With the introduction of AirBNB, Short Term and Medium-Term Rentals have surged in popularity. This is due, in part, to the simplicity in listing an accommodation and its roots focusing on homeowners who simply wanted to rent their place while they were away. But like most businesses, they are subject to laws, rules and regulations. With residential accommodations, these rules can be complicated with lots of inter-play between various legislative acts. This article aims to point you in the right direction to ensure you look for the rules you may need to abide by. You should obtain advice of legal and accounting professionals to ensure compliance to the laws which apply to your circumstances and jurisdiction.
Short-Term Rentals (STR):
Stays typically measured in days or weeks, these accommodations are meant for people who truly need temporary housing. The usual purposes are similar to a hotel or motel and may involve vacation, work related travel, family visits, weddings among many other similar reasons. Guests normally have another permanent address but need temporary shelter while away.
While many new entrants into this area of business feel that they are not subject to any rules, this is rarely a valid assumption. Depending on where your business is operating, at least the following areas of legislation need to be considered:
- Local Zoning Laws: Most municipalities have zoning laws (or by-laws) which define the nature of what may be constructed and what forms of business may operate within a specific area of that municipality. For example, hotels can only operate in specific zones; single family homes may be the only type of use of a building in other zones; and some zones can have mixed use. For small scale STR, the laws can be ambiguous as often home-based businesses are allowed in even a purely residential zone. However, enforcement can be at the discretion of by-law enforcement. This ambiguity has resulted in some municipalities enacting by-laws specifically targeting STR operations.
- STR By-laws: With the rising popularity of STRs, some municipalities have enacted by-laws to regulate the operation and licensing of STR based accommodation. In many cases, these laws severely restrict what accommodations can be made available as STR and of those allowed, how long they can be used as STR in any given year. Typically, these by-laws apply to accommodation of guests with stays shorter than one month. Toronto for example captures stays of less than 28 days and Ottawa captures stays of less than 30 days. Note these length of stay limits define only as to whether these by-laws apply and have nothing to do with any other regulation such as the Residential Tenancies Act. It should also be noted that fines associated with these by-law infractions tend to be quite severe.
- Business Licensing: As with other businesses, an STR operation may require obtaining a business license. Municipalities that have STR by-laws often also require business licensing.
- Innkeepers or Hoteliers Act: An STR operation can fall within the scope of an Innkeepers Act (aka Hotelier Act) which in most cases are designed to protect Innkeepers and Hoteliers including defining remedies for non-paying guests and responsibilities of the hotelier (see reference  and ).
- Residential Tenancies Act: These laws typically apply to long term residential tenancies. However, these laws can be very inclusive citing only limited exemptions. In Ontario for example, rule 5(a) has an exemption for the “Traveling or vacationing public”. Just because one believes the nature of the tenancy is short term does not mean it is automatically exempt from the Residential Tenancies Act. Even hotels can be caught within these rules as demonstrated in reference .
- Taxation: In many areas, this business may be subject to taxation at various levels of government. For example, municipalities may have an accommodation tax intended for say marketing and promotion of the area (sometimes called a destination marketing tax). In Canada, an STR operation may also be subject to HST. Typically, this applies to an individual or group of corporations that has HST related sales activity in excess of $30,000 per annum (as of time of writing). An STR operator should consult with an accountant to determine HST requirements for their specific circumstances.
- Health & Safety, Building Code, Fire Code: This is an area often overlooked. Depending on the nature of the operation and local laws, there may be more onerous requirements to ensure the safety of guests. It is not uncommon, for example, for hotels to have a more stringent set of safety requirements than a single-family home. If an injury or death should occur due to a violation in this area, the penalties can be very expensive and even result in criminal charges and jail time.
For an example of what a Hotel needs to consider see reference  which provides the Greater Toronto Hotel association’s legislative update.
Medium Term Rentals (MTR, also known as Executive Rentals):
Stays typically measured in months, these types of accommodations are typically meant for people who need a semi-permanent arrangement, but it is not intended to be their permanent residence. Common examples may include temporary work assignments, extended vacation (e.g. summer vacations), waiting for a new house to be built, etc. Normally the guest will have another address where they normally receive mail though in certain circumstances this may not be strictly true (e.g. when waiting for a home to be rebuilt after say a natural disaster).
This type of accommodation often falls within the grey area between Short-Term Rental and Long-Term Rental and in most cases, there are no laws specific to medium-term rentals and thus the laws should be interpreted as either a short-term rental or long-term rental. In most cases, operators will choose to interpret the laws as short-term rental where convenient. The choice of interpretation can be important. For example, if an operator chooses to abide by most STR laws but not to collect HST as may be required for an STR then if a challenge is brought by a tenant before the Landlord Tenant Board then this could be used as evidence to support a tenant’s claim that they are a long-term tenant and subject to the protections of the Residential Tenancies Act.
