Legal Considerations for Short-Term Rentals in Ontario
The short-term rental (STR) market in Ontario, as in much of Canada, has grown rapidly as people look for flexible travel accommodations. If you’re considering entering this market, whether as a homeowner or investor, understanding the legal framework is important. The regulations governing STRs differ widely across Ontario municipalities, and hosts must comply with local bylaws, taxation, zoning rules, and insurance requirements to operate legally. This article will break down the key legal considerations for short-term rentals in Ontario, offering insights into what potential hosts need to know.
Understanding Local Regulations
In Canada, short-term rental regulations are often dictated at the municipal level. While national or provincial laws may lay the groundwork, cities and towns have a great deal of flexibility when it comes to establishing their own rules. For instance, in Toronto, short-term rentals are defined as properties rented for less than 28 consecutive days. To operate an STR legally, the property must be the host’s principal residence, meaning it is the home they primarily live in, use for tax purposes, and where they receive mail. Similarly, in Ottawa, the city defines STRs as rentals of less than 30 days, and hosts must prove the rental is their primary home. These rules aim to balance the STR market with the availability of long-term housing.
Registering as a Host
Most municipalities require hosts or landlords to register their short-term rental units. In Toronto, for example, hosts must register with the city and secure a registration number that must be displayed in all advertisements. Failure to register can lead to significant fines, not to mention the risk of forced closure. This requirement ensures that the city can keep track of STR activities and enforce rules aimed at maintaining a balanced housing market. Cities like Ottawa also require hosts to apply for a permit, providing proof of residence, insurance, and compliance with local bylaws. Hosts may be required to submit a floor plan and undergo a fire code inspection before a license is granted.
Municipal Accommodation Taxes
A crucial aspect of STR hosting in Ontario is the Municipal Accommodation Tax (MAT). In Toronto, a 6% MAT is levied on short-term rentals, and hosts are responsible for collecting and remitting this tax to the city. STR platforms often take care of this on behalf of their users, but the host is still required to submit quarterly reports, even if they had no guests during that time.
In Ottawa, the MAT is slightly lower, at 4%, but the responsibility remains the same: hosts must remit the tax directly to the city or its hotel association. Failing to report and remit taxes can result in penalties, so it’s critical for hosts to maintain meticulous records of their bookings, earnings, and tax payments.
Zoning Bylaws: Where Can You Host?
Another layer of complexity in the short-term rental market is zoning. Municipal zoning bylaws dictate where STRs can operate, which can vary significantly from one location to another. In Toronto, STRs are only allowed in residential zones, and the rental property must be a principal residence.
In Ottawa, similar restrictions apply within urban areas, though there is greater flexibility in rural areas where secondary properties, like cottages, can be rented as STRs. The zoning restrictions are designed to prevent STRs from undermining long-term rental availability, which has been a growing concern in cities with housing shortages.
Compliance with Safety Regulations
Meeting safety standards is a legal requirement, and one that hosts must take seriously. Municipalities often mandate that hosts ensure their properties meet fire and building codes. For example, an inspection is required before an STR license is issued, ensuring that the property is safe for guests.
In Toronto, hosts must provide guests with a diagram of all exits from the building, as well as the contact details of a person who is available 24 hours a day in case of an emergency. Ottawa requires an inspection before a property can be listed as an STR. Adhering to these safety requirements not only helps avoid legal repercussions but also contributes to a safer experience for guests.
Protecting Your Investment with Insurance
Standard homeowner insurance policies may not cover damages incurred during a short-term rental stay, leaving hosts vulnerable to financial losses. As a result, it’s important for hosts to update their insurance policies to include STR activities. Ottawa requires hosts to have at least $1 million in liability insurance, which can cover potential damages or injuries that occur during a guest’s stay.
Some platforms, offer their own insurance products, but these should not be considered a substitute for a comprehensive home insurance policy. Discussing coverage with an insurance provider is crucial to ensuring that hosts are adequately protected from liabilities that may arise during short-term rental operations. It is important to effectively secure your investment with asset protection.
Managing Guests: Limitations and Responsibilities
While it may be tempting to maximize income by hosting as many guests as possible, municipal regulations often limit the number of guests that can stay in a short-term rental. For instance, In Toronto, hosts can rent out their entire home for up to 180 nights per year, while individual room rentals have no such limits. However, no more than three rooms in a principal residence can be rented out at a time. Ottawa allows up to a maximum of 10 guests, with no more than two guests per bedroom, depending on the size of the property. In addition to these guest limitations, hosts are responsible for ensuring fair treatment of all guests, regardless of race, gender, sexual orientation, or disability. These anti-discrimination policies are embedded in municipal bylaws and are crucial for fostering an inclusive environment for all short-term renters.
Dealing with Eviction
If a guest refuses to vacate the property after their agreed rental period, the situation can become complicated. In Ontario, the Residential Tenancies Act (RTA) may apply, depending on the length of the stay and other factors. In such cases, hosts can issue an N4 form for non-payment of rent. A new by-law in Toronto requires an N13 notice but the Landlord and Tenant Board (LTB) will decide whether the RTA applies. If the guest has overstayed, the eviction process must follow the legal protocols established by the LTB, which can include formal notice and a hearing.
Staying Compliant in a Dynamic Market
The short-term rental landscape in Canada is constantly evolving, and it’s the responsibility of hosts to stay informed and compliant with local regulations. While the ability to earn income from STRs can be lucrative, failing to adhere to municipal laws can lead to fines, loss of licensing, or worse. By understanding local bylaws, ensuring proper taxation and insurance, and adhering to zoning and safety regulations, hosts can protect both their investments and their guests while contributing to a sustainable short-term rental market.