VRB-Oh No! Condominium Edition

*Please note that School of Scheff is not legal advice and should not be taken as such. School of Scheff provides legal information which is specific to the Province of Alberta. Should you reside outside the Province of Alberta, please contact a lawyer in your jurisdiction with any legal queries as the laws across the Canadian provinces vary widely.*

VRB – Oh No! Condominium Edition

Own a secondary property and are considering renting it out? More specifically, do you own a condominium and are considering renting it on Airbnb, VRBO, or another short-term rental website? If so, keep reading!

The bylaws of your Condominium Corporation may prohibit you from using your unit as a short-term rental and if you do so, it could have very expensive consequences. As a condominium owner, you are likely aware that the bylaws of the Condominium Corporation which your unit is a part of govern all of the things you can, and cannot, do with your unit; including whether or not you can use it as a short-term rental.

You may believe that your bylaws do not prohibit short-term rentals because you may have looked under the leasing or renting section of the bylaws and saw no prohibitions. You may also have had a lawyer review the leasing section of the bylaws and gotten a “green light” for renting. If this is the case, these provisions of the bylaws aren’t the correct place to be looking. This is because short-term rentals, while they have the word rental in them, are not tenancies, but are actually licenses to occupy your unit and therefore, the leasing provisions of the bylaws do not apply, nor does section 32(5) of the Condominium Property Act (which prohibits bylaws from restraining, among other things, your ability to lease your unit).

As an aside, if you seek legal advice, be mindful of exactly what you’re asking your lawyer to review and be sure to tell them exactly what your plans are with your unit. Specifically, you may want to ask them to check whether short-term rentals such as Airbnbs or VRBOs are prohibited, instead of asking them whether you can rent your unit due. This is due to the different provisions of the bylaws which apply to long term leasing (i.e. residential tenancies leases) vs. short-term rentals (i.e. Airbnb and VRBO).

Common provisions which may actually tell you whether or not you are allowed to use your unit for short-terms rentals can sometimes be found under a section of the bylaws indicating what an owner shall or shall not do; owner rights and responsibilities; or if they’re recent bylaws, it may still be lumped in under a leasing section of the bylaws. In these sections you may come across provisions which state that an owner may not use their unit for commercial purposes or that you may only use your unit for a single-family dwelling. In newer bylaws, you may come across very express provisions which say outright that you cannot use your unit for short-term rentals.

On the face of it, the less specific provisions relating to commercial use or single-family dwellings may seem inapplicable to short-term rentals; however, they are quite applicable and both would prohibit short-term rentals if they are present in your bylaws.

The Court of King’s Bench recently commented on both types of provisions as it relates to short-term rentals in the case of Condominium Corporation No 042 5177 v Kuzio, 2020 ABQB 152 (“Kuzio”). In Kuzio, the Court stated that the definition of “commercial” in this context can only be interpreted to mean using your unit to generate income. The Court also found that the definition of “single family dwelling” cannot be interpreted to include the operation of a hotel-like business, with units being offered to complete strangers on the internet, on a repeated basis, for durations as short as a single night.    

If your Condominium Corporation has recently updated their bylaws or was newly formed, it is possible that the bylaws have a section dedicated to short-term rentals and whether they are or are not permitted. However, it is more likely than not that the bylaws will have the types of provisions relating to single-family dwellings or commercial uses.

Consequences of asking for forgiveness, instead of permission

If you own a unit that has bylaws which prohibit short-term rentals and you decide to take the seeking forgiveness, instead of asking permission route, this can have significant consequences for you as an owner. The board of a Condominium Corporation has the ability to impose sanctions on condominium owners for breaches of the bylaws. Under the legislation in the Province of Alberta, so long as the Condominium Corporation’s bylaws allow, the Condominium Corporation may impose fines of up to $500 for first offences, and up to $1000 for subsequent offences. This can add up quickly if you rent your unit out often. If you decide to continue renting your unit in the face of the sanctions, the Board can escalate their efforts and can apply to the Court of King’s Bench for a court order preventing you from renting your unit out as a short-term rental.

Breaching a court order is significant and should not be taken lightly. If you breach a Court Order, you may be held in contempt of court, which in this situation would be called “civil contempt”. The consequences of civil contempt include:

• Imprisonment until you’ve purged (corrected) your contempt;
• Imprisonment for not more than two years; and
• A fine (and if you default in paying the fine, imprisonment for not more than 6 months).

The Court can also make a costs award against you, which means you will be responsible for a portion of the Condominium Corporation’s legal fees in addition to your punishment for contempt.

On top of this, so long as the Condominium Corporation’s bylaws permit, you will also be responsible for the legal fees of the Condominium Corporation, on a solicitor and own client basis. This means every penny that the Condominium Corporation had to expend pursuing you for your breach of the bylaws would be payable by you and if you fail to do so, depending on the wording of the bylaws, may be issued as a special assessment against your unit or may be pursued in a separate court action against you.

If your bylaws do not allow for short-term rentals, all hope is not lost. You may wish to ask the board of the Condominium Corporation for special permission to do so – depending on the board and the particular Condominium Corporation you may be granted this permission as an exception to the bylaws. If there are many owners that are part of the Condominium Corporation that would like to rent their unit out but are prevented from doing so by the bylaws, the group of you may wish to approach the board of the Condominium Corporation for a revision of the bylaws that would permanently allow for short-term rentals.

The morale of this story is: if you are considering renting your unit out as a short-term rental, make sure you do your homework first, if you don’t it can have significant consequences.