Short-Term Rental VS Tenancies Act
Updated: Feb 11, 2022
Short-Term Accommodation, Airbnb, And Tenant Rights: Legal Developments for The Applicability of Residential Tenancies Act, 2006
(Picture credit Womenwhomoney)
The rapid globalization and development of transportation have led to the enhancement of mobility. Particularly in recent years, there has been a dramatic uptick in the numbers of people traveling to metropolitan cities in pursuit of education, leisure, or career opportunities. Almost two hundred million tourists visit the Americas every year. Millions of international students are enrolled in education programs in English-speaking countries. Overseas assignments by multinational corporations and diplomatic corps, growing demand for work and travel, exchange, work away and study abroad programs, expanding opportunities for interns and many other overseas initiatives have changed the landscape of the hospitality industry.
Traditional hotels, B&B stays, and motels are no longer adequate for this wide range of travellers. New varieties of accommodation establishments have arisen to meet the increasing demand in the market with short and long-term stay options. Airbnb, HomeAway, and VRBO have become the most prominent models/representatives of short-term rentals that are alternatives to hotels. They have rapidly dominated the hospitality and hotelier industry in the last decade and changed the way vacationers travel.
Though the accelerated development in the accommodation industry has not found a corresponding reformation in the legal industry. Current laws and regulations, including The Residential Tenancies Act, 2006 (RTA), do not fully regulate the licensing, taxation, and tenancy rights in these new and emerging accommodation businesses.
Section 5(a) of RTA lists the accommodation establishments to which the Act does not apply. It provides an exemption from RTA for the specified accommodation types if they “intended to be provided to the traveling or vacationing public or occupied for a seasonal or temporary period”. The existence of this section indicates that the legislation contemplates "residential premises" occupied on a seasonal or temporary basis, i.e., as other than a place of permanent residence (Matlavik Case p.16). The nature and the quality of the occupancy in hotel-type accommodations do not give rise to a stake for the occupant that needs to be protected under the RTA regime (Marchant v. Charters). Similarly, the intention of the legislature is also indicative that strong tenant rights in these types of establishments could deaden paralyze short-term booking arrangements and the high turnover periods adherent to temporary accommodation businesses.
Fourteen accommodation establishments listed in Section 5(a) are not exhaustive. Additional Other emerging accommodation businesses providing a similar short-term accommodation service could well be considered to be exempt from RTA even though not specified in this Section. The courts and the Board look into the essence and nature of the accommodation establishment and determine to decide whether the RTA applies to the specific establishment. For a prominent instance example, renting a unit short-term as an Airbnb is exempt from the provincial landlord and tenant legislation, as are rentals in hotels, cottages, or bed and breakfasts, although not mentioned in the Act.
Distinct Other short-term accommodation establishments have also arisen throughout that are not mentioned in the Act, including corporate housing, co-living spaces, houseboats, roommate-matching services, suite hotels, off-campus student residence, homestay, and the like. The applicability of the Act should be decided with a comparative analysis looking into nature and quality of occupancy, the purpose of the Act as well as other criteria developed by case law.
Nature of the Occupancy
Hotels and similar accommodation establishments operated on commercial premises are mainly exempt from RTA, with few exceptions. The controversial area is more related to the short-term or temporary living accommodations provided in residential premises, as in corporate housing, Airbnb, homestay, suite-hotel, or off-campus residences. The fact that the premise is a residential one is not conclusive in determining the nature of the occupancy. As emphasized in Foster v. Lewkowicz, “the focus of the inquiry should not be on whether the premises are residential, but whether they are a type of premise falling within one of the exclusions”. (Foster v. Lewkowicz para. 37)
The decision in Marchant v. Charters sheds light on the test deciding whether the occupier of the room is a tenant or a guest. According to Lord Denning, the answer depends on the nature and quality of the occupancy. He added that “[t]he true test was the nature and quality of the occupation, whether it was intended that the occupier should have a stake in the room or whether he only had permission for himself to occupy the room personally whether under a contract or not.” (Marchant v. Charters,  3 All E.R. 918 at 922 (C.A.)). Similarly, Judgement in Ramsay v Heselmann noted that the parties cannot transform a landlord & tenant relationship into a hotel & guest relationship merely by describing the occupier under the rental agreement as a guest. The Court suggested that “[t]he relationship must be determined in law on a consideration of all of the circumstances.” (Ramsay v Heselmann para 8)
Sufficient case law has been developed by the courts in terms of the factors to consider when determining the nature of the relationship between the unit owner and the renter. The Court in Curtis Property Management focused on the question: whether the occupation intended to be somewhat permanent? The Court further asked: did the occupant bring personal items typically found in a home and not a hotel, such as stereo equipment, rugs, pictures, lamps and so on, etc.? was cooking allowed in the suite; which party was responsible for the cleaning of the unit; what level of control the occupant has over the suite; were typical hotel services are available and so on. (Foster v. Lewkowicz para 36)
Similarly, in London Executive Suites Inc., the Court concluded that the Act did not apply to the case. The court examined the nature of the units and found that it was intended that the fully furnished suites, which contained kitchen facilities, would be used "as a home away from home on a relatively short-term basis". Among others, the Court considered the following factors in coming to its conclusion: suites included towels, dishes, housekeeping, a 24-hour switchboard, a front desk for checking in and out, and telephone service. (552838 Ontario Ltd. v. London Executive Suites Inc. (unreported: November 19, 1992, Ont. Gen. Div. - found in Foster v. Lewkowicz para 36)
The Court in Matlavik Holdings Ltd. v. Grimson considered the following factors in determining the nature of the accommodation establishment: All the apartments were fully furnished; suites are offered to the general public as temporary accommodation for monthly, weekly, and occasionally daily basis; average occupancy period runs between one and two months. The Court concluded that the very nature of the business carried on “amounts to competition with hotels and motels for the patronage of persons whose employment or business occasions them to require accommodation for periods that would involve heavy expense in a conventional hotel or motel.” (Matlavik Holdings Ltd. v. Grimson para 7).
