With the rise in popularity of short-term rental sites such as Air BNB, Home Away, VRBO, and Home to Go, there has also been a rise in entrepreneurial homeowners looking to capitalize on an additional revenue stream as short-term rental landlords. Many condominium buyers express their interest in purchasing a condo unit with the plan to lease it out on a short-term basis. Some owners will look to rent their unit only at specific times of the year, such as Stampede or when they take holidays away from their home and the home is thus vacant. Other owners have a view of renting out the unit on an ongoing and consistent basis, effectively treating it as a revenue property without a traditional long-term lease.
The question to be asked and addressed is: “Are short-term rentals legal in condominiums?” The answer is complicated. There are a number of factors to consider when evaluating the operation of a short-term rental accommodation from your condo unit, whether you are currently an owner, or a perspective buyer.
Condo Property Act
First, let’s consider the legislation which governs condominiums in Alberta for some clarity. The Condominium Property Act and Regulation do not restrict short-term rentals. Property ownership in Canada comes with a “Bundle of Rights” and included among these rights is the right to lease property which you own. As such, the Condo Act and Regulation can not infringe on these rights. However, there are specific rules set out in the Act which govern the lease of a condo unit.
Section 53 (1) of the Condo Act states “An owner of a unit shall not rent the owner’s unit until the owner has given written notice to the corporation of the owner’s intention to rent the unit, setting out (a) the address at which the owner may be served with a notice… and (b) the amount of rent to be charged…” In addition, the owner is required to give written notice to the corporation of the name of the tenant within 20 days of the commencement of the lease. Nothing within the Act prohibits short-term rentals. However, if the owner is operating within the framework of the Act, the requirement to inform the corporation of the name of every tenant in a short-term rental scenario becomes a practicality issue. Imagine that you rented the unit out to 10-15 different people every month… The alternative for some short-term accommodation landlords is to disregard the requirements of the Condo Act. This potentially opens them up to sanction and monetary fine by the corporation.
Another consideration of the Condo Act is that it gives power to the corporation to charge a damage deposit to an owner who intends to rent their unit. As per the Act, that deposit shall not exceed one month’s rent. It is up to the corporation to decide whether or not to enforce that power. However, the corporation will generally only be aware that an owner is renting their unit if that owners follows through on their obligation to inform the corporation of such an arrangement. Finally, the Condo Act authorizes the corporation to enforce the corporation’s bylaws on a tenant and grants the power for the corporation to remove a tenant in violation of the bylaws regardless of the Residential Tenancies Act or any lease which may exist.
Bylaws and Rules
In some circumstances, corporations have drafted bylaws which prohibit short-term rentals, or, rentals of any kind within the corporation. It is important to note that such a bylaw is in contradiction to the Condo Property Act and the owner’s bundle of rights. As such, if challenged by an owner such a bylaw would not stand up. A bylaw cannot infringe on the Condo Property Act and the Act is very clear that the leasing of a condo unit is permissible if the requirements to do so are met by the owner.
As a means to curb short-term rentals (or rentals of any nature) some condo corporations and Boards have gotten creative with the wording of their bylaws. For example, they may pass and implement a bylaw which states that “only unit owners can be in possession of a FOB or key for the main doors of the complex, the underground parkade, the Amenities etc”. In doing so the corporation is not directly stating that the unit owners cannot lease their unit, but they are making it impossible in practice to comply with the bylaws since the owner turning the FOB or building key over to a tenant immediately puts them in violation of the bylaws and subject to a fine.
It is also important to note that any tenant is held to the same bylaws and rules that a unit owner would be. Thus, violations of any other nature such as noise, liquor consumption, capacity of the unit, pets or damage or destruction of the common property of the corporation by the tenant would be changed back to the unit owner.
Mortgage Implications
Short-term rentals, as with any other revenue property will be viewed differently by lenders and banks. If you intend to buy a property as a primary residence the minimum requirement for a down payment is 5%. That down payment jumps to 20% for a non-primary residence or revenue property. It will be important to work with your lender or mortgage professional if you are considering a short-term rental revenue property as many of them may view the income stream as more volatile and less predictable than a traditional leasing situation with a more stable and long-range tenant.
City of Calgary – Municipal Law
The landscape around short-term rentals is changing. As noted above, they have become an attractive opportunity for entrepreneurs and investors looking to cash in on this burgeoning business model. Municipalities have been forced to adapt legislative changes to deal with this evolving landscape. On October 1, 2019 the City of Calgary announced the framework for new city bylaw regulations for short-term rentals. Under the proposed frame work, short-term rental operators in Calgary will be required to apply for a licence. A Tier 1 Licence would apply to a property with one to four rooms ($100) and a Tier 2 Licence and a fire safety inspection will be required for properties with five rooms or more ($191 licence, $104 inspection). Currently these licenses are set to be implemented on February 1, 2020.
Summary
There are multiple layers to consider when exploring the ability to operate a short-term rental property in a condominium. As noted above, the answer to the questions around legality and viability are complicated. Property ownership comes with a bundle of rights and the Condominium Property Act does not infringe on the owner’s ability to lease their unit. However, they do set out a list of obligations that the owner is required to follow, regardless of the length of the lease or rental contract.
If you are evaluating to the prospect of owning a condominium as a revenue property, part of your evaluation should be the viability to have a property for lease in the project/building/condo corporation that you are considering. While it is unlawful to prohibit owners from leasing their units, finding a rental friendly development will be vital to your enjoyment as a landlord to ensure that you are not constantly fighting an uphill battle against the Board or corporation.
