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Condos being rented out as private hotels raising safety concerns

Last Updated May 3, 2016 at 2:34 am EST

There are 6,000 condo and apartment units in the GTA being rented out by the night under the radar from condo and insurance corporation, licencing and zoning officials, and tax collectors, according to the Greater Toronto Hotel Association (GTHA).

“There’s no doubt the vast majority are in condominiums, there are a significant amount in the downtown core, some apartment complexes as well,” Terry Mundell, with the GTHA, explains. “Clearly these places should not be allowed to rent for transient accommodation, that’s stays less than 30 days, because that’s a hotel.”

But they are being rented out – skirting condominium corporation rules, and taking advantage of regulatory and legislative loopholes that haven’t caught up with the sharing economy, Mundell said.

It’s a practice that became mainstream thanks to websites like AirBnB, but has since expanded.

The marketplace has evolved to the point where businesses buy units in multiple complexes across the city, and lease them out by the night. Several travel websites like Booking.com and Hotel.com have hundreds of listings available, searchable by postal code.

One woman who lives in a waterfront condo building, but doesn’t want her name published, said at least a dozen units in her building are listed on these sites.

“Because they aren’t owners, they don’t care if they damage the property or break condo rules. That is a concern,” she explained.

The practice is also a growing concern for residents of 300 Front Street West, the condominium in the entertainment district that became the site of a gangland war last month.

Shots were fired and two men were kidnapped from the building, which has several listings for units on travel websites.

Mundell said hotels are subject to far greater controls than condos.

“The regulatory environment we deal with, and I mean we deal with everything from the Fire Marshal’s Act, to beverage and food handling, to security guard training and WSIB training,” he explained. “Then there’s the taxes issue.”

The City of Toronto doesn’t licence private hotels and they aren’t zoned. A report on dealing with these temporary accommodations is expected at city council later this year.

Although owners pay property taxes, they aren’t necessarily charging tax on their rentals or paying income tax on the money they earn. They also aren’t paying commercial or hotel-level property taxes to the City.

Mundell said Toronto hotelliers have the third highest property tax rate in North America, which is about $4,300 per room. He added that hotels contribute about $140-million a year in property taxes alone.

Last fall the provincial government announced a Sharing Economy Advisory Committee. The group was created to look at how the province could introduce regulations and ensure taxes are being paid.

“We have to do our utmost to ensure that we provide protection for the ones using the services, but as well, existing businesses,” Finance Minister Charles Sousa said. “There’s a responsibility for everybody to pay their fair share through the process. That’s why we are taking the steps that we are.”

One major step is a pilot project with AirBnB, where owners are sent messages reminding them to claim the income. That practice isn’t being shared with Booking.com or Hotels.com listers. Both companies refused to comment on how they vet, charge, or tax their users.

As well, Progressive Conserviative MPP Tim Hudak introduced a private-members bill that would create some regulatory framework for the sharing economy last year.

He said the government has been slow to react to the emergence of many aspects of the “sharing revolution”, creating confusion and chaos.

“I don’t know where Kathleen Wynne and her finance minister Charles Sousa have been, they’ve been absentee landlords,” Hudak said. “It seems to be pretty simple. Let’s do what other jurisdictions have done.”

“Standardized legislation will make it consistent across the province and more importantly, give us more choice as consumers,” he continued.

A key component of any legislation would have to include insurance.

Many condo owners renting out their homes for the night don’t have proper insurance to cover any damages caused by or to guests, according to the Insurance Bureau of Canada’s Pete Karageorgos.

“Typically your policy will cover family members who are staying over in your home, your condo, in your apartment. It’s when you start renting it out to strangers … as soon as you start operating commercial activities, you need to get the right insurance in place,” Karageorgos explained.

“You may not have coverage for certain events or you may not have coverage if something goes wrong. Something as small as a pipe that bursts or someone stealing something.”