational homes, and income properties. Your clients will appreciate clarity.
Another important point: many condo boards are restricting the number of STRs their building will accommodate. Others are banning them outright. Imagine clients learning that only after they’ve taken on a mortgage.Protection: Put simply, your client’s insurance needs to cover damages that may occur in their STR, or they could end up in deep financial trouble. Technically, this is a business they’re running in their home. Their insurance needs to take that into account.
Definitions: Municipal governments legislate hyper locally. In fact, communities next door to each other may have vastly different rules regarding what an STR is and rules around its operation. Local lawyers enjoy a distinct advantage. Regardless of the specifics of the definition, they cannot evict long-term tenants to convert their unit into an STR in any part of Canada. Your guidance here is vital.
And what if your client is sharing their space? A signed agreement composed by a real estate lawyer could save any housemates headaches, heartaches or worse down the road.
Restrictions and regulations increase the need for local law expertise.
Most housing rules in Canada are the products of provincial and municipal regulations. It’s an issue that favours specialists. The more focused you are on your region, the better for your clients. Every area differs.
Examples? Throughout BC, STRs can be just a room or an entire home that is rented for under 30 consecutive days. But Vancouver STR operators are required to have a license and display it in all advertising and listings.
In Toronto, an STR is a space for rent in an owner’s primary residence for under 28 days, for a maximum of 180 days per year, but with one notable exception. The owner of a basement apartment cannot make that space an STR if the apartment is in their primary residence. However, their long-term tenant can legally do precisely that.
Changes have come not just to the biggest cities. Each address local issues and circumstances. Early in the pandemic, Saskatoon passed laws defining STRs and their operation. Today, operators require a business license. Halifax recently passed new regulations which take effect on September 1. And the Greater Sudbury Region in Northern Ontario has introduced a 4% tax on any rental of fewer than 30 days in a row. Not just a VRBO or Airbnb but hotels, motels, resorts, inns, etc.
Wherever changes occur, contracts, mortgages, deeds, and insurance will need an expert local real estate lawyer’s review and counsel.