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Finishing off our 3-part series on short term rentals and whether it even can be done in certain circumstances.

Part 1 Short term rentals

It could be that the buy-to-rent market is becoming a bit more attractive. Over the last couple of years, the standard rental market was affected by regulation, and not in a good way (at least for landlords). Another type of rental is now 1firmly in play…

There has been, for some time now, a different type of rental that affects properties. I think everyone now is familiar with the short term or vacation rentals by the owner. These are and have become one of the most popular forms of rentals for people looking for short stays in a residence without incurring any long-term obligation in the property they are staying in. These accommodations are almost exclusively web or app based and they occupy a place in the marketplace that exist between a hotel accommodation and longer term standard rental accommodations. The definition really matters a great deal, as we will see, because municipalities are right now, across the world trying to figure out a way to regulate the short-term rentals and it will affect our clients who are buying properties with this type of rental in mind. To me, it seems like this might be getting to be a more popular type of rental purchase for clients. The definition of a short-term rental may vary from place to place, but generally the common traits can include that the accommodation spans are less than 30 days, the unit is usually rented out by the owner of the building directly, not by a business, the units can be virtually anything: houses, condominiums, apartments, or sometimes even individual rooms in homes. “Bed and breakfast” accommodations are specifically excluded from the definition, presumably because they have established regulation in place already in most places. Although it varies from place to place, there generally is less administrative process surrounding these units, meaning there is no changes to zoning designations or any specific taxation that goes along with this. As we will see over the next few weeks, that may be changing for our clients.

Short term rental City of Winnipeg process

Short term rentals are generally vacation type of rentals, by the owner for very short periods. I suspect for many of our clients it represents a potential for a new type of market that is different from traditional rental properties. If you are dealing with clients who are investigating, it is worth them (and you) being aware that the City of Winnipeg is currently looking at implementing a framework for regulating, and very likely taxing, these short-term rental properties. Right now, hotels in Winnipeg pay a 5% tax on each room rented out. This is common across the industry in many cities across the continent. Right now, the city does not collect any tax on short term rentals by owner and it could be that is the main issue that is being examined by the city. The process has been underway for awhile, and public consultations have been conducted and they are now concluded. The issues under consideration for Winnipeg’s initiative to regulate short term rentals include: A licensing fee and process for collecting that fee, inspections of the properties, maximum units allowed in a building or perhaps by a proprietor, maximum days allowed per unit, per stay, zoning restrictions for properties being used as short term rentals and designation of property as well as enforcement of all of the above. At present the consultations are closed, collected and the City Administration is developing recommendations for consideration by the new mayor and city council. Unless the entire process is not favoured or prioritized by the new council, you could otherwise expect this new regulation to be considered by the group next year.

How does a short terms rental regulation affect a property being purchased

We have talked a bit about short term rentals over the last weeks. These are generally rentals for short periods by the owner, sometimes even when the renters themselves still occupy a part of the property. You also are now aware that the City of Winnipeg is midway through a process of reviewing how these short-term rentals should or will be regulated. A couple other words of caution on this that you might wish to canvass with any clients thinking of purchasing rental property with the idea of short-term rentals in mind. Firstly, be aware that if they are considering a condominium for purchase in this manner, the by laws of the condominium will specifically speak to the idea of rentals generally. It is rare nowadays that a condominium will prohibit the owner from renting out their condominium (but it still happens occasionally), in fact the disclosure documents required by the legislation require that the buyer be informed of whether their unit is rented, what the lease is, how many other units are rented and what the fee is to the owner (to the condominium board) for the privilege of renting out the condominium etc. This is different than short term rentals by a condominium owner. Many by laws of condominiums, while they allow long term leasing of the units, specifically do not allow short term rentals (often referred to as “transitory rentals” in the condominium documents). As well, even in situations of property that are not condominiums, the idea that someone could be renting or leasing a place and then earning income from that place as a short-term rental themselves is likely a non-starter in virtually any circumstance. The lease they have will most likely state that the owner of the property needs to consent to any assignment or sub-let of the property and this would most certainly fall into that category. As mentioned previously the city of Winnipeg is expected to come out with new regulation in 2023, any client buying property with short-term rentals as a plan, needs to be aware.

After the last couple years, travelling is back with a vengeance. It would be good if that meant a sustained run for the hospitality industry and the part of that industry that offers temporary accommodations.
As we introduced, a new type of lodging does not fit the current regulatory regime. That could be changing.

For more information on Regulating Short Term Rentals in the City of Winnipeg.

Click on https://engage.winnipeg.ca/short-term-rentals?tool=story_telling_tool 

Information courtesy of Gord Steeves
**as always, every situation is different and laws can change if you have doubts, call someone

GORD STEEVES​
B.A., LL.B.
Barrister, Solicitor and Notary Public
200‑600 St. Anne’s Road
​WINNIPEG, MB., R2M 2S2
Direct Tel: 431.478.1280
Tel: 204.254.3511
Fax: 204.257.5139
Email: gord@avdkslaw.ca
Web: www.avslaw.ca

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