Long Term Rentals:
While many choose to define this as stays typically measured in years, intent of the accommodation plays a larger part. It is completely conceivable that a tenant residing in a hotel or motel can be defined as a long-term tenant and offered the rights, obligations, and protections of the Residential Tenancies Act (see reference ).
Generally, these accommodations are intended for tenants who plan to live there for an indefinite period and have no other permanent residence. In Ontario, unless a tenancy falls within a limited number of exemptions within the Residential Tenancies Act, the act will almost certainly apply. Interpretation in Ontario is within the domain of the Landlord Tenant Board and normally occurs if a tenant chooses to challenge the nature of their relationship with the property owner.
As with most other business operations, a long-term accommodation business is subject to at least the following:
- Local Zoning Laws: governs residential density within areas of a municipality. That is, the number of units/apartments within a building or on a given lot. It is not unusual to discover that a building may have more units than is allowed by zoning. In many cases these are illegal units as defined by the zoning law and can be subject to penalties including the destruction of the unit. In such cases, the interplay with the Residential Tenancies Act can be tricky. In other cases, these additional units may be considered non-conforming. A true non-conforming unit is one where the municipality acknowledges the additional units as an exception usually because they were present prior to current zoning by-laws. When purchasing such a building, it is important to obtain a compliance report from the municipality to determine the true nature of the building and its units.
- Municipal By-laws: Often, a municipality will have certain by-laws that will apply to residential apartments. For example: property standards, waste collection, parking, capital maintenance, etc.
- Business Licensing: It is becoming more common for municipalities to require landlords of long-term accommodations to obtain a license; sometimes called a Landlord License.
- Residential Tenancies Act: In Canada, this is a law enacted at the provincial level and defines the rights, responsibilities and obligations of the tenant and the landlord. It is arguably the most important piece of legislation for the day-to-day operation of a long-term residential accommodation. Everyone who manages tenants should be familiar with these rules for the benefit of the tenants and the protection of the owner’s investment.
- Taxation: In Canada, long term residential tenancy revenue is exempt from HST. However, it is still subject to income tax. An accountant should be consulted for your specific circumstances.
- Health & Safety, Building Code, Fire Code: If a unit is constructed with a proper building permit, it will normally meet these requirements. However, it is the property owner’s obligation to ensure the property continues to meet the ongoing obligations and maintenance. For example, if a building has a central fire panel then it must be maintained per regulations which may include annual and even monthly inspections. Smoke and CO detectors need to be in good working order. Failure to properly maintain fire systems can lead to serious fines and even jail time especially if it results in injury and death. In certain municipalities, an annual inspection may be required by a fire prevention officer and in others a “fire retrofit” certificate may be required. If you have an elevator, then it too needs to be regularly inspected and certified (in Ontario this is regulated by the Technical Safety Standards Authority or TSSA).
One area that is often overlooked by STR and MTR operators is insurance. In most cases, insurance is provided with an assumption as to the nature of the business. If for example, a building is insured for long term residential use, an operator can be exposed if they use one or more units for STR. If a guest were to initiate a suit for, say, a slip and fall and they were staying in an STR unit, the building’s insurance may not cover this. Insurance policies general distinguish between short term vs long term stays either by the nature of the stay or in many cases the number of days a tenant typically stays. We have seen policies where a short-term stay is defined as 30 days or less and others where stays are typically at least a year. It is important to consult with an insurance broker to ensure your operation is properly covered.
Some booking platforms (such as AirBNB) also offer insurance, and many do not. Regardless, it is important to understand the interplay between these policies and the building’s policy to reduce potential gaps. In some cases, a broker may also recommend an umbrella policy to help cover potential gaps.
Understanding the differences between these types of business operations is essential to help reduce liabilities while ensuring a quality customer experience. Consistency in operation is often your friend to help support positions of intent. It is also important to note that legislation changes over time and that the above lists are not exhaustive. You may find it interesting to search on applicable laws for hotels and see if any of those could potentially apply to you or even benefit you. But again, if you pick and choose laws that may benefit you it can weaken your position to claim those benefits while increasing your liabilities.
Offering customers choice in experience is a great thing as well as potentially being lucrative but take the time to manage your risks.
 Ontario’s Residential Tenancies Act: https://www.ontario.ca/laws/statute/06r17
 Ontario’s Innkeepers Act: https://www.ontario.ca/laws/statute/90i07
 Hotel Registration of Guests Act: https://www.ontario.ca/laws/statute/90h17
 What does the Landlord & Tenant Board look at when deciding whether my unit is protected under the RTA?:
 Toronto’s Short Term Rental By-law home page: https://www.toronto.ca/community-people/housing-shelter/short-term-rentals/
 Ottawa’s proposed Short Term Rental By-law: https://ottawa.ca/en/news/new-short-term-rental-law-designed-help-address-housing-shortage-and-community-nuisances
 Greater Toronto Hotel Association Legislative Update: https://www.gtha.com/legislative-updates