In deciding the relationship between parties, Court also looked into whether the occupant has a permanent residence somewhere else, and the current occupancy is intended for a temporary period. The Court in Ramsay v Heselmann considered the fact that the occupant had no other permanent residence from which she was absenting herself to constitute her a temporary resident at the time (Ramsay v Heselmann para 3) .Likewise, Matlavik Decision emphasized that the suites in a residential building were available “to staff temporarily assigned to the Toronto area on a short-term basis or permanently assigned to Toronto and requiring temporary accommodation pending the acquisition of something permanent” (Matlavik Holdings Ltd. v. Grimson para 7).
The duration of stay, even though it is important, is not conclusive itself either. A continuous stay for 15 years in a hotel did not transform the renter’s status from guest to tenant in Hodges Case. The Court noted that the length of occupancy is “obviously of some importance but the difficulty is that whatever its length, the relationship between the parties was no different than would have been that same relationship had Hodges' stay in the hotel lasted for a week.” (Hodges paras 11, 25) In arriving at its conclusion, the Court further emphasized that the occupant had no “control” over the property and he was not entitled to assign or sublet his room to anyone else probably (Hodges paras 11, 26). The Tribunal in Williams v Arista Way Suites shared the sample principle indicating that the intention of an occupant to use a temporary accommodation for a long period does not change the nature of the occupancy. (Williams v Arista Way Suites/Goldlist Properties (March 21, 2001), Doc. CET-01650)
Even though the circumstances and the factors described in case law are significant in determining the relationship between the renter and the unit owner, the major consideration is the intention of the parties. The intention can be gathered from all the facts and circumstances and the conduct of the parties. (Probably Hodges paras 24). The Tribunal in Alexander v 1290620 Ontario Ltd. concluded that the intention was the decisive factor. Tribunal noted that the unit was intended to be occupied for a temporary period and exempted from the Act. In concluding, the Tribunal found that the occupants had not clearly expressed their intention to occupy the unit as their permanent residence. (Alexander v 1290620 Ontario Ltd. o/a City View Motel (May 12, 1999), Doc. SOT-00338). Intention again formed the basis of the decision in the Williams v Arista Way Case. The Tribunal emphasized the critical importance of the intent noting that
“It is the intent of the Unit owner not whether or not there are fax services and any other services that a conventional hotel operation might offer, that is the determining factor. Those circumstances may impact on the determination as to what the intent was, but the fact that certain hotel services and amenities do not exist is not conclusive that the Unit could not have been intended to have been used for the traveling or vacationing public or occupied for a seasonal or temporary period.”
In conclusion, the Tribunal determined that the intended use of the unit in a residential complex was for hotel purposes and exempt from the Act in the absence of hotel operation services.
The distinction between a hotel and a residential premise is not crystal clear. Neither Parliamentary discussions nor textbooks provide a thorough guideline on the matter. In most cases, courts and tribunals are left with the public sources and dictionaries to determine the meaning of the critical terms and concepts. Perhaps, Judge Coo’s statement in Hodges Case was meant to give a message to future law-makers when he noted that “I have gone through all the textbooks on the subject which I thought might be of any guidance and I have read a very large number of the cases herein therein referred to. I have frankly not found any number of cases of any direct and conclusive guidance or assistance.” (Hodges para 23)
Case law(s) has developed significantly since Hodges Case and several factors and circumstances have been found useful in determining the nature of the occupancy. The physical features of the complex, amenities provided, the level of control of the occupant, inclusive services and the length of the stay are some prominent conditions highlighted by the courts and tribunals. But these factors are in no way conclusive by themselves nor exhaustive. The applicability of RTA should be determined in law based on the unique characteristics of the living accommodation and on a consideration of all the circumstances to reflect the purpose of the Act. However, the major consideration shall be still the “intent of the unit owner”, more than any other factor. As noted by the Tribunal Williams v Arista Way Case, a unit in a hotel building with full services can be covered by the Act, while a residential building without any hotel amenity can be a unit not covered by the Act. (Williams v Arista Way Suites/Goldlist Properties (March 21, 2001), Doc. CET-01650)
Similarly, the application of RTA should not be interpreted sharply, in black and white. A wholesale approach may not reflect the unique characteristics of each occupancy in the same residential complex. The exemption from the Act can be partial or full if any. Likewise, certain units in a residential complex can be exempt from the Act, while others are covered by the Act. Or, certain sections of the Act can apply to an accommodation establishment, while other sections do not.
By: Jonas Emre & Avi Khanna
Pacific Legal Professional Corporation