Canadian Lawyer

22 J U N E 2 0 1 5 w w w . C A N A D I A N L a w y e r m a g . c o m into commercial." Along with Toronto real estate lawyer Mark Weisleder, Mosher sus- pects such an arrangement could invalidate insurance. Will an apartment being sublet to overnight tourists be covered under the tenant or landlord's insurance? "To me, that's a problem," says Weisleder. Armand Conant, a partner with Shibley Righton LLP, expects concern over short- term rentals to increase. Condo rentals have been subject to some restrictions for many decades in Ontario. "Now, the last five years . . . you're starting to see shorter-term rent- als — six months, three months, and one month. People are trying to go shorter and shorter as a means of earning revenue." The increased traffic resulting from short-term rentals has many condo boards worried, says Conant. Most condominium declarations are designed for single-family residential purposes. But when it comes to short-term rentals, there is usually no specific prohibition or permission. "Of the 9,000 condo corporations in Ontario, you'd probably find the vast majority are com- pletely silent [on short-term/overnight rent- als] because it wasn't an issue. I suspect we're all having the similar issue: What the heck do we do when the declaration is silent?" After determining whether or not it is permitted, the next step for the board is to decide the best interest for the corporation and then whether to restrict or limit short- term rentals in the future. "The safest route, if you can do it, is amending a declaration" because it can address the issue head-on, says Conant. But doing that is nearly impos- sible. In Ontario, for instance, it requires the written consent of 80 per cent of the build- ing's unit owners, many of whom could be off-site. The most likely way to introduce a new restriction is through bylaws or rules. Sanctioned or not, condo units have sometimes been used in their infancy to gen- erate income for unit owners, says Tammy Evans, a partner at Blaney McMurtry LLP where she focuses on condominium devel- opment. Only the unit owner is permitted to occupy a new condo during the four- to six- month period in between occupancy closing and final closing when the unit is registered. But investors, who are already paying car- rying costs on the condo, sometimes install tenants under the radar during this period to recoup some of their costs. As online rental marketplaces become more prolific, and entrepreneurial unit owners create their own web sites advertis- ing short-term rentals, Evans has seen the inclusion of short-term rental prohibition become a standard provision in the dec- laration for new condominium buildings. Property managers acting for the condo corporations are required to investigate any reported breaches and the corporation itself has a duty to take all steps to ensure unit owners comply. "Now there's an obligation to investigate leasors." Governments, also interested in gener- ating additional revenue, will likely wade into the issue eventually, predicts Conant. Short-term rentals typically skirt HST, hotel, and commercial business taxes. Act- ing upon pressures from municipalities, Airbnb has agreed to collect relevant taxes from its hosts in several cities, including San Francisco, Portland, Ore., Paris, and Amsterdam. "The same thing is going to happen in Ontario, I bet you," says Conant. "It's going to become an interesting dynam- ic as it goes forward." R E A L E S TAT E Be confident when advising clients on the use of cheques, notes and other negotiable instruments in business transactions. 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