Short-Term Rental Restrictions Make Leasing Condo Unit Difficult for Owner

The ability for people to use digital tools and online websites for short-term rental properties, through companies such as VRBO or Airbnb, has not only shifted the hotel industry, but has also impacted some residential neighbourhoods. Many people choose to rent out a property either full-time, or during times when they are not occupying their primary residence. While this type of income property may be a convenient way for the owner to make money, it does come with the risk of alienating neighbours who are not fond of the high turnover of contemporary neighbours.

A recent case from the Alberta Court of King’s Bench looks at the use of condominium bylaws as a mechanism to prohibit property owners from listing their property as a short-term rental. In the decision, the Court was asked to determine whether the applicant’s lease agreement for a condo unit he owned violated the building’s bylaws.

Condominium board restricts units from short-term rental

In Porter v Condominium Corporation No. 042 5177, issues began in May 2013 when the applicant purchased a unit in an Edmonton condominium building. In 2017, the applicant and several other unit owners began to rent out their units through various short-term rental platforms. Before long, the condominium corporation provided notice to all unit owners that short-term rentals were prohibited by the corporation’s bylaws.

In the summer of 2019, the condominium corporation filed an application asking for the Court’s support in preventing owners from listing their property as a short-term rental option. This resulted in an interim injunction in favour of the application. In 2020, that interim injunction was made permanent by the Court. In that decision, the judge held that short-term rentals were not leases, but were instead licenses to use property. Accordingly, the corporation was correct in its interpretation that the bylaws prevented this without violating the Condominium Property Act. That decision was not appealed.

Unit owner enters into month-to-month lease with a tenant

On August 4, 2021, the applicant (“JP”), entered into a residential lease agreement of his unit with a tenant. He stated that once the tenant moved in, the corporation interfered with the lease agreement and harassed the tenant. JP later entered into other month-to-month lease agreements with other tenants.

Although he sold the unit in June 2023, JP pursued his application asking the Court to recognize that he had not broken the corporation’s bylaws by entering into these valid lease agreements recognized by s. 32(5) of the Condominium Property Act.

The condominium corporation argued that the lease agreements were not valid leases, but rather licenses that were entered into in an effort to circumvent the 2020 order prohibiting short-term rentals. The condominium corporation alleged that the lease agreements in question did not provide for a fixed term of occupancy, did not stipulate a rental amount, and did not automatically continue from one month to another without notice. One paragraph of the lease agreements stated:

“Upon giving written notice no later than five days before the expiration of the month periodic lease, the tenant may renew the lease on a monthly basis each month. All terms of the renewed lease will be the same except for this renewal clause and the amount of rent. If the landlord and the tenant cannot agree as to the amounts of the rent, the amount of rent will be determined by mediation.”

The Court agreed that there was not a bona fide intention by the applicant to lease the unit nor was there an intention to have the tenants become domiciled in the unit. The Court also noted that the applicant had advertised his unit on Airbnb before the first lease agreement with a tenant was signed. Finally, the Court agreed with the Condominium Corporation that the agreements were not leases, but were instead, licenses.

Did the condominium corporation engage in improper conduct?

The Court then looked at whether or not the applicant was correct in his assertion that the corporation engaged in  “unilateral, biased, arbitrary, and prejudicial actions respecting (the tenant) in that the Corporation disabled her parkade fob” contrary to the Condominium Property Act. In the legislation, s. 67.1 provides several examples of improper conduct and “gives the court broad authority to grant remedies and it is well established that s. 67 is similar to corporate oppression remedies.”

Given that the 2020 order was still in full force and effect, the condominium corporation was “legally entitled to use reasonable measures to thwart the Applicant’s continued efforts to use his unit for short term rentals.” Although the condominium corporation imposed a monetary fine against JP of $3,000 and disabled the tenant’s parkade fob, all fobs were reinstated once the unit was vacated by the tenant.

Applicant fails to establish breach; court dismisses application

It was acknowledged that the actions of the condominium corporation were “not abusive or excessive and did not amount to harassment” and were “properly characterized as rigorous enforcement of the bylaws in the face of ongoing contraventions of them.” It was also emphasized that the condominium corporation had communicated with JP several times regarding the prohibition of short-term rentals and “made every effort to avoid conflict.”

The Court found that there was “ample opportunity” for JP to comply with the 2020 order and noted that “several other unit owners who were using their units for short-term rentals did comply.” Accordingly, the Court did not accept that JP established a breach by the condominium corporation, nor did he establish “a claim for psychological stress or the alleged undue financial burden incurred by him.” Ultimately, there was no need to undertake an investigation of the condominium corporation and there was no evidence to suggest that it acted improperly.

Contact DBH Law in Calgary for your Commercial and Residential Real Estate Needs

If you have questions about a residential real estate dispute, or are involved in litigation, the experienced real estate litigation lawyers at DBH Law can help. From purchasing your first condominium to new neighbourly disagreements, our real estate lawyers can help you understand how the law applies to your circumstances and help you develop a cost-effective and efficient legal strategy to protect your interests. To schedule a consultation with a member of our litigation team, contact us online or by phone at 403.252.9937.