Municipal By-Laws in the Airbnb Era

August 9th, 2018

By Isabelle Landry and Audrey-Anne Béland, Lawyers.

Everyone is familiar with the Airbnb rental and booking platform, which allows you to advertise your home, condo, apartment, or cottage for short-term rentals. However, many people using this platform are unaware of the regulations governing this type of rental and overlook the building owners and managers who should be consulted to help them best manage these short-term sublets.

In order for property owners and managers to make an informed decision on whether or not to allow short-term rentals in their buildings, they must first know the applicable legislative rules in force.

Classification Certificate

The Act respecting tourist accommodation establishments and its regulation obligate every person operating a tourist accommodation establishment to obtain a classification certificate, which cannot be secured without a certificate of compliance with municipal regulations.

A tourist establishment is defined as any establishment in which at least one accommodation unit (room, bed, suite, apartment, house, cottage, ready-to-camp, campsite, etc.) is offered for rent to tourists, in return for payment, for a period not exceeding 31 days, on a regular basis in the same calendar year and whose availability is made public.

Thus, a person who offers his/her apartment for rent once a year during his/her own summer vacation does not do so on a regular basis during the same calendar year and is therefore not subject to the obligation to obtain a classification certificate.

The 31-day or less period is also significant. Indeed, according to case law, any rental that exceeds this duration is no longer considered a commercial rental, but rather an established residence, i.e. it falls under residential use.

Finally, the posting of a rental offer is also a determining factor for a lodging unit to be considered a tourist establishment. A person who regularly rents his/her apartment by word of mouth between acquaintances, without ever advertising it, is not obligated to obtain a classification certificate.

Québec Sales Tax and the Tax on Lodging In order to solve the problems of inequity and unfair competition, raised by certain hoteliers who were concerned that owners and tenants advertising on Airbnb were not charging the same taxes that they themselves were required to impose on their customers, a Lodging tax compliance agreement regarding hosts using the “Airbnb” platform was concluded on 21 July 2017. This agreement stipulates that, while hosts do not have to register to collect applicable taxes, Airbnb must do so and must collect the taxes directly, through its platform at the time of booking. Airbnb must remit the amounts thus collected to Revenu Québec four times a year.

Municipal By-Laws

Municipal by-laws must be followed so that Airbnb hosts can obtain their classification certificate. Municipalities may govern these short-term rentals in several distinct ways. Some smaller municipalities have not yet changed their zoning regulations to reflect this new reality. Municipal by-laws, as a whole, must be interpreted to determine whether or not short-term rentals are permitted. Generally speaking, case law has established that in areas where only residential use is permitted, short-term rentals (defined as commercial use) are prohibited. Some cities, such as Montréal, have come to limit commercial use by stipulating that there must be a distance of at least 150 meters between two tourist residences. Other cities, such as Québec City, have just obtained the advisory committee’s recommendations on how to manage such use in the future. Real estate developers and property managers must question the desirability and cost-effectiveness of allowing short-term rentals in their buildings and request zoning by-law be modified accordingly. Indeed, depending on the sectors concerned, as well as supply and demand, it could be financially attractive for developers to allow tenants and/or private unit owners to rent out their space on a short-term basis.

It is important to note that since short-term rentals are considered commercial use, municipal taxation will be affected by the fact that the institutions holding a classification certificate will no longer be considered residential and will be taxed accordingly.

Contractual Tools

Beyond that which is provided for in the legislation and regulation, remember that a contract is binding on all parties involved. Consequently, it is possible to prohibit such rentals through a co-ownership declaration, an easement, or a building by-law. Several examples in case law have demonstrated that private regulations of this type are valid, even when public regulations would have allowed commercial use. Such a bylaw for a residential building intended to be both upscale and quiet, in a less touristic sector, may appeal to the owner.

This is a summary of the full article written by the author and her colleague, Audrey-Anne Béland, entitled “Municipal By-Laws in the Airbnb Era,” published in Recent Developments in Municipal Law 2018, which is accessible here