August 2017
Love it or hate it, Airbnb is here to stay.
A few years ago there were two ways for a condo owner to rent out their suite. One option was to rent it unfurnished on a 12-month lease. In Toronto the vacancy rate of these suites was close to zero. The second option, where allowed, was to rent it furnished for a shorter period of time. The vacancy rate was higher but so was monthly rent – about 25% higher.
Today, Airbnb makes it easy to rent out a furnished suite by the night for about 100% more than the 12-month lease. The return is much greater although so are the risks.
Risks come from three areas.
The condo corporation may prohibit short-term rentals. Check the declaration, by-laws and rules. The condo corporation may take legal action against you. You could be held liable for the cost of enforcing corporation documents. Electronic access cards or fobs may be deactivated to prevent their misuse. Finally, your renters may be denied access to the building.
Hotels are required to pay tax on income. There may be area specific hotel taxes to be paid. Canada Revenue Agency may require that you collect and submit HST. Failure to properly collect and submit taxes may result in fines or penalties along with taxes due.
Residential home insurance policies are not intended to cover a business. Should the insurance company learn that a condo suite is being used to conduct business, this could void your coverage.
Airbnb will continue to be a popular consumer service. Condo owners and residents that choose to rent their properties for short-term use in violation of condo and city restrictions, and those that fail to collect and pay appropriate taxes, will place themselves at risk.
