The Sharing Economy Part 1: The Effects of Short-Term Rentals on Your Condo Association

Posted on Friday November 11, 2016 |


Click here to download our in-depth The Ins and Outs of Short-term Rentals in Managed Communities guide today.


Did you recently used a blue and white Car2Go vehicle to run errands in Calgary? Or maybe you got a ride home just last weekend from an Uber driver in Edmonton. If you have done either of these things, you are part of the fast-growing “sharing economy.”
 
In this article, we discuss a particular aspect of this flourishing trend—short-term rentals—and how it is affecting buildings in cities like Calgary and Edmonton. In a follow-up article, we’ll recommend ways that your condo board can address short-term rentals in your building.  
 
Why have short-term rentals become so popular? Home-sharing websites such as Airbnb, VRBO and HomeAway have made it easier for owners to monetize their homes by renting them out to vacationers. Unit owners appreciate being able to reduce their costs and earn some extra money. Travelers appreciate the opportunity to get a nice place to rent at a good price. Proponents also say this is an efficient use of existing assets and capital that is a win-win for everyone. But is that the whole story? Not entirely.

Keeping up with the trend
The fast growth of short-term rentals has outpaced some practical considerations—like what to do if renters damage your home. In one extreme situation, a Calgary family came home to discover that their Airbnb renters had caused more than $50,000 worth of damage. (Fortunately, Airbnb paid for all the cleanup and repairs.)
 
Another issue is that laws written many years ago could not have foreseen the sharing economy. To date, none of the Canadian provinces (including Alberta) have adopted any specific laws about short-term rentals. Many cities throughout North America, on the other hand, have taken it upon themselves to establish laws and ordinances. Some prohibit short-term rentals altogether. Others prohibit them only in multifamily buildings. And still other cities—like Edmonton—regulate them by requiring homeowners to obtain a business license and permit to rent out their homes on a short-term basis.
 
Abiding by your condo’s governing documents
Even if condo owners follow local laws and regulations, they must also comply with the policies and bylaws in their condo association’s governing documents. Many condo associations do not allow short-term rentals, and they impose fines on homeowners who defy the policy. In some cases, they may even evict renters who offer their homes to vacationers. 
 
However, as with local laws, the governing documents developed by many condo associations preceded the advent of the sharing economy, leaving your association with no set policy. Should your board attempt to amend your governing documents? If so, is it better to allow short-term rentals as long as homeowners abide by certain regulations, or is it better to ban them entirely?
 
Addressing potential risks
Condo associations have legitimate reasons to be concerned about home sharing. Even when policies are in place, short-term rentals can potentially increase insurance and security risks, as well as decrease property values, in several key ways:
  • Fire safety. Many city laws hold a building’s owner responsible for complying with fire and safety codes. In the case of a condominium building, this means the condo association. However, unlike hotels, which must comply with specific fire and safety codes—such as clearly marking fire exit routes, installing sprinkler systems and providing fire extinguishers—short-term rentals are under no such obligation. A renter may, therefore, be at an increased risk of injury or even death if a fire occurred, leaving the condo association liable.
  • Personal safety. Short-term renters are also not subject to background checks the way long-term renters are. As a result, residents face potential safety risks when these unscreened guests are given access to the building and any shared amenities.
  • Property damage. Since the building is not “home” to short-term renters, they have less stake in maintaining its condition. A vacation mentality can lead some guests to disregard proper use of equipment or to recklessly cause damage to common areas. Residents are left with the effects, which directly impact their quality of life.
  • Nuisance behavior. Short-term renters are less likely to consider how cigarette smoke, odors, noise, etc., affect residents in neighboring units. When this becomes an ongoing problem, it can hurt the condo’s reputation and property values.
What can your condo association do?  Whether your board is currently dealing with short-term rentals in your building or you want to find ways to address them before they become an issue, an experienced condominium management company can help guide you. You’ll also want to read Part 2 of our series, The Sharing Economy Part 2: Reducing the Risks to Condo Associations and Residents, to learn how you can proactively implement an effective approach. 
 
Want additional information about the effects of short-term rentals on condo associations? Contact FirstService Residential, the leading condominium management company in Alberta.

Learn more about how the sharing economy can impact your building. Fill out the form below to download our comprehensive white paper. You’ll find out what it takes for your condo association to create a short-term rental policy and how working with a professional condominium management company can add value to your association.

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