Airbnb & Short-Term Rentals, Part 1: How the Sharing Economy Can Impact Your Multi-Family Building
Why has the sharing economy taken off? Proponents of this business model cite how it efficiently utilizes existing assets and capital – after all, owners can leverage the cost of ownership and earn extra money, while consumers can enjoy short-term usage at a reasonable price, without the cost of ownership.
The quick and increasing growth of the sharing economy is sometimes outpacing both legal and practical considerations. Take popular home-sharing websites like Airbnb, HomeAway, VRBO and even Craigslist, which enable people to monetize their living spaces through short-term or vacation rentals to travelers – in essence, blurring the lines between a traditional rental and a hotel room. Sounds great, especially if you own or lease a home or apartment in an area known for high-priced hotel rates, like Toronto.
Well, not everybody wins. Lawmakers are struggling to keep up with the trend, and many cities – such as Toronto – have yet to pass legislation that regulates the practice (complicating matters is the fact that the City of Toronto doesn’t license or provide zoning parameters for private hotels). In the meantime, this facet of the sharing economy is leaving owners and their “guests” open to liability and is showing little sign of slowing down. According to CityNews.ca, the Greater Toronto Hotel Association (GTHA) reports there are about 6,000 condo and apartments in the Greater Toronto Area being rented out in the short-term – without the knowledge of condominium management or insurance corporations.
By way of solution, some cities have come to forbid the practice altogether. In Vancouver, for instance, short-term rentals can only be offered by a hotel or bed and breakfast.
Of course, Airbnb is working to change this. But until the legislative landscape becomes clear in Toronto, there are a few things we can be certain about. Even though the law hasn’t clarified the matter, condominium corporations are normally very explicit in what constitutes a compliant rental agreement. Both homeowners and tenants alike are required to be aware and abide by these agreements, and many condominium corporations are warning residents not to participate in home sharing.
Despite these practices, short-term subletting is here to stay. But condo corporations are beginning to raise a red flag about home sharing. Their concerns are legitimate – short term renters are a security and insurance risk, and the practice has the potential to adversely affect home values and quality of life.
For example, unlike hotels, which are required to comply with fire and safety codes to protect short-term guests -- such as providing portable fire extinguishers, sprinkler systems and clearly marked fire exit paths – short-term sublets may not follow these safety precautions. Consequently, in the event of fire, a temporary paying guest may not know the safest evacuation route, increasing their risk of injury or death – and increasing the building’s liability.
Here’s another issue: security. Whereas legitimate subletters undergo screening, that’s not the practice with home sharing. There are no criminal background checks – leaving a complete stranger with total access to your condominium amenities. That’s risky for everyone.
Also of concern is how short-term renters treat the amenities and common areas. There’s a real danger that those who are only in town for a few days may not treat these spaces with respect, resulting in damage or undue wear and tear. Permanent residents are then left to live with the damage after the subletter is long gone.
“Short-term subletters are bad for a building’s sense of community,” said Roger Thompson, Executive Vice President of FirstService Residential in Toronto. “They may not be sensitive to neighbours when it comes to things like noise, odors or cigarette smoke. This can give your condominium a bad reputation, or result in diminished property values.”
A good property management company can help. FirstService Residential, for instance, has held seminars on the home sharing trend, providing a valuable educational opportunity for condominium board members.
“We’ve had tremendous interest in this issue,” Thompson said. “It’s a concern for owners and board members alike. We continue to stay at the forefront of home sharing and how it affects our clients.”
So if there are currently no city regulations to guide you, what should you do? Contact a good property management company for help. They’ll have their finger on the pulse of this issue and can help you navigate these uncertain waters. For more information on how short-term rentals can impact your building, contact FirstService Residential.
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