Ontario court refuses to amend condominium’s declaration to remove provisions enabling short-term rentals

10 November 2017

By Kevin Zakreski

With the advent of online services such as Airbnb, short-term rentals have been causing increasing anxiety for strata and condominium corporations across the country. This anxiety has spilled over into the courts, particularly in Ontario. Late last year, that province saw an important decision on a condominium corporation’s power to restrict short-term rentals. But another decision from earlier this month points to some of the limits on that power.

In TSCC No 1556 and No 1600 v Owners of TSCC No 1556, 2017 ONSC 6542, “[t]wo sister condominium corporations” located in the city of Toronto asked the Ontario Superior Court of Justice for “an order amending their declarations to eliminate provisions, deliberately inserted into the declarations, that expressly permit transient, short-term rentals within the condominiums.” Even though “[t]here have been no complaints or problems with short-term rentals,” the applicant condominium corporations said they needed the order “to prevent future problems.” The condominium corporations argued that “the leasing provisions are inconsistent with the provisions of the Condominium Act, 1998, S.O. 1998, c. 19, with the applicable zoning by-law, and with a restrictive covenant registered on title to the lands on which the condominiums are situate.”

The condominium corporations served the application on all of their owners. Three of them participated in the hearing of the application. Two of these respondents were

represented by counsel who is retained by an entity known as DelSuites Inc., a company in the business of providing furnished short-term rental accommodations across the Greater Toronto Area. DelSuites manages a number of units in the condominiums. It is related to Del Condominium Rentals, which is in the business of condominium rental management. Both DelSuites and Del Condominium Rentals are part of the Tridel Group of Companies. Tridel was the developer of the condominiums and the declarant of the declarations of TSCC 1556 and TSCC 1600.

The case turned on the condominium corporations’ declarations. A declaration is the charter document for an Ontario condominium corporation. There is no real equivalent to it in British Columbia’s law. It can be thought of as combining aspects of a strata plan and a strata corporation’s bylaws.

A declaration is crafted by the condominium’s developer. It is difficult for the owners to amend it. Any amendment must be approved by at least 80 percent of the owners. But Ontario’s legislation does empower the courts to order an amendment to the declaration. That legislative provision was the focus of this case.

The condominium corporations argued that the court should order the amendment for the following reasons:

The applicants argue that the declarations are inconsistent with the Act in two ways: because they impermissibly grant rights with respect to occupancy and use and because they interfere with the ability of the condominium boards to make rules.

The court didn’t accept these arguments, concluding that the relevant provision in the declaration dealt with restrictions on the use of condominium unit, not on enabling rights inconsistent with the act:

In my view, these provisions of the declarations do not purport to grant rights. The right to lease a property short-term, or at all, is a right of ownership. The declarations restrict the uses to which the units may be put, and in defining the scope of the restrictions, make clear that occupancy and leasing, including short-term leasing, of the units are not restricted uses. The declarations do not create the right to lease; they merely make clear that in restricting other uses, they do not restrict the right to lease.

The court dealt briefly with the condominium corporations’ other arguments, finding no inconsistencies with zoning bylaws or with a restrictive covenant registered on title to the lands.

Finally, while the court had some sympathy for the condominium corporations’ predicament, it also sympathized with the owners who purchased units on the strength of the declaration and suggested that balancing the interests of the two groups is a task for the legislature:

The applicants argue that the advent of organizations like Airbnb has changed the nature of short-term leasing. They argue that the developer, Tridel, included the provisions about short-term leasing in the declarations to protect its business model in the wake of cases like Zeidan. Indeed, Tridel’s witness admitted that was the case. The applicants urge me not to allow developers to hold condominium boards hostage by allowing developers to enshrine whatever business protections they seek in a condominium’s declaration. They argue that the process available to condominium unit owners under s. 107 of the Act is difficult, because there is much apathy on the part of condominium owners, such that getting the requisite 80% approval to amend a declaration is a practical impediment to desirable changes to a declaration. I have sympathy for these arguments.

On the other hand, Mr. Hatahan [a respondent] deposes that the ability to earn rental income from Airbnb has allowed him to meet his daily living expenses including those related to his condominium. Mr. Hatahan deposes that he relied on the ability to rent or lease his condo when deciding to purchase it. . . .

If developers can enshrine business protections in the declarations of the condominiums they develop, the solution for the unit owners who find this undesirable is to amend the declaration pursuant to s. 107 of the Act. If the 80 percent threshold is unreasonably high to facilitate change that is desirable, and perhaps especially desirable to some in the current climate where websites like Airbnb make short-term leasing widespread and readily available, the remedy lies in legislative change to the threshold. The remedy is not to take what is fundamentally an amendment to a declaration that the board desires and repackage it as an inconsistency in order to seek relief under s. 109 of the Act.

In the result, the application was dismissed.

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