Short-Term Rentals: Not So Sweet for Condominiums?

• Jeskiret
  Bains

  Jeskiret
  Bains

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Most of us have experience with short-term rentals, whether as a renter or an owner, for example, through Airbnb. What you may not have considered is whether a short-term rental provides a lease or licence.

A lease is a grant of exclusive possession which creates an interest in the property. In contrast, a licence is a contractual right to use the property without an interest in the property.

In Condominium Corporation No 042 5177 v Kuzio, 2020 ABQB 152, the Alberta Court of Queen’s Bench was tasked with just that. Does a short-term rental arrangement constitute a lease or licence?

Background

In a condominium building, several owners listed their units on short-term accommodation websites without the knowledge of the condominium board. Once the condominium board discovered these postings, they advised the owners that they were in violation of the condominium bylaws, which dictate that the units must be occupied by the owner, the owner’s tenant, or their friend and family. The use of the unit by an individual who supplies consideration to the owner is prohibited.

The condominium corporation was of the view that the short-term rental created a licence, as provided for in hotels and sought a permanent injunction ordering the owners to stop renting out their units. In contrast, the owners viewed the rentals as a lease where the condominium corporation was prohibited from restricting rentals under Section 32(5) of the Condominium Property Act, RSA 2000, c C-22 under which no condominium bylaw may restrict any lease of a unit.

Court Decision

Upon review of the Airbnb terms of service, the Court decided the rental agreement created a licence and did not create an interest in real property. The condominium bylaws were permitted to prohibit the rentals where no lease existed. The Court determined that this use of units would result in a fundamental change to the structure and character of the condominium and granted a permanent injunction. The Court’s decision in this case is a departure from the Court’s previous decision in Condominium Corporation No 0312235 v Scott, 2015 ABQB 171, where it held condominium boards cannot restrict a unit owner’s ability to enter into short-term rentals.

Other Limitations Imposed by Condominium Boards

Aside from short-term rentals, condominium bylaws have restricted owner rights in other ways. In last year’s Lupuliak v Condominium Plan No. 8211689, 2022 ABQB 65, the Court determined that the condominium board acted reasonably in ordering the removal of a doorbell camera that the owner had installed. The Court referred to property law expert Bruce Ziff when quoting, “[p]articipation in the condominium projects necessarily involves a surrender of some degree of proprietary independence. An owner is at the mercy of the rules enacted through the internal decision-making process.”

Takeaway

If a condominium corporation’s existing bylaws prohibit commercial use or limit occupancy, a short-term rental ban will likely be valid without a majority vote of the unit owners.

Before acquiring a condominium property, it is important to review the condominium bylaws to confirm there is no prohibition of its intended current or future use.

_{This post is meant to provide information only and is not intended to provide legal advice. Although every effort has been made to provide current and accurate information, changes to the law may cause the information in this post to be outdated.}